making life sound better

Making Life Sound BetterAnnual Report 2015

GN Store Nord A/S

2MANAGEMENT'S REPORT

GROUP DEVELOPMENT 20152015 in figures 3Foreword by the chairman 4Making life sound better 6Execution of strategy in 2015 9Consolidated financial highlights 10Group performance 2015 11Financial outlook 13

16BUSINESS DEVELOPMENTGN ReSound 16GN Netcom 24Corporate responsibility 32Risk management 33

36SHAREHOLDER INFORMATION & GOVERNANCEShareholder information 36Corporate governance 38Board of directors 42Executive management 44

45ADDITIONAL FINANCIAL INFORMATIONQuarterly financial highlights 46Quarterly reporting by segment 47Q4 segment disclosures 48Foreign exchange impact 49

50FINANCIAL STATEMENTSConsolidated - Financial statements 2015 51Parent company - Financial statements 2015 97Statement by the executive management and the board of directors 108Independent auditors' report 109

Contents

Contents

Our investment case

Through relentless execution of our strategy: INNOVATION & GROWTH, we create shareholder value based on our core competency within sound processing

GN RESOUND

• Leaderincustomer-driveninnovationsbasedondif-ferentiatedwireless2.4GHztechnology

• Focusedbusinessmodel–dedicatedwholesalemanufacturerrefrainingfromverticalintegration

• Attractivemarketgrowthdrivenbysustainablemegatrendsinaconsolidatedindustrywithattrac-tiveprofitmargins

• Profitabilityinlinewiththebestmanufacturersintheindustry

GN NETCOM

• Theworld’sleadingsupplierofUnifiedCommunica-tionsheadsetsdrivenbycustomer-focusedcom-mercializationofastate-of-the-artproductportfolio

• Doubledigitmid-tolong-termCC&Omarketgrowthdrivenbysustainablemarkettrends

• Thecorebusinessoperatesinaconsolidatedindus-trywithhighbarrierstoentry

• Attractiveoperatingmarginandreturnoninvestedcapital

GN STORE NORD ANNUAL REPORT 2015

2/MANAGEMENT’SREPORT / CONTENTS

CONTENTSCONTENTS

2/GNSTORENORDANNUALREPORT2015

CONTENTS

Group development 2015

Business development

Shareholder information & governance

Additional financial information

Financial statements

Independent auditors' report

2015 in figures2015 in figures

EPS development (DKK)

Revenue split by region

37%

20%

43%

EMEA

NA

RoW

Revenue split on business units

54%

8%

25%

13%

Hearing Instruments

Diagnostic Equipment

CC&O

Mobile

EPS reported Beltone Networknon-recurring items

20132012

CAGR ~ 50%

2014 2015

1.80

5.89

0

1

2

3

4

5

6

7

14%revenue growth 1.5bn

EBITA of DKK

1.2bnDKK

share buybacks and dividends

+6%ptsvs 2014

+16%vs 2014

51%cash conversion

+13%ptsvs 2014

+34%vs 2014


3/MANAGEMENT’SREPORT / 2015iNFiGURES

2015 IN FIGURES


Contents

GROUP DEVELOPMENT 2015






2015 IN FIGURES • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

MAKING LIFE SOUND BETTERinrecentyears,wehavetransformedGNfromacompanyinrestructuringtoaleaderininnovationandgrowth.Ourfocusistocontinuouslyimproveourcommercializationofinnovation,includingthewaywedosalesandmarketing.Wewanttocontinuetochangeourcompanyaswellasourindustries.TodaywehaveajointpurposeacrosstheGNgroup:MAKiNGLiFESOUNDBETTER.Bycombiningknowledgeinmedicalhearinginstrumentswithprofessionalandconsumerheadsetcompetencies,GNisuniquelyposi-tionedtodevelopintelligentaudiosolutionsthatallowourusersto“hearmore,domoreandbemore”thantheyeverthoughtpossible.

THE YEAR 20152015wasayearwithstrongexecutiononourstrategyfor2014–2016:iNNOVATiON&GROWTH.Wehave,bothinGNReSoundandinGNNetcom,madesignificantprogressinourquesttobecomemoreprofessionalatcommerciali-zinginnovation,therebyfurtherstrengtheningourplatformforcontinuedgrowthinthecomingyears.2015wasalsoayearwithsomeunexpectedfactors,particularlytheBeltonefraudcaseandthesoftmarketconditionsforGNNetcominthefirsthalfoftheyear.Whilethesecircumstancesweredisturbing,bothmattersarenowwellbehindus.Ourfundamentalsaregood,andwehaveentered2016strongerthanever.

During2015wehave–asplanned–significantlyupgradedourcommercializationskillsetwithnewhiresinkeyposi-tions,addingspecificexperienceandknowhowinim-portantfunctions.Withourhighambitionlevel,peoplechangesweredeliberateandanexplicitpartofourstrategyfor2014–2016undertheenabler“enhancingorganiza-tionalcapabilities”.Thefactthatwewanttoandneedtobebetteratcommercializationiswhywehavehiredpeoplefromoutsideourindustriesintokeymanagementpositionsinsalesandmarketing.itisalsothereasonwhyweattheboardlevelhaveaddedfurthercommercialization,digitalandAPACexperiencethroughlastyear’snewboardap-pointmentofRonicaWang.

GNReSound’smomentumisexceptionallystrong–per-hapsbetterthanever.Thissuccessisinparttheresultofnewmarketingandsalesinitiativescenteredonanumber

ofimportantproductlaunches.Thegrowthin2015wasbroad-basedacrossregions,channelsandcustomers.Thethreelargestmarketsintheworldareallexamplesofourremarkablesuccessin2015:NorthAmerica–includinginthehighlycompetitiveVeteransAffairschannel–aswellasJapanandGermany.

Theproductlaunchesduring2015–includingthelaunchofourfourthgenerationofhearingaidsbasedonthe2.4GHztechnology,ReSoundLiNX2TM–clearlyshowthatGNReSound’sinnovationmachinecontinuestorunatfullspeed.WearedeterminedtomakesurethatGNReSoundmaintainsitsedgeinproductofferings–alsoinfaceofanticipated2.4GHz-basedproductsfromourcompetitorsin2016–andwearetrulyexcitedaboutthesuccessorofReSoundLiNX2,whichwillofferunprecedenteduserben-efitsandwillbelaunchedinlinewithGNReSound’snormallaunchcycle.

During2015,GNNetcom,likeGNReSound,madesignifi-cantimprovementsinitsapproachtocommercializinginnovation.And,while2015provedtobeachallengingyearforGNNetcom,theseimprovementsallowedustoachievemarketsharegainsinthecorepartsofGNNetcom’sbusi-ness.Amongotherthings,GNNetcomestablishedaglobalmarketingorganizationcoveringboththeCC&OandMobiledivisionswithsignificantlyupgradedcompetenciesandahigherdegreeofspecialization,includingdigitalmarketing.

AfterverysoftmarketconditionsinthefirsthalfoftheyearforourUnifiedCommunications(UC)businesswere-turned,asprojected,tonormalgrowthratesinthesecondhalf.For2016andbeyond,thegrowthoftheUCmarketissupportedbythesignificantinvestmentsmadebytheUCsoftwareproviders,includingMicrosoft’supgradefromLynctoSkypeforBusiness,withnewcloudcapabilities,furtherexpandingthereachofUCintoSmallandMedium-sizedEnterprises.

During2015,GNNetcomlaunchednewinnovativeMobileproducts,includingJabraSportPace™Wireless,anaffor-dablesportsheadset.Withthis,GNNetcomtookanimpor-tantstepinthere-positioningoftheproductofferingintheMobilesegmenttowardsproductswheremusicandvoiceconvergebeyondthetraditionalmono-segment,whichfacedsignificantchallengesandnegativegrowthin2015.

Foreword by the chairmanRelentless focus on commercialization of innovation delivered strong fundamental results in 2015 – and provides a solid platform for growth in 2016 and beyond


4/MANAGEMENT’SREPORT / FOREWORDByTHECHAiRMAN

FOREWORD BY THE CHAIRMAN


Contents







2015 in figures • FOREWORD BY THE CHAIRMAN • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

ReflectingthecontinuedstrongbusinessperformancebyGNReSoundandGNNetcom,andreflectingourstrategytodistributeexcesscashflowtoourshareholders,GNhasduring2015distributedDKK1.2billiontoitsshareholders–anincreaseofmorethan30%comparedto2014–throughsharebuybackprogramsanddividend.

in2015,wehavemadesignificantprogresswithinhumanresources(HR)andwearebecomingtrulyprofessionalinseveralareas.Wearenowinamuchstrongerpositiontoat-tractandretainsomeofthebestpeopleandcompetenciesavailableinthemarket.

Whilethesharepriceperformanceoverthelastfewyearsisverystrong–withanincreaseofmorethan50%duringthelastthreeyears–wecannotbepleasedwiththenegativesharepricedevelopmentduring2015.TheBeltonefraudcase,theuncertaintycausedbythesoftmarketconditionsforGNNetcomduringfirsthalfoftheyear,aswellasthesignificantattentionsurroundingpatentlitigations,werenotpredictable–andinvestorsandanalystsdonotlikenega-tivesurprises.Thesespecificcircumstanceswere,however,temporaryinnatureandtheyarenowwellbehindus.

2016 AND BEYONDWearewellpositionedtocontinuetodeliveronourfinan-cialtargetsfor2016assetoutinthestrategyfor2014–2016–justaswedeliveredontheambitioustargetsinour

strategyfor2011–2013.inGNReSound,weaimtocon-tinuetogrowatleastdoublethespeedofthemarket,andinGNNetcomweaimtocontinuetogrowwithdoubledigitratesinthecoreCC&Obusiness.Whilecontinuingtoinvestingrowth,wewill–aspreviouslycommunicated–ensurethattheEBiTAmargininbothbusinessescontinuestobeinlinewithtop-tiercompetitors.

Latethisyear,wewillcommunicateourstrategyfor2017–2019.Butmakenomistake:Profitablegrowthdrivenbyinnovationandcommercializationwillcontinuetobethecoreofourbusinessalsogoingforward.Wewillleveragethefullend-to-endpotentialofGNandstarttocapturedigitalopportunitiesinordertotakealeadingpositioninourindustries.

Ourachievementsin2015,andourabilitytodeliveronourstrategicplansfor2016andbeyond,aretheproductofthehardanddedicatedworkofourmorethan5,000employeesthroughouttheworld.Onbehalfoftheboardofdirectors,iwanttocongratulateandthankallemployeesfortheircontributionsandsuccessinefficientlychangingthefocusandprioritiesofGN.

Per Wold-Olsen Chairman

“We are making life sound better for the users of our solutions. That common purpose is at the heart of everything we do. We allow people to hear more, do more and be more than they ever

thought possible” Per Wold-Olsen Chairman


5/MANAGEMENT’SREPORT / FOREWORDByTHECHAiRMAN


Contents







2015 in figures • FOREWORD BY THE CHAIRMAN • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

MEDICAL GRADE

PROFESSIONALGRADE

CONSUMER GRADE

MEDICAL GRADE

PROFESSIONALGRADE

CONSUMER GRADE

UNITED BEHIND A COMMON PURPOSE AND VISION GNuniquelyincorporatesworld-leadingexpertiseinthehumanauditorysystem,soundandspeech,wirelesstech-nologies,andsoftwaredevelopment,linkingdeepinsightandknowledgefromboththehearingaidandtheheadsetindustries-allunderoneroof.

BybringingtheGNgroupofbrandsevenclosertogetherthantoday,sharingknowledgeandexpertise,GNcande-velopstrongerintelligentaudiosolutions.ThiswillgiveGNaresilientpresenceinthemarketasthegroupwillfurtherincreasedesirability,trustandcredibilityandtherebyoffermoreappealingbrandstoourusers.

insupportofthisGNhasarticulatedanewpurposeandvisionthatencapsulatestheentiregroupandallitsbrands.GN’spurposeistoMAKELiFESOUNDBETTERanditsnew-lyarticulatedvisionistobeTHELEADERiNiNTELLiGENTAUDiOSOLUTiONS,TRANSFORMiNGLiVESTHROUGHTHEPOWEROFSOUND.Thismarksanewchapterinthecompany’s146yearsofhistorytyingthegroup’sdivisionsandactivitiesclosertogethertowardsacommongoal.

Asaresult,nowmorethanever,GN’sleadersandemploy-eesarethinkingandactingasonecompany,unitingbehindthiscommonvisionandpurpose.Thiswillfurtherstrength-enGN’spositionastheonlycompanywithintelligentaudio

Making life sound betterGN is uniquely positioned to combine knowledge in medical hearing instruments with professional and consumer headset competencies. With world leading expertise in the human ear, sound, wireless technologies, software and miniaturization, GN develops intelligent audio solutions allowing users to "hear more, do more and be more"

The leader in INTELLIGENT AUDIO SOLUTIONS, transforming lives through the power of SOUND

Hearinginstruments

54%ofrevenue

8%ofrevenue

25%ofrevenue

13%ofrevenue

DiagnosticEquipment

Contact Centers& Offices

Mobile

WORLD LEADING AUDIO SOLUTIONS EXPERTISE – ALL UNDER ONE ROOF


6/MANAGEMENT’SREPORT / MAKiNGLiFESOUNDBETTER

MAKING LIFE SOUND BETTER


Contents







2015 in figures • Foreword by the chairman • MAKING LIFE SOUND BETTER • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

solutionsexpertiseacrossconsumer,professionalandmedi-calsolutionsunderoneroof,thatletpeoplehearmore,domoreandbemore,thusspearheadingthedevelopmentofthe“hearables”ofthefuture.

PIONEERING INTELLIGENT AUDIO SOLUTIONSLeadingthewayandpioneeringboldinnovationshasal-waysbeenembeddedinGN’sDNA.SupremeunderstandingofhighqualitysoundinallitsformshashelpedGNpioneernewcommunicationexperiences,fromwiredtowireless– fromthecontinentaltelegraphconnectionsofthe19th

centurytothetechnologicallyadvancedanduser-friendlyheadsetsandhearingaidsofthe21stcentury.

in1870,GNfirstconnectedtheFarEast,ChinaandJapan,withtherestoftheworldviatelegraphiccables.And,inthisprocess,inventedthecodethattothisdayenablescompu-terizationofChinesecharacters.

GNwasfirsttomarketamobileBluetoothheadsetandpioneeredhearingaidswithdigitalsoundprocessing.GNwasfirsttoutilize2.4GHztechnologyinhearingaidsfordirectconnectivityandintroducedtheworld’sfirstMadeforiPhonehearingaidwithdirectstereosoundstreaming.Forthefirsttime,hearingaiduserswereprovidedwithsupremespatialsoundalongsideseamlessconnectivitytoafullrangeofaccessories,includingsmartphonesandtablets.GNlaunchedtheworld’sfirstprofessionalactivenoisecancelationheadphonecertifiedforallleadingUnifiedCommunications(UC)platformsandlaunchedtheworld’sfirstwirelessDolbysportsearbudswithintegratedheartratemonitor.

THE TRANSFORMATIONAL POWER OF SOUNDSoundimpactshumanbeingsbothphysiologicallyandpsychologically.Forthehearingimpaired,beingunableto

communicateisdebilitating.Fortheofficeworker,beingunabletoconcentrateortakephonecallsbecauseoftoomuchnoiseseverelyreducesproductivityandcancausestress.

GN’sSmartHearingaidstransformthelivesofthehearingimpaired:lettingthemrediscoverthepleasureofgathe-ringwithfriendsandfamily,takingaphonecall,feelingmoreconfidentatworkandenjoyingmovies,musicandTVprograms.

GN’sheadsets,forprofessionalandpersonaluseandearbudsforanactivelifestyle,havethecapabilitytoimproveworkproductivity,optimizetrainingtoincreasewell-beingandfit-nesslevelsorenhancethepleasureoflisteningtomusic.

UTILIZING SOUND FOR MOREGN’suniquecombinationofcompetenciesenablesthegrouptodeveloptrulyintelligentaudiosolutions,whereahearingaidoraheadsetdoesmuchmorethanjustamplifyspeechandsound.Theyarecomprehensivesolutionsthatsupporttheuserinavarietyofways.

Ahearingaidshouldobviouslydeliverahigh-qualitysoundexperience.Butsublimeaudioisfarfromenough.Today’shearingaidsshouldbesimpleandeasytouseandofferabroadrangeofadvantagesfortheuser.ApremiumhearingaidshouldbeabletoconnectdirectlytoaniPhonesotheusercaneasilygetphonecalls–ormusic–directlyintheirear.itshouldbeeasytoadjustthehearingaidtodifferentsoundenvironments.Athome,atworkoronthego,theusershouldbeabletowirelesslyconnectthehearingaidstoanysoundsource–phone,TV,radio,computeretc.ThisandmuchmoreisalreadyaddressedwithGN’scomprehen-siveportfolioofSmartHearingaids.

GN INNOVATION BREAKTHROUGHS THAT HELP PEOPLE DO MORE

Firsttolaunchprofessionalheadsetswithtouchscreen (tripleconnectivity)

Firsttolaunchhearingaidfeaturing2.4GHztechnologyfordirectconnectivity

Launchestheworld’sfirst BluetoothheadsetwithActiveNoiceCancellation

Firsttolaunchear-to-earcommunicationbasedon2.4GHzwirelessconnectivity

World’sfirstwirelessheadsetwithanintegra-tedheartratemonitor

Launchesthe world’ssmartest andfirstMadeforiPhonehearingaid

introducesSmart Hearingwith SpatialSense™

2009 20112010 2012 2013 2014 2015




Contents








Thesamepertainstoaheadset:high-qualitysoundisjustnotenoughtosatisfytoday’sconsumer–atwork,dur-ingsportsorwhenenjoyingmusic.GN’sheadsetsallofferamazingsoundqualityforplayingmusic,plusmore.“More”canbesolutionsfornoisereductionandincreasedcon-centrationinopenoffices–andconnectingtoyourmobileorPCphone.Oritcouldbesportsearbudswithheartratemonitoringorin-earcoaching,whichallowyoutomonitoryourfitnessprogress.

THE INNOVATION POWERHOUSEToday,GNistheonlyaudiosolutionscompanywithworld-leadingexpertiseinears,sound,wirelessandminiaturiza-tion,linkingdeepinsightandknowledgefromboththehearingaidandtheheadsetindustries–allunderoneroof.

ResearchersandscientistsfromacrossGN’sR&Ddepart-mentswithinheadsetsandhearingaidscollaborateonnewtechnologyconcepts.Sharingknowledgeandideasbetweendifferentresearchgroups,clustersanddisciplinessuchassoftware,hardware,hearingscience,neuroscienceandpsycholinguisticsacrossthegroupisanintegralele-mentofGN’sinnovationpowerhouse.

Additionally,GNsponsorsexternalresearchcentersanduniversities,andGNresearchersworkcloselywithscien-tistsfromacrosstheworldtostayattheforefrontofscien-tificbreakthroughs.World-leadingscientistsparticipateintheGNScientificAdvisoryBoardtoprovideGNwithdeepandforward-lookinginsightandvaluableguidancefromglobalstateoftheartresearchwithincurrentGNtechnol-ogyareasaswellaspotentialnewtechnologiesinadjacentareas.

TOWARDS A FUTURE OF HEARABLESAttheinternationalCESinLasVegas,wewereagainre-mindedthatthehumanearisacrucialentrypointthatusedintelligentlycansupportapersonwithmanymoretasksthanmerelyhearingsound.ForpeoplelivingwithsightlossanintelligentheadsetsolutionfromGNwithcompass,gyroscope,andGPScanletwearersknowexactlywheretheyare–e.g.whichstoresarenearby.Andtheearisalsoauniqueandprecisesourceofmultiplehumandata–suchasheartrate,temperature,cadenceorgravitationalforce.

Today,GNalreadyutilizesmuchofthis“eardata”todeliverarangeofaddedbenefitstousersofsportsearbudswithintegratedin-earheartratemonitor,motionsensors,etc.inthefuture,avarietyofapplicationscanbeincorporatedinbothheadsetsandhearingaidsforvariousperformance,healthorsafetypurposes.

Thus,“hearables”arehybriddevicesthate.g.mergehealthtrackingcapabilitieswithhighqualityaudio.Tomorrow’s“hearables”willofferusersaneverincreasingrangeoffea-turesandfunctionalities.When,forinstance,combiningac-curateheartratereadingsandcorebodytemperaturelevelsfromtheearwithmovementsensorsandGPSreadings,thepossibilitiesforprovidinginnovativeandimportantnewproducts,servicesandsolutionsareliterallyendless.

GN’sabilitytocontinuetodeveloprevolutionizingnewtech-nologyandtransformtheseinnovationsintocommercialsolutionsthatsolverealchallengesforhumanbeingsisthefoundationforthegroup’scontinuedquesttoprovidepeo-plewithintelligentaudiosolutionsthatletthemhearmore,domoreandbemorethantheyeverthoughtpossible.

GNmarketsitsintelligentaudiosolutionsinmorethan90countries.ThegrouphasresearchcentersinDenmark,USA,theNetherlandsandChina.itsmainhearingaidmanufactu-ringplantsarelocatedinDenmark,ChinaandMalaysia.Thegroupoutsourcesthemanufacturingofitsheadsetsaspartofcostoptimization.

GNcommandsavastandfine-meshedsystemofchannelstoreachtargetconsumers.TheContactCenters&Officesbusiness(CC&O)marketsitsprofessionalsolutionsviaregionaldistributorsandvalueaddedresellerstocorporatecustomers.Adedicatedsalesteamworkswiththetop1,000globalenterprises,andfulfillmentishandledviavalueaddedresellers.GNentersintoclosestrategicallianceswithlargeiTintegrationandcommunicationsolutionsproviderstocontinuallyexpanditsreachwithcorporatecustomers.

Themobilebusinesssellsviaclosepartnershipswithcon-sumerelectronicschainsonlineandinbrick-and-mortarstoresaswellasincreasinge-commerce.PR,socialmediaandonlinemarketingareimportanttoolstoraiseawarenessamongtheseconsumers.

Thehearingaidbusinesspredominantlysellsbusiness-to-business.Theprimarycustomercategoriesareindepen-denthearingclinicians,largerhearingaidchainsandpublichealthorganizations.GN’sstrategyistoenterintostrategicpartnershipwiththesecustomersandnottoengagedi-rectlyinretailactivities.Thesetypesofcustomersalsobuythegroup’sdiagnosticequipment.

VAST GLOBAL FOOTPRINT




Contents








Execution of strategy in 2015GN ReSoundIncrease marketing & sales efforts

• Achieved significant growth in key markets and channels worldwide, including Germany, Japan, and Veteran Affairs

• Enhanced marketing and sales initiatives centered around product launches during the year, including the launch of ReSound LiNX2 – the 4th generation of hearing aids based on 2.4 GHz – as well as ReSound Enya in the essentials segment and ReSound ENZO2 in the super power segment

• Established a Smart Hearing Alliance with Cochlear to develop and commercialize bimodal solutions for people using both implants and hearing aids

Gain preferred supplier status

• Continued to strengthen the position as preferred partner by offering leading technology and by re-fraining from vertical integration

• Won Costco’s Kirkland Signature 6 contract, under-lining the leading technology and superior customer service provided by GN ReSound

• Continued to exploit the demand for long-term part-nerships through financial support arrangements

GN ReSoundAccelerate innovative R&D

• Continued to develop innovative products with distinctive user benefits, fortifying GN ReSound’s long-term technology advantage with a highly at-tractive and competitive product pipeline in 2016 and beyond

• Developed a full family of new and superior hearing aid offerings, ReSound LiNX2 and Beltone Legend, as well as a 2nd generation of superior super power hearing aids, ReSound ENZO2

• Expanded its renowned sound expertise and innova-tive wireless technologies into lower priced solutions for the first time, with the launch of ReSound Enya

Grow GN Otometrics into new channels and offerings

• Launched new features and enhancements in AURI-CAL that help hearing care professionals boost efficiency throughout the fitting process so there is more time for quality counseling and care

• Acquired Biomedica from Amplifon, strengthening GN Otometric’s position in Italy

GN NetcomIncrease marketing and sales efforts

• New global marketing organisation with significantly upgraded competencies, including online marketing knowhow

• Increased investments in co-marketing with channel and retail partners to extend reach and impact, more than doubling the point of sale marketing display presence

Key market initiatives

• Leveraged the strong CC&O product portfolio and improved sales execution to gain market share, for example, in North America and with global accounts

• Further strengthened its position as the world’s lead-ing supplier of UC headsets, for example, with the successful Jabra Evolve

• Maintained its leading position in the personal speak-er category, for example, with the announcement of Jabra Speak 810 for mid-large sized meeting rooms

• Strengthened its partnerships with key US retailers in the consumer space, including Best Buy and Target

GN NetcomDeeper and broader customer focus

• Continued to develop and commercialize innovative solutions with distinctive customer benefits, for ex-ample, with Jabra Evolve and with Jabra Speak 810

Stronger online presence

• Further strengthened focus on digital as a key mar-keting platform with increased digital presence and uplift in digitally generated revenue

Refine music portfolio

• Extended its product range with the Launch of Jabra Sports Coach and Jabra Sports Pace. Together with the already successful Jabra Sports Pulse, Jabra now offers a full portfolio of sports products addressing a market segment with very high growth

• Significantly outperformed the voice market in all key markets, fuelled by the launch of three new strong products: Jabra Eclipse, Jabra Boost and Jabra Steel

11%

4%

8%

2%

organic increase in

revenue

organic increase in

revenue

constant currency increase in EBITA

constant currency increase in EBITA


9/MANAGEMENT’SREPORT / EXECUTiONOFSTRATEGyiN2015

EXECUTION OF STRATEGY IN 2015


Contents







2015 in figures • Foreword by the chairman • Making life sound better • EXECUTION OF STRATEGY IN 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

DKK million 2011 2012 2013 2014 2015

GN ReSoundRevenue 3,450 3,896 4,179 4,469 5,175-Hearinginstruments 3,060 3,423 3,636 3,892 4,526-Otometrics 390 473 543 577 649Organicgrowth 9% 6% 10% 8% 8%-Hearinginstruments 9% 5% 10% 8% 9%-Otometrics 5% 13% 10% 6% 2%Grossprofitmargin* 60.8% 63.0% 65.5% 67.1% 65.8%EBiTA* 426 551 842 897 995EBiTAmargin* 12.3% 14.1% 20.1% 20.1% 19.2%EBiTAreported 426 321 738 897 995ROiC(EBiTA/investedcapital) 9.2% 6.6% 14.6% 15.9% 15.8%Freecashflowexcl.companyacquisitionsanddivestments 81 99 47 287 592Cashconversion(freecashflowexcl.company acquisitionsanddivestments/EBiTA) 19% 31% 6% 32% 59%

GN NetcomRevenue 2,106 2,355 2,612 2,871 3,229-CC&O 1,400 1,530 1,591 1,854 2,148-Mobile 706 825 1,021 1,017 1,081Organicgrowth 9% 7% 18% 11% 2%-CC&O 12% 5% 12% 18% 6%-Mobile 3% 11% 27% (1)% (5)%Grossprofitmargin 56.4% 54.2% 52.7% 53.6% 52.6%EBiTA 310 362 472 521 540EBiTAmargin 14.7% 15.4% 18.1% 18.1% 16.7%EBiTAreported 310 362 472 521 540ROiC(EBiTA/investedcapital) 48.8% 57.1% 64.7% 56.5% 46.9%Freecashflowexcl.companyacquisitionsanddivestments 358 236 178 340 271Cashconversion(freecashflowexcl.company acquisitionsanddivestments/EBiTA) 115% 65% 38% 65% 50%

GN Store NordRevenue 5,564 6,251 6,791 7,340 8,404Organicgrowth 9% 6% 13% 9% 6%Grossprofitmargin* 59.2% 59.7% 60.6% 61.8% 60.7%EBiTA* 1,284 846 1,284 1,260 1,457EBiTAmargin* 23.1% 13.5% 18.9% 17.2% 17.3%EBiTAreported 1,284 616 1,180 1,260 1,457Operatingprofit(loss)reported 1,247 528 1,118 1,195 1,220Financialitems,net (28) (69) (91) (84) (133)Profit(loss)beforetaxreported 1,225 461 1,023 1,116 1,092Effectivetaxrate 29% 30% 28% 29% 26%Profit(loss)fortheyearreported 865 321 735 793 805 Totalassets 11,181 8,199 8,963 10,229 11,176Consolidatedequity 6,878 5,542 5,330 5,667 5,764Parentcompanyequity 4,653 5,680 4,914 3,933 2,684 ROiC(EBiTA/investedcapital) 16.1% 8.7% 19.6% 18.5% 19.0%Earningspershare,basic(EPS) 4.31 1.80 4.40 4.89 5.16Earningspershare,fullydiluted(EPSdiluted) 4.27 1.78 4.35 4.85 5.14 investmentsinproperty,plantandequipment (82) (103) (120) (106) (179)Freecashflowexcl.companyacquisitionsanddivestments 297 2,756 93 480 743Cashconversion(freecashflowexcl.company acquisitionsanddivestments/EBiTA) 23% 447% 8% 38% 51% Equityratio 61.5% 67.6% 59.5% 55.4% 51.6%Netinterest-bearingdebt 1,269 230 1,113 1,631 2,212Netinterest-bearingdebt(period-end)/EBiTDA 0.9 0.3 0.9 1.1 1.4Payoutratio 16% 17% 18% 19% 20%Sharebuybacks** 641 1,614 787 877 1,162 Outstandingshares,endofperiod(thousand) 192,974 170,486 164,740 159,592 152,254Averagenumberofoutstandingshares,fullydiluted(thousand) 202,604 180,613 168,891 163,619 156,734Treasuryshares,endofperiod(thousand) 15,386 23,211 8,589 8,429 9,937Sharepriceattheendoftheperiod 48 82 133 135 125Marketcapitalization 9,634 13,980 21,910 21,513 19,032

*ExcludingSMARTrestructuringcosts**includingbuybacksaspartofthesharebasedincentiveprograms

Consolidated financial highlights

10/MANAGEMENT’SREPORT / CONSOLiDATEDFiNANCiALHiGHLiGHTS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Contents







2015 in figures • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • CONSOLIDATED FINANCIAL HIGHLIGHTS • Group performance 2015 • Financial outlook

REVENUE Basedonhighlysuccessfulproductlaunchesaswellasfurtherinvestmentsinmarketingandsales,GNincreasedrevenuetoDKK8,404million–anincreaseof14%comparedto2014.Excludingthedevelopmentinforeignexchangeratesthegrowthwas6%,withM&Ahavinglimitedimpact.Comparedto2014GNincreasedrevenuebymorethanDKK1billion.

EBITAReportedEBiTAendedatDKK1,457million,anincreaseof16%comparedto2014.ThegroupEBiTAinconstantcur-renciesincreasedby7%(excludingthecostsrelatedtotheabandonedM&Aopportunityin2014).inconstantcurren-ciestheEBiTAmargintherebyendedat18.7%,comparedto18.5%in2014(excludingthecostsrelatedtotheabandonedM&Aopportunity)–ontracktodelivertheguidedunderly-ingmarginimprovementfrom2014to2016.

NET PROFIT AmortizationofacquiredintangibleassetswasDKK(77)million,whilegain(loss)ondivestmentofoperationsetc.endedatDKK(10)million,inlinewith2014.inQ22015,itwasdiscoveredthattheVPofFinanceintheBeltone

distributionnetworkhadcommittedaccountingfraud.Asaresultofthisdiscoveryandtheinvestigationsconducted,aone-offlossofDKK150millionrelatedto2012–2014hasbeenbookedbyGNReSoundinQ22015intheline”Belt-oneNetworknon-recurringitems”(nocasheffect).Finan-cialitemsendedatDKK(133)million.Theeffectivetaxratewas26.3%,andthenetprofittherebyendedatDKK805millioninlinewithindicatedguidance.

OTHER PERFORMANCE INDICATORS Thegroupcashconversionendedat51%in2015,reflect-inganimprovementof13percentagepointscomparedto2014.Asexpectedandpreviouslycommunicated,theimprovedcashconversionisprimarilydrivenbyGNRe-Sound.TheimprovementinGNReSoundwasevenstrongerthanexpected,andmanagementispleasedtoseethatGNReSoundalreadyin2015generatedacashconversioninlinewithindustrypeers.

Thereturnoninvestedcapital(ROiC)was19.0%in2015correspondingtoanincreaseof0.5percentagepointscom-paredto2014,whichishoweverprimarilyexplainedbytheabandonedM&Aopportunityin2014.ROiCisnegativelyimpactedbythestrengtheningoftheUSDagainstDKKas

Group performance 2015In 2015, GN Store Nord continued to execute on the strategy for 2014 – 2016. Highly successful product launches and improved commercial excellence generated 14% revenue growth and further underlying margin expansion. GN enters 2016 in a very strong position for accelerated growth

Financial overview Q4 2015

GN ReSound GN Netcom Group total*

Constant Constant Constant Q4 currency FX Q4 Q4 currency FX Q4 Q4 currency FX Q4 DKK million 2014 growth effect 2015 2014 growth effect 2015 2014 growth effect 2015

Revenue 1,226 +10% +8% 1,453 894 +3% +9% 1,005 2,120 +7% +9% 2,458

Organic growth 8% 9% 20% 3% 13% 7%

Grossprofit 833 +10% +7% 974 491 +4% +1% 518 1,324 +8% +5% 1,492

Gross margin 67.9% (0.1)%-p (0.8)%-p 67.0% 54.9% +0.5%-p (3.9)%-p 51.5% 62.5% +0.4%-p (2.2)%-p 60.7%

EBiTA 291 +10% +7% 340 201 +7% (3)% 210 477 +6% +3% 522

EBITA margin 23.7% (0.2)%-p (0.1)%-p 23.4% 22.5% +0.8%-p (2.4)%-p 20.9% 22.5% (0.3)%-p (1.0.)%-p 21.2%

Freecashflow excl.M&A 113 248 43 68 158 340

*including"Other"


11/MANAGEMENT’SREPORT / GROUPPERFORMANCE2015

GROUP PERFORMANCE 2015


Contents







2015 in figures • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • GROUP PERFORMANCE 2015 • Financial outlook

themajorityofthegoodwillisdenominatedinUSD,whilethepositiveeffectonEBiTAisessentiallypostponedoneyearduetothegroup’shedgingpolicy.

Earningspershare(EPS)endedatDKK5.16reflectinga6%improvementcomparedto2014.Excludingtheone-offrelatedtotheBeltoneaccountingfraud,EPSincreased21%.Sincethebeginningofthecurrentstrategyperiod,EPShasincreasedwithaCAGRof16%,whenexcludingtheone-offrelatedtotheBeltoneaccountingfraud.Thisisprimarilybasedonthestrongincreaseinnetprofit,butalsoduetothedecreaseintheaveragenumberofoutstandingsharesandtheongoingsharebuybackprograms.

DIVIDEND AND SHARE BUYBACK PROGRAMS Basedontherelentlessfocustodelivershareholdervalue,andinlinewithGN'scapitalstructurepolicy,GNhasdistributedaroundDKK1.2billiontoshareholdersin2015withDKK151millionasdividendandDKK1,047millioninthreedifferentsharebuybackprograms.AsofFebruary12,2016,GNhasrepurchasedsharesforanamountofDKK179millionin2016.TheboardofdirectorswillproposetopayoutDKK0.99pershareindividendforthefiscalyear2015(equivalenttoatotaldividendofDKK161million)com-paredtoDKK0.90persharelastyear,up10%.

CAPITAL STRUCTURE Aspreviouslycommunicated,GN’slong-termcapitalstructurepolicyistohavenetinterest-bearingdebtofuptoamaximumoftwotimesEBiTDA.BasedonthesolidfinancialdevelopmentinGNaswellasthefavorablecapitalmarkets,GNnowtargetsanetinterest-bearingdebtofaround1.7timesEBiTDAbytheendof2016.ThecurrentsharebuybackprogramwillbeconcludednolaterthanMarch9,2016.AsofDecember31,2015,thenetinterest-

bearingdebtamountedtoDKK2,212million–equiva-lentto1.4timesEBiTDA.AsofFebruary12,2016,GNholds11,403,340treasurysharesequivalentto7.0%ofthesharecapital.AttheannualgeneralmeetingtobeheldinMarch2016,theboardofdirectorswillproposetocancel7,403,340shares.

CLAIM AGAINST PLANTRONICS INC. in2012,GNNetcomfiledsuitagainstPlantronicsforat-temptedmonopolizationofthedistributors’marketintheUS.OnSeptember23,2013,thefederaldistrictcourtinWilmington,Delaware,dismissedPlantronics’“motiontodismiss”thecaseinitsentirety.ThecourtalsostatedthatGNNetcom’sallegationsweresufficientlysubstantiatedtoallowthecasetoproceedintodiscovery.Duringthediscov-eryphase,GNlearnedofallegedintentionaldocumentde-structionandhassubmittedamotionforsanctionsaskingtheCourttodeterminetheappropriateremedyforPlant-ronics’allegedmisconduct.itisexpectedthatthecourtwillscheduleahearingonthematterinQ12016.

PATENT DISPUTES WITH WILLIAM DEMANT HOLDINGOnJanuary7,2016GNandWilliamDemantHoldingreachedanagreementtosettleallpatentdisputesbetweenthetwocompanies,therebyterminatingallpatentlitiga-tions–bothinEurope,includingDenmark,andinNorthAmerica–withimmediateeffect.

Thesettlementincludesbroad-basedcross-licensingof15differentpatentsrelatedtohistoric,pendingaswellassomepotentialfuturedisputes.Thedetailsofthefinancialarrangementareundisclosed.However,thesettlementofthe15patentsincludesanannualnetlicensepaymenttoWilliamDemant,whichwillhavenomaterialfinancialim-pactontheresultsofeitherparty.

Financial overview FY 2015

GN ReSound GN Netcom Group total*

Constant Constant Constant FY currency FX FY FY currency FX FY FY currency FX FY DKK million 2014 growth effect 2015 2014 growth effect 2015 2014 growth effect 2015

Revenue 4,469 +9% +7% 5,175 2,871 +2% +10% 3,229 7,340 +6% +8% 8,404

Organic growth 8% 8% 11% 2% 9% 6%

Grossprofit 2,998 +9% +5% 3,406 1,538 +6% +4% 1,697 4,536 +8% +5% 5,103

Gross margin 67.1% (0.1)%-p (1.2)%-p 65.8% 53.6% +1.9%-p (2.9)%-p 52.6% 61.8% +0.9%-p (2.0)%-p 60.7%

EBiTA 897 +11% 0% 995 521 +4% 0% 540 1,260 +16% 0% 1,457

EBITA margin 20.1% +0.4%-p (1.3)%-p 19.2% 18.1% +0.4%-p (1.8)%-p 16.7% 17.2% +1.5%-p (1.4)%-p 17.3%

Freecashflow excl.M&A 287 592 340 271 480 743

*including"Other"


12/MANAGEMENT’SREPORT / GROUPPERFORMANCE2015


Contents







2015 in figures • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • GROUP PERFORMANCE 2015 • Financial outlook

GNhasenteredthelastyearofthestrategy2014–2016,iNNOVATiON&GROWTH,inastrongshapeandwillcon-tinuetoexecuteonthekeyinitiativesofthestrategy.2016isexpectedtobeastrongfinishofthestrategyperiod:

• increasedorganicrevenuegrowthfrom6%in2015to“around7%”in2016

• EBiTAmargintobevisiblyabovethelevelbeforeenteringthestrategyperiodin2014(constantcurrencies)

• Effectivetaxrateof“25-26%”downfrom26%in2015andamaterialimprovementfrom“26-27%”previouslycommunicated

• GuidanceonFinancialitems,AmortizationsetcdownfromDKK(365)millionin2015to“aroundDKK(200)million”in2016

• All–combinedwithcontinuedsharebuybacks-leadingtoafurtherincreaseinEPSin2016

Theforeignexchangedevelopmentwillpositivelyimpactthefinancialoutlookin2016.DuetoGN’srolling12monthshedgingoftheEBiTAexposureinthemaincurrencies,theimpactonEBiTAofanychangeinthemainexchangeratesisessentiallypostponedoneyearwhilethemajorityoftherevenueimpactwillbeseenimmediatelyforbothGN

Financial outlookIn 2016, GN will continue to execute on the 2014 – 2016 strategy, INNOVATION & GROWTH, leading to continued revenue growth and improved profitability

GN ReSound EBITA margin reported*(%)

GN ReSound EBITA margin improvement in constant currencies compared to 2013(%-points)

18

19

20

21

22

20142013 2015 2016E

20.1% 20.1%

19.2%

~21.3%

0

1

2

20142013 2015 2016E

1.3%p

0.9%p

~1.8%p

Financial guidance 2016

DKK million Organic revenue growth EBITA Profit before tax Effective tax rate

GNReSound Around6% Around1,200

GNNetcom 7-10% Around590

-CC&O Morethan10%

-Mobile 0-6%

Other Around(70)

GN Store Nord Around 7% Around 1,720 Around 1,520 25 - 26%

*BasedonforeignexchangeratesasofFebruary1,2016


13/MANAGEMENT’SREPORT / FiNANCiALOUTLOOK

FINANCIAL OUTLOOK


Contents







2015 in figures • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • FINANCIAL OUTLOOK

ReSoundandGNNetcom.in2015,GNhadhedginglossesofaroundDKK130millioninparticularduetoappreciationoftheUSDversustheDKK.ThislosswillbesignificantlylowerataroundDKK20millionin2016(basedonforeignexchangeratesasofFebruary1,2016).Overall,GNisposi-tivelyexposedtoappreciationsinlargerforeigncurrenciessuchasUSD,GBPandJPy.

GN RESOUND

Guidance 2016GNReSoundexpectstogainfurthermarketsharein2016inlinewiththefinancialtargetsoutlinedinthestrategy2014–2016,iNNOVATiON&GROWTH.Basedoncontinuedstrongexecutionofthestrategy,GNReSoundexpectstodeliverorganicrevenuegrowthof“around6%”in2016.Thisisestimatedtobeatleast3percentagepointsaboveexpectedmarketgrowth.

Duetotheappreciationofanumberofforeigncurrenciesandnon-recurringhedginglossesthereportedrevenuegrowthin2016isexpectedtobe“around9%”(basedonforeignexchangeratesasofFebruary1,2016).

ThesolidrevenuegrowthisexpectedtohaveavisiblepositiveimpactonEBiTA.inabsoluteterms,GNReSound’sEBiTAisexpectedtobe“aroundDKK1,200million”.Thisisequivalenttoamarginexpansionofaround2percentagepointscomparedto2015,ofwhichthelargerpartisdrivenbyforeignexchangetailwindandaround0.5percentagepointsareorganicallydrivenmarginexpansion–incontinu-ationofthe0.4percentagepointsEBiTA-marginexpansionin2015.in2016,GNReSoundwillfurtheracceleratesalesandmarketingactivitiesandalsoincreaseactivitiesandinvestmentsrelatedtoinnovativeR&D.

Aspartofthestrategy2014–2016,iNNOVATiON&GROWTH,GNReSoundtargetedthatROiCinconstant

currenciesimprovedbymorethan4percentagepointscomparedtothelevelin2013(14.6%).ThesustainableandprofitablegrowthdeliveredbyGNReSoundduringthestrategyperiodmeansthatthetargetisexpectedtobeachievedin2016.BasedoncurrentforeignexchangeratesthismeansthatthereportedROiCwillbearound18%in2016,significantlyupfrom15.8%in2015.Theslightlylowerreportedtargetisprimarilyduetothecontinuedappre-ciationoftheUSDcomparedtoDKK,astheEBiTAeffectfor2016ispostponedduetohedging,whiletheeffectoninvestedcapitalimpactsROiCimmediately.

Market projectionsinthemid-tolongterm,thevalueoftheglobalhearingaidmarketisexpectedtogrow1–4%peryear.Thisreflectsannualunitgrowthof3–5%andamodestASPerosionof1-2%peryear.GNReSoundexpectsthatthehearingaidmarketgrowthwillbewithinthisrangeagainin2016.

Allregionsareprojectedtoshowmarketgrowthinvaluewithinthe1–4%rangein2016.However,Europeisexpec-tedtobeinthelowendoftherangedueto,amongotherfactors,reimbursementchangesintheNetherlands.

GN NETCOM

Guidance 2016Basedoncontinuedstrategyexecutionandattractivemarketconditions,GNNetcomexpectsorganicrevenuegrowthof“7-10%”in2016.Theexpectedorganicrevenuegrowthwillbedrivenby"morethan10%"organicgrowthinthehighmarginCC&Obusinessandwith"0-6%"organicgrowthintheMobiledivision.

inreportedterms,GNNetcom’srevenuegrowthisexpectedtobe“8-11%”primarilyduetoaslightappreciationofanumberforeigncurrencies(basedonforeignexchangeratesasofFebruary1,2016).

0

50

100

150

200

250

300

350

GN Store Nord Sonova William Demant

30/12/2010Index: 30/12/2010 = 100

30/12/2015

Plantronics

GN ReSound revenue* (DKK million)

3,000

4,000

5,000

6,000

2013 2014 2015 Organic FX 2016E

4,1794,469

5,175~6%

~3%

GN Netcom revenue* (DKK million)

1,000

2,000

3,000

4,000

2013 2014 2015 Organic FX 2016E

2,612

2,8713,229

7-10% ~1%


GNSTORENORDANNUALREPORT2015



Contents








GNNetcom’sstrongrevenuegrowthisexpectedtoleadtoEBiTAof“aroundDKK590million”in2016.inconstantcurrencies,theEBiTAmarginisestimatedtogrowbyaroundonepercentagepointin2016comparedto2015.GNNetcom’sstrongexecutiononthestrategy2014–2016,iNNOVATiON&GROWTH,isdrivingtheprofitablegrowth.

GNNetcomexpectstomaintainahighROiClevelagainin2016,whichhasbeenanimportantfinancialambitionaspartofthestrategy2014–2016,iNNOVATiON&GROWTH.in2016,GNNetcomexpectsROiCtobearound45%inre-portedcurrencies,whichisslightlydownfrom47%in2015,primarilyrelatedtothecontinuedappreciationoftheUSDagainsttheDKK,whichhasaslightlynegativeeffectonEBiTA,butmovesinvestedcapitalup.However,theguid-anceisinlinewiththepreviouslycommunicatedtargetfor2016adjustedforthemovementsinforeigncurrencies.

Market projectionsFollowingunusuallysoftCC&Omarketconditionsinthefirsthalfof2015,GNNetcomexpectsnormalizedgrowthlevelsin2016.inCC&O,themarketisprojectedtoreturntodouble-digitgrowthratesagaindrivenbythecontinuedincreasedpenetrationofUCsolutions.AccordingtoFrost&Sullivan,theoverallCC&Omarketisexpectedtogrowonaverage12%peryearfrom2014-2021(CAGR),ofwhichtheUCmarketisexpectedtogrowannuallyby19%onaverageintheperiod.

ThemarketsinwhichtheMobiledivisionisoperatingarestillexpectedtoshowdifferentgrowthtrendsin2016andtheoutlookcontainssomedegreeofuncertaintyduetorapidlychangingconsumertrends.However,therecenttrendsareexpectedtocontinueinto2016withstronggrowthintheSportsAudio,andfurthermarketdeclinesinthetraditionalMobilemarketwiththelargeBluetoothmonocategory.

OTHER ACTIVITIES, FINANCIAL ITEMS AND TAXEBiTAinOtherisexpectedtobe"aroundDKK(70)mil-lion"in2016(DKK(78)millionin2015).ThecostsinOtherprimarilyreflectoperatingcostsforthefunctionssharedacrossGNReSoundandGNNetcom.Additionally,theboardofdirectorshasdecidedtoinvestincertainstategicinitiativesintheStrategyCommittee,includingnewcon-creteproductsandbusinessopportunitiesbeingpursuedin2016.TheseprojectsareaimedatdiscoveringpotentialfuturebusinessopportunitiesoutsidetheimmediateareaofwhereGNReSoundandGNNetcomoperatetoday,butleveragingonthecoreknowledgeandcompetenciesofGN.

Amortizations,financialitems,etc.isexpectedtobe“aroundDKK(200)million”,whichislowerthantherealizedlevelofDKK(365)millionin2015.Theloweramountispri-marilyduetothenon-recurringlossrelatedtotheBeltoneaccountingfraudin2015.

AsthecorporatetaxrateinDenmarkisgraduallylowered,GNalsoexpectstoseeafurtherdecreaseintheeffectivetaxrate.in2015,theratewas26%andisexpectedtoim-proveto“25-26%in2016.Thisisbelowtheprevious2016targetof“26-27%”.

0

50

100

150

200

250

300

350


30/12/2010Index: 30/12/2010 = 100

30/12/2015

Plantronics

GN Netcom EBITA margin reported*(%)

GN Netcom EBITA margin improvement in constant currencies compared to 2013(%-points)

15

16

17

18

19

20142013 2015 2016E

18.1% 18.1%

16.7% 16.5-17.0%

0

1

2

20142013 2015 2016E

0.0%p

0.4%p

1.2-1.7%p





Contents








GN ReSoundIn 2015, GN ReSound strengthened its innovation leadership and continued to improve commercialization in line with the strategy 2014 – 2016: INNOVATION & GROWTH. The result was strong growth, significantly above market growth

HIGHLIGHTS 2015• 16%revenuegrowthfor2015-organicfullyeargrowth

of8%.inQ42015,organicgrowthinHearinginstrumentsacceleratedto10%

• EBiTAincreasedby11%inconstantcurrenciesaswellasinreportedterms

• Significantincreaseincashconversionto59%in2015,comparedto32%in2014

• ThelaunchofReSoundLiNX2™inMarch2015underlinesGNReSound’sabilitytocontinuouslybringunparalleleduserbenefitstothemarket

in2015,GNReSounddeliveredsustainableandprofitablegrowththroughthetwostrategicfocusareas:commerciali-zationandinnovativeproductdevelopment.

Continuedimprovementsintheapproachtocommercializa-tionweremadeduring2015,leadingtostrongperformanceacrossmarketsandchannels.Anumberofexperimentshavebeenmadeinselectedmarkets,withsuccessfulexper-imentstobeleveragedacrossmarketsandchannels.Majoreffortshavebeenputintoobtainingcontinuouslyimprovedmarketunderstandingandintosecuringevenstrongerandcloserrelationshipswiththecustomers.

GNReSound’spositionasaleaderinuser-driveninnovationwas,again,acornerstoneintheprofitablegrowthgener-atedin2015.ThehighlyefficientR&Dmachinedeliveredavisibleupgradeofthehearingaidportfoliobasedon2.4GHztechnologywithReSoundLiNX2–thefourthgenera-tionofhearingaidsusing2.4GHztechnology–asthemostprominentlaunch.

GNReSoundalsoshowedprogressonotherkeyfinancialmetricsin2015asROiCincreasedby0.3percentagepointsinconstantcurrenciesreflectingthesolidgrowthinearn-ingsanddeclineinnetworkingcapital.ThereportedROiCwas15.8%.Additionally,cashconversionincreasedto59%in2015from32%in2014.

Hearing aids & ear related diagnostic equipment

17%

10.3%

unit market share in Hearing Instruments

spent on R&D as percentage of revenue

employees worldwide

4,425GN STORE NORD ANNUAL REPORT 2015

16/MANAGEMENT’SREPORT / GNRESOUND

GN RESOUND


GN RESOUND • GN Netcom • Corporate responsibility • Risk management

Contents


BUSINESS DEVELOPMENT





ReSound ENZO™" This is just revolutionary"

James Raath was a business consultant until nine years ago when he lost his hearing. He literally woke up one morning and had gone almost completely deaf overnight. His hearing loss was accompanied by severe vertigo attacks and constant fatigue, so much so he could not continue with the business he was involved with. He used to work 12 hours a day and run marathons. He loved every minute of it. Overnight that lifestyle was not possible any longer. Suddenly he was not able to speak on the phone and was restricted to texting or emailing his wife.

When James called his wife for the first time in nine years wearing ReSound ENZO hearing aids that were wirelessly connected to his iPhone. He now feels that his confidence is coming back.

Today, he can think of work, family, friends and socializing – thus being able to hear more, do more and be more than he ever thought possible after that fateful day nine years ago.

Watch the full story


Contents







https://www.youtube.com/watch?v=-Jxpn-5Y7Ko

REVENUEGNReSounddeliveredstrongrevenuegrowthinQ42015of19%ofwhichorganicgrowthconstitutes9%.Thedevelopmentinforeignexchangeratesimpactedrevenuepositivelybyaround8%,whereasM&Aactivitieshadanimpactofaround1%.TherevenueforthequarterwasDKK1,453million.

Hearinginstrumentsshowedaverystrongorganicgrowthof10%inQ42015.ThisachievementwasaccomplisheddespitetheQ42014comparisonbasebeinginflatedbytheaccount-ingfrauddiscoveredintheBeltonedistributionnetwork–anadjustmentofthecomparisonbasewouldaddtotheorganicgrowth.

ThestrongorganicgrowthinHearinginstrumentswasfueledbycontinuedimprovementsintheapproachtocom-mercializinginnovation.inEurope,GNReSound’sorganicgrowthevenexceeded20%inQ42015.Germanyagaingrewatsignificantdoubledigitrates.intheUSA,theReSoundwholesalebusinessdeliveredstrongdoubledigitorganicgrowthwithsolidcontributionfromallchannels.inAPAC,theimportantJapanesemarketwasagainavisiblegrowthcontributorasGNReSounddelivereddoubledigitorganicgrowthinthecountryinQ42015.

GNOtometricsdelivered1%organicgrowthinQ42015de-spiteachallengingcomparisonbaseinQ42014whereorganicgrowthwas21%.Forthefullyear,GNOtometrics’revenuewasDKK649millionleadingto2%organicgrowth.Whilethiswasinlinewiththediagnosticsmarketgrowthitisnotsatisfac-tory.

Forthefullyear2015,GNReSound’srevenuegrew16%,ofwhich8%wasorganicgrowth.Thiswasvisiblyabovethemarketgrowthestimatedtobearound3%.Thedevelop-mentinforeignexchangeratesimpactedrevenuewitharound7%,whileM&Aactivitiesaccountedforaround1%.Netcashflowfromfinancialssupportarrangementsduring

2015wasDKK(46)million–comparedtoDKK(229)millionin2014–withanetcashinflowofDKK24millionduringthesecondhalfof2015.inabsoluteterms,revenueendedatDKK5,175millionin2015.

EARNINGS AND OTHER FINANCIAL HIGHLIGHTSForthefirsttimeinGNReSound’shistory,quarterlyEBiTAsurpassedtheDKK300millionmarkasEBiTAreachedDKK340millioninQ42015.inconstantcurrencies,thisisequivalentto10%growth.ThereportedEBiTAincludesahedginglossofDKK31million.

Forthefullyear,EBiTAendedatDKK995million,whichisinlinewiththeguidancefor2015.EBiTAgrew11%incon-stantcurrenciesaswellasinreportedfigures.Thereby,GNReSoundfurtherimprovedtheEBiTAmarginby0.4per-centagepointsinconstantcurrenciescomparedto2014.

ThegrossprofitinQ42015endedatDKK974million.GNReSoundiscontinuouslyfocusingonoptimizingproduc-tionefficiency,whichwasunderlinedbytheestablishmentoftheMalaysianproductionfacilityduring2015.Thegrossmargininconstantcurrencieswasrelativelyflatcomparedto67.9%inQ42014,whichreflectsareturntonormallevelsfollowingaslightdeclineinQ32015related,amongothers,tothestartupoftheproductionfacilityinMalaysia.

TheoperatingexpensesamountedtoDKK634millioninQ42015comparedtoDKK542millioninQ42014,wherearoundhalfoftheincreaseisduetotheforeignexchangedevelopment.Theoperatingexpensesasapercentageofrevenuetherebydecreasedslightly.Forthefullyear,operat-ingexpensesendedatDKK2,411million,equivalenttoanincreaseinconstantcurrenciesofaround7.5%.

inQ42015,GNReSounddeliveredstrongcashflow.ThecashconversioninQ42015reached73%–visiblyhigherthan39%inQ42014.Thestrongdevelopmentwasdriven

2015 revenue split by region 2015 revenue split by brand

31%

48%

21%

EMEA

NA

RoW

ReSound

Beltone

Interton

Otometrics





Contents







In 2015, GN ReSound set the new benchmark in Smart Hearing with ReSound LiNX2™ and introduced new apps for users looking to connect to the world like people without hearing loss

Product launches 2015

ReSound ENZO2 ™ReSound LiNX2 ™

ReSound Enya™ ReSound apps

The next step in Smart Hearing for Super Power users. It lets users hear more of what they want because every part of it is designed to give a better hearing experience with a rich, balanced sound in all situations. It offers direct connection

to iPhone, iPad and iPod touch devices

The latest in Smart Hearing. It provides effortless hearing just as nature intended. Spatial Sense™ gives the user a

natural sense of where sounds are coming from and helps form a detailed sound picture of the surroundings. It is

offered in a complete product family and includes a built-in tinnitus therapy sound generator to achieve relief from

tinnitus. It offers direct stereo streaming from iPhone, iPad and iPod touch giving the user the same opportunities to

connect, interact and engage as everyone else

Delivers excellent sound quality and speech understanding at an affordable price in a discreet, durable design to meet

the challenges of a rich and active lifestyle. It is wireless and streams sound directly to the hearing aids with the 2.4

GHz wireless accessories and can be controlled with the ReSound Control™ app

With ReSound apps the wearer of ReSound’s Smart Hearing aids is able to intuitively adapt the listening experience. In April, GN ReSound launched the first ever hearing aid app

for Apple Watch allowing users to personalize their hearing experience straight from their wrist. In addition, GN ReSound also launched the industry’s first direct smart app for Android



19/GNSTORENORDANNUALREPORT201519/GNSTORENORDANNUALREPORT2015


Contents







by,amongothers,asignificant16%reductioninworkingcapitalcomparedtoendQ32015.Thecashconversionforthefullyear2015endedat59%,whichisinlinewithcom-parablecompaniesandsignificantlyupcomparedto32%in2014.Thesignificantlyimprovedcashconversionforthefullyearisalsodrivenbyalowerleveloffinancialsupportarrangementsin2015thanin2014.

Thereturnoninvestedcapital(ROiC)endedtheyearat15.8%.Asexpected,ROiCwasrelativelyflatcomparedto15.9%bytheendof2014,primarilybasedonthefactthatalargepartoftheinvestedcapitalisdenominatedinUSD,whiletheforeignexchangeimpactonEBiTAisessentiallypostponedoneyearduetohedging.inconstantcurrenciesROiCtherebyincreasedby0.3percentagepoints.

BUSINESS HIGHLIGHTS

ReSound LiNX2

inMarch2015,GNReSoundlaunchedthefourthgenera-tionof2.4GHzhearingaidswithReSoundLiNX2andthecorrespondingBeltoneLegend.Theproductfamilieshavebeenstrongcontributorstorevenuegrowthin2015,andunderlineGNReSound’spositionastheinnovationleaderinthehearingaidindustry.

ReSoundLiNX2hasreceivedexcellentfeedbackfromusersanddispenserswithregardtotheimpressivesoundexperi-encewithSpatialSense,improvingtheabilitytolocatesounds,andthevalueofprovidingMadeforiPhoneconnec-tivityinadditionalformfactors.

Other smart hearing product launchesTheSmartHearingfamilyhasbeenstrengthenedfurtherduring2015,andGNReSoundhasanindustryleadingandfullyupdatedproductportfoliobasedon2.4GHztechnologycoveringalltypesofhearinglossesandpricepreferences.

AttheEUHACongressinOctober2015,GNReSounddem-onstratedReSoundEnya™andthecorrespondingBeltoneAlly™,offeringadvancedhearingsolutionsincluding2.4GHztechnologyataffordableprices.Additionally,GNReSounddemonstrateditssecondgenerationsuperpowerhearingaid,ReSoundENZO2,basedon2.4GHztechnology.Re-SoundENZO2isdesignedforpeoplewithaseverehearingloss,makingitanimportantproductforexampleintheVet-eransAffairs,anddeliverstop-ratedsoundexperiencewithSpatialSenseanddirectconnectivitywithsmartphones.

Veterans Affairsin2015,GNReSoundcontinuedthesuccessintheattrac-tiveVAchannelintheUSA.GNReSoundentered2015withamarketshareof12%inthechannel.inDecember2015,themarketsharereached20%andGNReSoundreachedamile-stoneasitbecamethesecondlargestsuppliertotheVA.

ThesignificantmarketsharegainsachievedintheVAre-flectsGNReSound’scontinuedfocusedeffortsinthechan-nel,whichwereinitiatedattheendof2013.Furthermore,GNReSoundhasalsolaunchedthemarketleadingproductfamiliesReSoundLiNX2andReSoundENZO2inthechannelduring2015.

CostcoGNReSoundandCostco,oneofthefastestgrowingglobalhearingaidretailers,furtherstrengthenedtheirpartner-shipinearly2015whenGNReSoundagainwonCostco’sKirklandSignaturecontract.ThetransitionfromKirklandSignature5toKirklandSignature6wasconductedinthefirstpartoftheyearinallCostcostores.ThepartnershipisatestimonytoGNReSound’spremiumhearingaidtechnol-ogyandbest-in-classservicelevel.

CochlearAttheEUHAcongressinOctober2015,GNReSoundandCochlearjointlyannouncedtheestablishmentoftheSmartHearingAlliance.Thisisacommercialexpansionofthesuccessfultechnologycollaborationinitiatedin2011.Withthestrategicalliance,GNReSoundwilldevelopandcom-mercializetheworld’ssmartestbimodalhearingsolutionstogetherwithCochlear,theundisputedgloballeaderinthemarketforimplantablehearingsolutions.Bimodalhearingsolutionsallowhearingimpaireduserstocombinetheben-efitsofhearingaidsandcochlearimplants.TheSmartHear-ingAlliancewascommerciallylaunchedinthebeginningof2016andwillallowGNReSoundtoparticipatefurtherinthemedicalchannel.

Beltone network intheinterimReportQ22015,itwasannouncedthattheformerVPofFinanceintheBeltonenetworkhadcommit-tedaccountingfraudfrom2012–2014.Thisledtoaone-offlossofDKK150million(non-casheffect).TheemploymentoftheVPofFinancewasterminatedforcause.

Duringthesecondhalfof2015,aplantocreateanevenstrongerBeltonebusinessinNorthAmericawascrafted.Theambitiousplanaimstofullyexploitthebusinessopportuni-tiesinthestrongnetworkandbrand,includingcapturingdigitalopportunities.inthebeginningof2016,CorrinePerri-tanowashiredasthenewpresidentoftheBeltonenetwork.

AppsGNReSoundcontinuestobeattheforefrontintermsofappsdesignedforthehearingaidusers.Early2015,theRe-SoundSmartAppwasalsomadeavailablefortheAndroidplatform.initiallycompatiblewiththeSamsungGalaxyS5,theappwasalsomadecompatiblewithanotherhandfulofSamsungdevicesduring2015.Thisgavemillionsofaddi-tionalusersaccesstothepersonalizedcontrolofReSoundSmarthearingaidsthroughtheirsmartphones.





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Veterans Affairs

GNReSoundentered2015withamarketshareinVAof12%andhasincreasedthesharethroughouttheyearend-ingat20%inDecember2015.Thisisanunusuallystrongachievementinahighlycompetitiveenvironmentwhereallhearingaidmanufacturersarepresentwiththeirpremiumtechnology.

TheimpressivemarketsharegainsintheVAismadepossi-blebyGNReSound’sleadingtechnology,includingRe-SoundLiNX2™andReSoundENZO2™.However,themarketsharegainshadnotbeenpossiblewithoutGNReSound’s

Veterans Affairs (VA) represents around 21% of the total US hearing aid market. US veterans with a hearing loss that are eligible for a hearing aid through the program are provided hearing aids without any charge

Monthly VA market share development 2013 - 2015 (value)(%)

significantlyimprovedcommercializationcapabilities.Attheendof2013,whenGNReSound’smarketshareintheVAwasaround7%,severalinvestmentsweremadeinthebusi-nesstocreateamorecustomer-centricorganizationwithadeepunderstandingoftheneedsoftheVAdispensers.

AspartofGNReSound’scommercialexcellenceinitiativesinthestrategyfor2014–2016,theexperiencesandsuccessofamongothertheVAteamissystematicallyleveragedtoothercountriesandchannelsinordertoensureoptimalcommercialimpactofGNReSound’sleadingtechnologies.

Total US hearing aid market 2015 ~ 3.4m units

VAshareofmarket 21%

0

5

10

15

20

25

JAN2013

DEC2015

20%





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OPERATIONSAspartofGNReSound’srelentlessfocusonoptimizingproductivity,thenewmanufacturinganddistributionfacil-ityinMalaysiawasofficiallyopenedinSeptember2015.inadditiontothecostbenefits,theMalaysianfacilityprovideslogisticaladvantagesduetotheproximitytotheefficientdistributionhubinSingapore,andfurthermorethefacilitywillmitigaterisksthroughthepossibilityofmovingproduc-tionfromonefacilitytoanother.

TheexpectedfuturesalesgrowthalsoleadGNReSoundtoincreaseitshybridcircuitboardproductioncapacitydur-ing2015.inJanuary2016,GNReSoundofficiallyopeneditsexpandedhybridsfactoryinPraestoe,Denmark,withincreasedcapacityfortheproductionofthefifthgenerationofhearingaidsbasedon2.4GHztechnology.

MARKET DEVELOPMENTThehearingaidmarketgrewaround4%inunitsin2015,whichisinlinewithGNReSound’smid-termexpectationsof3-5%annualunitgrowth.ThedevelopmentwasdrivenbysolidunitgrowthinNorthAmerica,especiallyinthefirsthalfoftheyear.TheNorthAmericanhearingaidmarket’sunitgrowthwas7%in2015comprisedby8%intheprivatemarketand5%growthinVA.Asexpected,duetothereim-bursementchangeattheendof2013,theGermanmarketshowednegativeunitgrowthin2015.ThismeantthattheEuropeanhearingaidmarketshowed2%unitgrowthin2015.

AstheNorthAmericamarketgrewfasterthantheEuro-peanmarketandRestoftheWorld,thishadaslightposi-tiveimpactontheaveragesellingprice(ASP)intheglobalhearingaidmarket.Ontheotherhand,thelargerretailerscontinuedtogrowfasterthantheindependentchannelin2015.Overall,theASPdevelopmentisestimatedtohavebeenslightlynegativein2015.Thisleadstoavaluegrowthofaround3%intheglobalhearingaidmarketin2015.

Theestimatedmarketsizeisaround13millionhearingaidsin2015.GNReSound’sunitmarketshareisestimatedtobearound17%.

WithApple’slaunchoftheAppleWatch,GNReSoundintroducedtheReSoundSmartAppfortheAppleWatch.TheReSoundSmartAppfortheAppleWatchputsthemost-usedfeaturesoftheReSoundSmartAppstraightonthewristofpeoplewithhearingloss.TheReSoundSmartAppfortheAppleWatchwasrecognizedasabest-practiceexampleofconvenience,functionalityanduserinterfaceatApple’sWorldwideDeveloperConference.

GN Otometricsin2015,GNOtometricsdeliveredrevenuegrowthinlinewiththemarket.investmentsintheNorthAmericansaleschannelandotherkeymarketscreatethefoundationforrenewedgrowthabovethemarketintheyearstocome.Duringearly2015,GNOtometricsgainedamarketleadingpositioninitalyaftertheacquisitionofAmplifon’sitalianbiomedicalbusiness.

Thedevelopmentoftheinnovative3Dear-scanner,OTO-scan,isstillprogressing,althoughcertaintechnologicalchallengeshaveoccurredduring2015.Asaconsequence,productdevelopmenteffortswereinsourcedduringtheyear.Thecommerciallaunchisnowexpectedtobein2017.

R&DGNReSound’sinnovationmachineisrunningfullspeed,asillustratedbytheimportantproductlaunchesin2015,includingthelaunchofReSoundLiNX2.TheabilityofGNReSound’sR&DdepartmenttocontinuouslydelivertrulyuniqueuserbenefitshasbeenanimportantdriverofGNReSound’sgrowthinrecentyears.During2015,GNRe-Soundhasfurtherstrengthenedthebasisforfutureinnova-tionsallowingGNReSoundtomaintainitsedgealsointheyearstocome.PartofthiswillbethesuccessorofReSoundLiNX2,whichwilloffernewsignificantuserbenefitsandbelaunchedinlinewithGNReSound’snormallaunchcycle.

GNReSound’sR&Ddepartmentisbasedinfourlocations:Ballerup(Denmark),Chicago(USA),Eindhoven(Holland)andXiamen(China).

MARKETINGinlinewiththestrategyfor2014–2016,continuedimprove-mentsintheapproachtocommercializinginnovationweremadeduring2015.Asparthereof,anewSVPofMarketingwasappointedduring2015todrivethenewambitiousmar-ketingagenda.Amongthefocusareasduringtheyearwasthewaymarketinsights,includinghearingaiduserinput,areusedtodrivetheproductdevelopmentagenda.Aspe-cificfocusisalsoplacedonoptimizationofglobalexecutionofproductlaunchesandcampaigns.Moreover,itisafocustograduallyengageusersinmorewaysinordertobuildupdesireforandloyaltytoGNReSound’sbrands,amongoth-ersmakinguseofdigitalopportunities.





Contents







Smart HearingBuilding a hearing aid brandHistorically, hearing aids have not had much brand recognition. Users most often accepted their hearing care professionals’ choice and were unaware of which brand they used. This is changing. Today, hearing aid users are becoming increasingly engaged. They stop being patients and become consumers asking for a specific hearing aid.

Our marketing, brand and PR activities support this trend to build genuine brand awareness. In 2015, GN ReSound joined IFA in Berlin, Germany, and International CES in Las Vegas, USA, the world's largest consumer electronics tradeshow. The purpose was to maximize attention to the Smart Hearing range and excite current and potential consumers and customers as well as journalists and bloggers. GN ReSound engaged in customer conferences, panel events, large scale press events and one-to-one meetings with journalists.


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GN NetcomDuring 2015, GN Netcom strengthened its platform for profitable growth in 2016 and beyond benefitting, among others, from the position as the world’s leading Unified Communications supplier

HIGHLIGHTS 2015• Followinganexpectedreturntonormalgrowthinthe

CC&Omarketduringsecondhalfof2015,GNNetcomexited2015withastrongplatformforprofitablegrowthin2016andbeyond

• intotal,revenuegrew12%in2015.Fullyearorganicgrowthwas2%,reflecting6%growthinCC&O–drivenby16%growthinUnifiedCommunications(UC)headsets–and(5)%growthinMobile

• EBiTAofDKK540million,inlinewithguidanceandcor-respondingtoanimprovementof4%inconstantcurren-ciesaswellasinreportednumbers

• Continuedattractivecashconversionof50%fortheyear

Thefirsthalfof2015sawunusuallysoftCC&Omarketcondi-tionsbut,asprojected,areturntonormalmarketconditionsinthesecondhalfof2015.ThegrowthprospectsoftheUCmarketremainhighlyattractive,supportedbysignificantinvestmentsmadebytheUCinfrastructurevendorsdur-ing2015.ThisincludesMicrosoft’stransitionfromMicrosoftLynctoMicrosoftSkypeforBusinesswithcloudcapabilitiesdecreasingtheneedforinvestmentsinserverhardwareetc.,thuspromotingfurtheradoptionofUCbymakingUCevenmoreaccessibletoSmall-andMedium-sizedEnterprises.During2015,GNNetcomstrengtheneditspositionastheworld’sleadingUCsupplier–deliveringanorganicgrowthinUCof16%fortheyear,including23%growthduringeachofthethirdandfourthquarteroftheyear.

TheMobilemarketsawasignificantdoubledigitdeclineintheBluetoothmonosegmentandveryhighgrowthintheSportsAudiomarketsegment.

inlinewiththestrategy2014–2016:iNNOVATiON&GROWTH,GNNetcomcontinuedtoinvestinfuturegrowthopportunities,andduringtheyearGNNetcomlaunchedseveralinnovativeproductsthatwillfuelgrowthinbothCC&OandMobilein2016andbeyond.

TheperformanceintheUCsegmentdemonstratedthestrengthofGNNetcom’sinnovativeproductportfolio.Amongother,therecentlylaunchedJabraEvolve™productserieswasamajorcontributortothegrowth.Especially

Intelligent audio solutions

The world's leading Unified Communications supplier

spent on R&D as percentage of revenue

No. 1

8.1%

employees worldwide

1,000GN STORE NORD ANNUAL REPORT 2015

24/MANAGEMENT’SREPORT / GNNETCOM

GN NETCOM


GN Resound • GN NETCOM • Corporate responsibility • Risk management

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THE OFFICE OF THE FUTURE inshort,UnifiedCommunications(UC)makesiteasierforpeopletoconnect,communicateandcollaborate.UCbringstogetherallofficecommunicationdevicesandinterfacesintoonesingleintegratedapplicationanduserexperience,includingreplacingthetraditionaltelephonewithasoft-phonebasedonthesameplatform.

UCsignificantlyincreasesofficeproductivitybyintegratinginstantmessaging,presenceinformation,voice,mobilityfeatures,audio,webandvideoconferencing,fixedmobileconvergence,desktopsharingandmanyotherreal-timefeaturesandprovidesaconsistentunifieduserinterface,e.g.SkypeforBusiness,acrossmultipledevicesandmediatypes.

inadditiontoincreasedofficeproductivity,UCdeliverstangiblecostreductions.Theinvestmentrelatedtotheimplementationofsoftwarelicenses,serverhardwareandvoiceequipmentismodestcomparedtotheongoingcostreductionsfromreplacementofthetraditionaltelephonesystemsandcostreductionsfromwebandteleconferenc-ingaswellaslesstravellingexpenses.FurtherdevelopmentoftheUCofferingwillincreasethecostreductions.Micro-soft’slaunchin2015ofSkypeforBusiness(thesuccessorofMicrosoftLync)isanexampleofthisdevelopment,withSkypeforBusiness’cloudcapabilitiesdecreasingtheneed

forinvestmentsinserverhardwareetc.,thuspromotingfurtheradoptionofUCbymakingUCevenmoreaccessibletoSmallandMedium-sizedEnterprises.

GN NETCOM – THE GLOBAL LEADER IN UC HEADSETS AsthegloballeaderinUCheadsets,GNNetcomisuniquelyexposedtoahighlyattractivemarketwithcurrentlyaroundhalfabillionofficeworkersworldwide.

TheUCmarketisexpectedtogrowby19%p.a.during2014-21,assuminganadoptionrateintheOfficespaceof24%in2021,fromanadoptionrateofapproximately10%in2014(Frost&Sullivan,September2015).ThenumberofUCusersisexpectedtogrowfromcurrentlyaround50millionto177millionin2021.Keydriversoftheexpectedgrowthare:continuedproliferationofsoftware-baseddesktopcommunicationsclients;productivitybenefitsassociatedwithbusinessheadsets,includinghands-freecommunica-tionsandanefficientworkenvironmentwithagrowingnumberofopenworkspaces;andaninfluxofGenywork-ers(i.e.,thegenerationofpeoplebornduringthe1980sandearly1990s)favoringmodernmeansofworkingandcommunicating.Reflectingbarrierstoentry,nomaterialchangestothecurrentcompetitivelandscapewithregardtotheheadsetmanufacturersisexpected(Frost&Sullivan,September2015).

Email

TelephonyWebconferencing

Chat

Voicemail

Calendar

Audioconferencing

Videoconferencing

– the growth driver of GN Netcom’s business solutions (CC&O)

Unified Communications





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reflectingsignificantimprovementsincommercializationofinnovationandreflectingthestrongproductportfolio,includingtheJabraEvolveseriesandtherecentintroduc-tionoftheJabraSpeak810.inQ42015,theUCbusinessdeliveredorganicgrowthof23%leadingtofullyearorganicgrowthfortheUCbusinessof16%.

TherevenueintheMobilebusinessinQ42015increasedtoDKK360million,comparedtoDKK344millioninQ42014,representingorganicgrowthof(4)%anda9%positiveimpactfromthedevelopmentinforeignexchangerates.ThedevelopmentreflectsthecontinueddeclineinthetraditionalmonoBluetoothheadsetmarket,however,tosomedegreeoffsetbythestrongperformanceintheSportAudioseg-ment,whichcontinuedtodeliverdoubledigitgrowthrates.ThequarterwasalsosupportedbyastronglaunchofthenewproductJabraHaloFusion™–adirectresultofthere-positioningofMobile,whichisstartingtoshowencouragingresults.ThefullyearorganicgrowthinMobileendedat(5)%.

Forthefullyear2015,GNNetcom’sgrouprevenueendedatDKK3,229million,up12%comparedto2014,correspond-ingtoanorganicgrowthof2%andwithanimpactfromthedevelopmentintheforeignexchangeratesof10%.M&Adidnothaveanyimpactontherevenue.

EARNINGS AND OTHER FINANCIAL HIGHLIGHTSinQ42015,GNNetcomdeliveredanincreaseinEBiTAincon-stantcurrenciesof7%,translatingintoa0.8percentagepointsincreaseintheunderlyingEBiTAmargin.Thestrongdevelop-mentreflectsabetterproductmixasthehigh-marginCC&Obusinessgrewstrongerthanthelow-marginMobilebusiness.inreportedterms,EBiTAincreasedtoDKK210million,whichis4%higherthantheEBiTArealizedinQ42014.inreportedterms,theEBiTAmarginendedat20.9%forthequarter.

Forthefullyear,EBiTAendedatDKK540millioncomparedtoDKK521millionin2014,equivalenttoa4%increaseinbothreportednumbersandconstantcurrencies.TheEBiTAmarginfortheyearendedat16.7%inreportednumbers,but18.5%inconstantcurrenciescomparedtoa18.1%EBiTAmarginin2014.Thus,during2015GNNetcomincreasedtheunderlying

thehigh-endJabraEvolve80proveditsrelevanceandal-lowedGNNetcomtoestablishanewpricepointintheUCsegment.TheproductportfoliowasexpandedduringtheyearwiththeintroductionoftheJabraSpeak™810,extend-ingtheJabraspeakerphonesintomedium-sizedmeetingrooms.Thisnewcategoryisexpectedtogeneratesolidgrowthlikeitspersonalspeakerphonefamilymembershavedoneinrecentyears.

in2015,theMobilebusinesslaunchedtwoadditionalproductsinthefast-growingSportsAudiosegment.Thetwonewproducts,JabraSportCoach™WirelessandJabraSportPace™Wireless,followJabraSportPulse™Wireless(launchedin2014),andJabranowoffersthestrongestSportsAudioheadsetportfoliointhemarket.ThefocusonSportsAudiosolutionsispartofthecontinuedeffortstopositiontheMobiledivisiontowardsfastergrowingsegmentsofthemarket.Overall,theimpactoftheJabraSportWirelessfamilyofproductscombinedwithincreasedinvestmentsinin-storemarketinghavedeliveredverygoodresultsin2015.

GNNetcomhascontinuedtoincreaseinvestmentsintomar-ketingandsales–particularlyontheNorthAmericanmarket,whichremainsthemostimportantgrowthopportunityforGNNetcom.GNNetcomhasagainincreaseditsmarketshareinNorthAmericaandisstronglypositionedgoinginto2016.

REVENUEinQ42015,GNNetcomdelivered8%organicgrowthinCC&Oand(4)%organicgrowthinMobile.intotal,GNNetcomdeliveredoverallorganicgrowthof3%inQ42015despiteadifficultcomparisonbaseof20%organicgrowthinQ42014.TherevenueforthequarterendedatDKK1,005millionwiththedevelopmentinforeignexchangeratesaffectingrevenueby9%.M&Aactivitiesdidnothaveanyimpactonrevenue.

TheCC&ObusinessgeneratedrevenueofDKK645millioninthefourthquarter–anincreaseof17%includingdevel-opmentinforeignexchangeratescomparedtoQ42014.TheUCbusinesscontinuedtoperformwellinthequarter,

2015 revenue split by region 2015 revenue split by business

47%

35%

18%

EMEA

NA

RoW

CC&O

Sports Audio

Other Mobile





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Jabra Sport Coach™ Wireless

Jabra Speak™ 810

Jabra Sport Pace™ Wireless

Jabra Sport Coach Wireless is part of the world’s first complete range of wireless sports earbuds. With intelligent

audio coaching and optimized for cross training, Jabra Sport Coach Wireless has in-ear coaching and is data

compatible with third party apps

Jabra Speak 810 is designed for mid-size meeting rooms and acoustically optimized for up to 15 people. Jabra Speak 810 is UC-focused, easy to use, has a competitive price and great sound.

This new speaker is an attractive addition to the highly popular Jabra Speak 410 and 510

Jabra Sport Pace Wireless are wireless earbuds optimized for fitness. The earbuds are an affordable solution to take

the next step on a fitness journey. Jabra Sport Pace Wireless features premium sound and ergonomic design. The

earbuds are sweat and weather resistant. As with the other products in the range, the Sport Life app can help plan,

track and analyze workouts

In 2015, GN Netcom continued to innovate the CC&O and Mobile categories. These are some of the best examples of how sound, user friendliness and functionality are optimized in the office space, the voice category and within sports audio

Product launches 2015





Contents







Forthefullyear2015,GNNetcom’sfreecashflowendedatDKK271million,comparedtoDKK340millionin2014.Thedecreaseisprimarilycausedbytheincreaseinnetworkingcapitalaswellasinvestmentsinproductdevelopment.Forthefullyear,GNNetcom’scashconversionremainedatanattractivelevelof50%.

BUSINESS HIGHLIGHTSOnMarch13,2015,GNappointedRenéSvendsen-TuneasCEOofGNNetcomandmemberofGNStoreNord’sexecu-tivemanagementwitheffectasofApril1,2015.RenéSvend-sen-Tunehasmorethan25yearsofmanagementexperienceinthetechnologysectorandin-depthknowledgeofGNNet-com’skeybusinessareas,includinginformationtechnologiesandtelecommunications.Healsohassignificantunderstand-ingandinsightintothebusinessofGNStoreNord,wherehehadservedasavaluedboardmembersince2007.

MarketingDuring2015,GNNetcommadesignificantimprovementsinitsapproachtocommercializinginnovation.Amongothers,GNNetcomestablishedaglobalmarketingorgani-zationcoveringboththeCC&OandMobiledivisionswithsignificantlyupgradedcompetenciesandhigherdegreeofspecialization.Asoneresult,thedigitalmarketingactivitiesweresignificantlyincreasedduringtheyear.Also,thelevelofinvestmentsintoco-marketingwithselectedchannelandretailpartnerswasincreasedconsiderablyduringtheyear.

CC&O GNNetcomfurtherstrengtheneditsportfolioofUCprod-uctsduring2015.inOctober2015,GNNetcomfortifieditsworld-leadingpositionwithinthemarketforUSB-enabledspeakerphoneswiththelaunchofJabraSpeak™810,apromisingextensionoftheproductportfolioalreadyconsist-ingofJabraSpeak410andJabraSpeak510.Withpremiumsoundqualityinmeetingroomsdesignedforupto15peo-ple,JabraSpeak810meetsthedemandsoftoday’sofficeworkers.TheJabraSpeakfamilyisatestimonytoGNNet-com’scommercializationcapabilitiesasthespeakerphonefamilypassedthe1,000,000unitssoldinAugust2015.

EBiTAmarginwhileinvesting,aspartofthecurrentstrategy,incontinuedgrowthandmarginexpansionin2016andbeyond.

inQ42015,thegrossmargininconstantcurrenciesendedat55.4%,comparedto54.9%inQ42014.Thepositiveunder-lyingdevelopmentisprimarilyreflectingabetterproductmixaswellasthefactthatCC&OgrewfasterthanMobile.includingtheimpactfromthedevelopmentinforeignex-changerates,thegrossmarginendedat51.5%.

Forthefullyear2015,thegrossmargininconstantcurren-ciesendedat55.5%(reportedgrossmarginof52.6%),whichisanimprovementofaroundtwopercentagepoints,re-flectingbetteroverallproductmix,andthestrongergrowthinthehigh-marginCC&Obusiness.

Theoperatingexpensesasapercentageofrevenuewerepracticallyflatat35.8%in2015comparedto35.4%in2014.inabsoluteterms,theoperatingexpensesendedatDKK1,157millionin2015–anincreaseof14%comparedto2014,primarilydrivenbythedevelopmentintheforeignexchangeratesbutalsoreflectingtheinvestmentsintostra-tegicgrowthinitiativesaspartofthe2014–2016strategy.

inventoriesasapercentageofrevenuehaveremainedratherconstant.TradereceivablesamountedtoDKK909millionbytheendof2015,comparedtoDKK761millionbytheendof2014,partiallyduetothestrongerUSDbutalsotoanincreaseinDaysSalesOutstanding(DSO).TheDSOlevelpeakedinQ12015andhasgraduallydecreasedthroughouttheyear.TradepayablesendedatDKK379mil-lion,comparedtoDKK326millionbytheendof2014.Asaresultoftheabovemovements,thenetworkingcapitalasapercentageofrevenueincreasedfrom12%in2014to15%in2015.

Thereturnoninvestedcapital(ROiC)endedtheyearat46.9%.Asexpected,ROiCdeclinedcomparedto56.5%bytheendof2014,primarilyduetotheincreaseinnetworkingcapital.Moreover,alargepartoftheinvestedcapitalisdenominatedinUSD,whyROiCinconstantcurrenciesendedat49%.

Mobile CC&OTraditional mobile

Integration of voice and music Traditional CC&O Unified Communications

Mono headsets

UC headsets

UC speakerphone

Car speakerphones

Sports Audio

Segments in GN Netcom





Contents







Jabra Evolve™ – an essential part of the office of the futureBased on its customer-focused value proposition and innovative features including concentration zone and advanced noise cancellation benefits, the Jabra Evolve™ product family continued its success in helping to alleviate some of the key challenges experienced by office workers today.

Whether working in an open office, working from home, taking a Skype call on the go or at the airport, the Jabra Evolve family enhances communication, concentration, collaboration and productivity.

In 2015, the innovative Jabra Evolve family contributed to growth and underpinned GN Netcom’s world-leading position in the UC segment. Especially the high-end Jabra Evolve 40, Jabra Evolve 65 and Jabra Evolve 80 proved their relevance and allowed GN Netcom to establish a new price point in the UC-segment.


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OPERATIONSCarefullyselectedsubcontractorsinChinamanufactureallofGNNetcom’shardwareandmostcomponentsaresourcedfromAsiansuppliers.GNNetcomisworkingwithapproximately10tier-onemanufacturerssupportedbymorethan100sub-suppliersinordertoproducethecom-prehensivevarietyofproductsintheproductportfolio.

Tooptimizelead-time,theCC&Odivisionmaintainsaregion-alpresenceatthreeregionalwarehouseslocatedintheUSA,theNetherlandsandHongKong.TheglobaldistributionofGNNetcom’sproductsishandledbyonepartnerrespon-siblefortheentireprocess–fromleavingthefactoriesviawarehousestothefinaldeliverytothespecificcustomer.

TheMobiledivisionismainlyoperatingasaconfigure-to-orderbusinesswherecustomersinNorthAmerica,EuropeandAsiaaresuppliedthroughasingleAsia-basedcenter.Thisset-upenablestheMobiledivisiontooperatewithlowinventoriesandtobemoreresponsivetochangesindemandatalowerrisk.

MARKET DEVELOPMENT

CC&O GNNetcomisestimatedtohavemaintaineditsmarketshareintheglobalCC&Omarketin2015.Themarketgrewslowerthananticipatedwhenenteringtheyear.Theunusualmarketconditionsduringthefirsthalfoftheyearreflectedanumberoffactors,includingMicrosoft’sintroductionofSkypeforBusiness,whichappearedtohavecreatedsomeshort-termuncertaintyaroundtheUCsolutionandledcorporationstoslowdownUCdeploymentstemporarily.Additionally,theiTindustrygenerallyreportedtemporarilyweakmarketconditionsinthefirsthalfoftheyear.

ThetotalCC&OmarketsizeisestimatedtobearoundUSD1.3billionin2015.Long-termgrowthintheCC&OmarketissupportedbytheexpectedfurtheradoptionofUC,drivenbyproliferationofsoftware-baseddesktopcommunicationsclients,productivitybenefits,includinghandsfreecommu-nicationsandanefficientworkenvironmentwithagrowingnumberofopenworkspaces.DetailsonUCcanbefoundonpage25inthisreport.

MobileTheBluetoothstereomarkethasgrownatdoubledigitratesin2015fueledbymorethan100%growthinSportsAudio,whereGNNetcomhasastrongcompetitiveproductportfo-lio.

TheBluetoothmonoheadsetshowedasignificantlyweakerthanexpecteddevelopmentin2015.itisestimatedthataroundaquarterofthemarketdisappearedfrom2014to2015asconsumerstradedawayfromthisheadsetcategory.

TheJabraEvolve™series,launchedinlate2014,continuedtodrivegrowthbasedonitscustomer-focusedvaluepropo-sitionandinnovativefeaturesincludingconcentrationzoneandadvancednoisecancellationbenefits.inacustomerstudy,90%respondedthatJabraEvolveincreasedproduc-tivity,and95%respondedthatJabraEvolvehadapositiveinfluenceontheadoptionofUC.ThestudyclearlyindicatesthatJabraEvolveisfulfillingitsintendedvaluepropositionofsolvingthekeychallengesexperiencedbyofficeworkerstoday.

Mobile inJune2015,GNNetcomlaunchedanewhigh-endproductintheSportsAudioheadsetportfolio,JabraSportCoachWireless,theworld’sfirstwirelessheadsetoptimizedforcrosstraining.Theheadsethasanintegratedmotionsen-sor,andtheadvancedSportLifeappprovidesreal-time,in-earcoaching.Furthermore,premiumDolbysoundqualitysecuresastate-of-the-artmusicexperience.DuringtheiFAinternationalconsumerelectronicstradeshowinBerlininSeptember2015,GNNetcomaddedtheJabraSportPaceWirelesstotheSportsAudioportfolio.

in2015,GNNetcomtookanimportantstepinthere-posi-tioningoftheproductofferingintheMobilesegmenttowardproductswheremusicandvoiceconverge.DuringtheiFAtradeshow,GNNetcomlaunchedJabraHaloFusion–aneck-wornheadsetdesignedtomeetthedemandsofdailyaudioandmediaconsumptionaswellasvoicecommunication.

AttheinternationalCESinLasVegas,USA,GNNetcomdemonstratedthelatestJabraproductinnovationstoitsmostimportantcustomers,andfeedbackwasveryposi-tiveemphasizingJabra’sclearstrategicfocusandenhancedbrandproposition.

R&DGNNetcomhastwoR&Dfacilities,onebasedinBallerup,DenmarkandonebasedinXiamen,China.Throughout2015,GNNetcom’sproductdevelopmentfocusedonce-mentingJabra’spositionastheworldleaderwithinprofes-sionalheadsetsthroughthecorecompetenciesofwirelesstechnologyandintelligentaudiosolutions.AsexemplifiedbytherecentlaunchesofJabraSpeak810,JabraSportCoachWireless,JabraSportPaceWirelessandJabraEclipse™,theinnovationinheadsetsandearbudscontinuedwithhighpacebasedonextensiveresearchintocustomerneedsandfocusedondeliveringoutstandinguserbenefits.

inrecentyears,softwarehasbecomeincreasinglyimportantinthedevelopmentofintelligentheadsetsandearbuds.Thedistinctivefunctionalitiesofdirectionalmicrophonesthateliminatebackgroundnoiseorappsusedforsportcoachingareexamplesofsoftwaretechnologybeingcriticallyimpor-tantfordeliveringproductbenefits.Softwareisalsoanim-portantcontributorindeliveringexcellentsoundexperienceasexemplifiedbytheintegrationofDolbysoundinproductslikeJabraSportPulseWirelessorJabraSportRox™Wireless.





Contents







Jabra Sport Pulse™ Wireless“ To be more than I was yesterday”

When Marianne Hüche was involved in a traffic accident and suffered a severe back injury she almost gave up on life. She embraced the role of a victim and overindulged in food to an extent that left her weighing 137 kilos. After a painful realization that only she could change this, she started training.

The training progressed slowly until one day her trainer told her that she was training too close to her maximum pulse zone. This is when she started training with Jabra Sport Pulse Wireless earbuds with a built-in heartrate monitor. Marianne feels it safer to get information about her pulse level with one tap on the earbuds than by looking at a monitor during a para-triathlon. Audio cues during interval training mean hitting the correct pulse in her peak and restitution zones. In her own words, pulse training has changed her life and let her do more than she ever thought possible. Marianne’s next goal is to qualify for the Paralympic Games in Rio in 2016.

Watch the full story


Contents







https://www.youtube.com/watch?v=LMCQLW4Kw-k

Corporate responsibilityGN Store Nord considers acting in a responsible manner to be crucial to managing a long-term sustainable successful global business. Examples of GN’s corporate responsibility activities in 2015 are extracted below

HUMAN AND LABOR RIGHTSPeopleEmployeesareGN’smostvaluableasset,andanengagedworkforceiskeytoachieveGN’sambitionsasacompany.Tomeasuretheengagement,GNregularlyconductsaglobalEngagementSurveyforthegroup.in2015,theresponseratewas95%.Resultsfromthissurveyshowthatemployeesarehighlymotivatedandcommitted.inGN,strongempha-sisisputonfollowinguponthesurveyresults,andmanag-ersandteamsatalllevelsworktoidentifyandexecuteonactionplanstoconstantlyimproveGNasaworkplace.

Supplier auditsEachyear,GNconductsanumberofauditsatitssuppli-ersamongotherswiththefocusonensuringthatGN’sstandardsoncorporateresponsibilityarereflectedinthesuppliers’businessconduct.Findingsin2015wereprimarilyrelatedtoexcessworkinghoursaswellashealthandsafetyissues.Thesefindingswereallmitigatedthroughactionplansprovidedbytheindividualsupplier.

ENVIRONMENTClimate partnershipin2013,GNestablishedaclimatepartnershipwithDONGEnergy.TheclimatepartnershipwillensurethatGNcontin-uestodecreaseitselectricityspendingwhileinvestinginsustainableinitiatives.

ANTI-CORRUPTIONWhistleblower systemGNhasimplementedtheAlertline,whichisaglobalwhistle-blowersystem.Thissystemallows,inmultiplelanguages,allemployeesandexternalstakeholderstoconfidentiallyreportillegalorunethicalconductviatheinternetorviaoneofthelocalAlertlinephonenumbers.in2015,theAlertlinewasrevitalizedthroughaglobalinternalinformationcampaign.

Business ethics and complianceGN’scommitmenttobusinessethicsandcompliancewithinternationalregulationandinternalpoliciesisanchoredinthecorporateethicsguide,thecodeofconductandotherinternalcorporateguidelines.Toensureanddocumentemployees’familiaritywiththecodeofethicsandkeypoli-ciesatalltimes,relevantemployeeselectronicallysignoffontheircompliancewithinspecificareasandtakeGN’snewe-learningcourseswithinanti-corruptionandcompetitioncomplianceonaregularbasis.

CITIZENSHIPSouth African hearing aid donation programGN’shearingaiddonationprograminSouthAfricacontin-uestoimprovequalityoflifeformanyimpoverishedSouthAfricans.ThedonationprogramprovidesrecipientswithnewhearingaidsalongwithprofessionalfittingbyaGN-educatedaudiologistatthelocalhospital,whichensuresahighlevelofusersatisfaction.

INTERESTED IN LEARNING MORE ABOUT GN’S RESPONSIBILITY ACTIVITIES? GN’sCommunicationonProgressreporttotheUnitedNationsGlobalCompactoutlinesGN’sfullcorporateresponsibilityactivitiesandisavailableonwww.gn.com/~/media/Documents/CSR/COP-2015.pdf.ThereportrepresentsGN’smandatoryaccountforcorporateresponsibilityaccordingto§99aintheDanishFinancialStatementAct.


32/MANAGEMENT’SREPORT / CORPORATERESPONSiBiLiTy

CORPORATE RESPONSIBILITY


GN Resound • GN Netcom • CORPORATE RESPONSIBILITY • Risk management

Contents







Risk managementOperating in business environments where the pace of innovation and change keeps increasing, GN’s executive management considers its proactive and systematic approach to risk management a valuable tool in our continuous efforts to stay ahead of new developments and compete in tomorrow’s marketplace

FacilitatedandsupportedbyGN’sriskmanagementfunc-tion,keyrisksareidentifiedandassessedbyGN’smanage-mentteamsonaregularbasisacrosstheentirevaluechain.

TheglobalmanagementteamsinGNReSoundandGNNetcomsubsequentlymeettoevaluatethemostsignificantrisksidentifiedacrossthetwobusinessesandtodeterminewhetheranyadditionalordifferentactionsshouldbetakeninordertomitigatethemorturnthemintoopportunities.

Atleastonceayear,therisksthatareassessedtobethemostmaterialarereportedtoanddiscussedwiththeauditcommitteeandsubsequentlytheboard.

Thisprocessisalsousedtoidentifyspecificriskareastobeanalyzedinfurtherdetail.Toexemplify,GNhasundertakenadeep-diveanalysisintokeysupplychainandinformationsecurityrisksduring2015,bothofwhichhavebeenevalu-atedwiththeauditcommitteeandledtospecificinitiativestofurtherreducetherisklevel.

Theoverallaimofthisintegratedapproachtoriskmanage-mentistoenableGNtoreaptherewardsofmorecoordi-nated,controlledandintelligentrisk-taking.

ThemainrisksassociatedwithGN’sbusinessandthemainmeasurestakentomanagethemareoutlinedbelow.

Main risks associated with GN’s business

RESEARCH AND DEVELOPMENT1 OPERATIONS2 MARKETING AND SALES3

FINANCIAL RISK6

INFORMATION SECURITY5

BothGNReSoundandGNNetcomoperateinmarketswithrelativelyshortproductlifecyclesandintensecompetition.Theabilitytodelivercontinuedinnovationandgrowth,therefore,increasinglydependsontheabilitytoantici-patetheneedsofthecustomersandusersanddevelopnewsolutionsandservices,whichtrulymeetthoseneedsonatimelybasis.

During2015,GNinitiatedseveralinitiativesaimedatenhancingtheabilitytounderstand,an-ticipateandshapecustomeranduserneeds,in-cludinganumberoforganizationalandprocesschanges.TheseinitiativesenableGNtofurtherstrengthenthedevelopmentofnewintelligentaudiosolutions.

RISK CHARACTERISTICS MITIGATING ACTIONS

RESEARCH AND DEVELOPMENT

1

INTELLECTUAL PROPERTY RIGHTS4


33/MANAGEMENT’SREPORT / RiSKMANAGEMENT

RISK MANAGEMENT


GN Resound • GN Netcom • Corporate responsibility • RISK MANAGEMENT

Contents








MANUFACTURiNG–GNRESOUND

SomeofthekeycomponentsforthehearinginstrumentscommercializedbyGNReSoundareproducedatGNReSound’sownfacilityinDenmark.ThemainhearingaidmanufacturinganddistributionsitesarelocatedinChinaandMalaysia.Operatingthesefacilitiescomeswithanunlikelyriskoffireorothertypesofdisasterevents,whichcouldnegativelyaffecttheabilitytosupplythemarket.

Throughthepastfewyears,GNhassignificantlyreduceditsexposuretosuchrisksatproductionanddistributionsites.AttheDanishsite,GNiniti-atedtheconstructionofanewbuildingfurtherawayfromtheexistingonein2015,whichsignifi-cantlyreducestheexposure.in2015,theofficialopeningofanewmanufacturinganddistributionsiteinMalaysiatookplace,whichsignificantlyreducestheriskofbusinessinterruptionbycom-plementingtheexistingsiteinChina.

MANUFACTURiNG–GNNETCOM

ThemanufacturingofallGNNetcom’sproductsisoutsourcedtoanumberofcarefullyselectedcontractmanufacturers.WhilethissetupishighlyflexibleandmakesGNNetcomcapableofquicklyadaptingitsproductionleveltofluctua-tionsinmarketdemand,italsoentailsanumberofinherentrisksrelatedtothedependenceontimelydeliveriesandconsistentproductqualityfromGN’smanufacturingpartners.

Thankstoastrongbusinessrelationshipattopmanagementlevel,GNNetcomisinaposi-tiontoentertainongoingdiscussionswithitsmaincontractmanufacturersontheirbusinesscontinuityplansinordertoensurethatbusinessinterruptionrisksareminimized.During2015,theanalysisofkeymanufacturingrisksshowedapotentialforfurtherreducingtheexposurethroughphysicalseparationofcertainmanufac-turingactivities.Therelevantcontractmanufac-turersarenowimplementingthis.

SUPPLY CHAIN

GNReSoundandGNNetcombothdependontheirsupplychainsforthetimelydeliveryofcriti-calmaterialsandcomponents,whichmustmeettheirhighqualitystandards.Failureofanyofthekeysupplierstomeetagreeddeliverablesmaynegativelyaffecttheabilitytoaccommodatede-mandforGNproductsorresultinsafetyissues.

ToensurethatGNalwayshasappropriateriskmitigationplansinplaceforthemostcriticalmaterialsandcomponents,GNhasdevelopedatooltoquantifythefinancialexposuretoalong-terminterruptionofsuppliesfromallkeysuppliers.Thisprovidesaninformedbasisfordecidingwhetheradditionalmeasuresmustbetakentobringtheriskdowntothedesiredlevel.Wherepossibleandfeasible,GNpursuesadualsourcingstrategyaimedatensuringthatGNisabletosourcethesametypeofcomponentfromatleasttwodifferentsuppliers.Forsomeuniquesuppliers,othermeasuresareconsideredtoreducetherisk,suchashigherinventorybuf-fers,dualsetsofproductionequipmentorotherinitiatives.

OPERATIONS

2

GNRESOUND

GNReSoundgeneratespartofitsrevenuefrompublictendersandanumberoflargeretailerswhooccasionallyputtheirbusinessupfortender.ThismeansthatGNReSoundisexposedtotheriskoflosingbusinessasthesearere-tendered.

Thisriskisreducedthroughcontinuouseffortstodevelopnewsuperiorsolutionsandservicesinalignmentwiththeirspecificneedsandbydevelopingstrongandclosepartnershipswiththecustomerstohelpthemfurtherenhancetheirvalueproposition.

MARKETING AND SALES

43

GNNETCOM

GNNetcomremainswellestablishedandposi-tionedasoneoftheworld’stwoleadingplayersinthefast-growingmarketforUnifiedCom-munications(UC)headsets.However,theveryattractivegrowthratesalsoentailariskthatnewcompetitorsenterthemarketandchallengeGN’spositioninthissegment.

GNNetcomcontinuallyworkstomaintainandexpanditsleadingpositionbydevelopinginnova-tiveanduniquesolutionsbasedondeepinsightsintonewtrendsanddevelopmentsinuserpref-erences,purchasingbehavior,technologyandotherkeytrendsshapingfuturecustomerneeds.





Contents








GN’sbusinessdependstoalargeandincreasingextentonreliableandsecureiTsystems.FailuretoadequatelyprotecttheiTinfrastructureandkeysystemsagainsttheriskofsecurityincidentscouldpotentiallyleadtounintendeddisclosureofbusiness-criticalconfidentialdataorsensitivepersonaldata,whichmaynegativelyaffectGN’scompetitiveposition,damageitsreputationand/orresultinfines.

GNaimstominimizetheserisksthroughawiderangeofmeasures,suchastechnicalsecuritycontrols,variousprocesscontrolsandinternalemployeeawarenesscampaignsbasedonitsiTsecuritypolicyframework.During2015,GNhadateamofexternalsubjectmatterexpertsconductathoroughinformationsecurityriskanalysisinordertoidentifyopportunitiesforfurtherstrengtheningofthedefensesandensurethatGNstaysontopofevolvingthreats.

4

INFORMATION SECURITY

5

Duetothenatureoftheoperations,invest-mentsandfinancingactivities,GNisexposedtoanumberoffinancialrisks.GNhascentralizedthehandlingofthesefinancialrisksexceptforcommercialcreditrisk,whichismanagedbythegroup’soperatingbusinesses.ThefinancialrisksaremanagedinaccordancewiththeoverallfinancialriskmanagementguidelinessetoutinGN’streasurypolicy.

Basedonthecurrentrevenueandcostcomposi-tion,thetablebelowoutlinestheprimaryforeignexchangeexposuresforGNin2016beforeanyimpactfromhedging.inadditiontotheex-posuresoutlinedinthebelowtable,GNhasasignificantexposuretoEURinbothGNReSoundandGNNetcom,whichhistoricallyhasbeenpeggedtotheDKK.Theexposureis,however,partlyhedgedviabankloans,whicharemainlydenominatedinEUR.

GN’scontinuedambitiontodistributefundsbacktoitsshareholdershasledtoanincreasingnetinterest-bearingdebtduring2015,whichendedatDKK2,212million.GN’sloansarebasedonshorttermEURiBORandCiBORinterestrates.

GNishedgingthevastmajorityoftheexpectedEBiTAexposureforthenext12monthsinthematerialtradingcurrenciesinbothGNReSoundandGNNetcom.ThehedgingpracticeentailsthattheEBiTAeffectfromforeignexchangedevelopmentisessentiallypostponedoneyearwhilethemajorityoftheimpactonrevenuewillbeseenimmediately.Pleaserefertotheoutlooksectionforadetaileddescriptionofthe2016guidance.

TomitigatetheinterestrateriskGNhashedgedthemajorityofthedebtbyinterestrateswaps,meaningthattheweightedmaturityofthedebtisaroundfouryears.

Pleaserefertonote4.2forfurtherinformationaboutfinancialrisks.

4

FINANCIAL RISK

6

ANNUAL EBITA IMPACT FROM A 5% INCREASE IN CURRENCY EXCLUDING HEDGING (DKKmillion) Currency GN ReSound GN Netcom GN Store NordUSD 52 (1) 51

GBP 9 7 16

JPy 8 2 10

CNy (8) 0 (8)

CAD 6 0 6

AsGNoperatesinhighlyinnovativeindustriesandwithincreasedfocusonwirelesstechnolo-giesandsoftware,thereisariskthatthefree-domtooperateisrestrainedbypatentbarriers,preventingcommercializationofcertainproductsorsolutionsorforcingGNtopayroyalty.

During2015,GNfurtherstrengtheneditsiPRorganizationandpatentportfoliotoprotectitsfreedomtooperatewithincurrentandfutureinnovationspacesandtodefenditselfincaseofpatentinfringementclaimsbeingbroughtagainstGN.

INTELLECTUAL PROPERTY RIGHTS

(IPR)

4





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Shareholder distribution(DKK million)

Development in outstanding shares(Million)

SHARE PRICE PERFORMANCE ThepriceoftheGNshareendedatDKK125onDecember31,2015,whichisequivalenttoadecreaseof7%comparedtotheendof2014.ThetotalmarketvalueofGN’sshares,excludingtreasuryshares,wasDKK19billionattheendof2015.

GNis,amongothers,includedintheOMXC20CapandLargeCapindexesonNasdaqCopenhagenaswellastheStoxxEurope600indexandtheStoxxEuropeanSustain-abilityindex.

OWNERSHIP TheGNstockis100%freefloat,andthecompanyhasnodominantshareholders.T.RowePriceAssociatesinc.,Mara-thonAssetManagementLLPandAPGAssetManagementN.V.havereportedanownershipinterestinexcessof5%ofGN’ssharecapital.ForeignownershipofGNisestimatedtobearound65%.

Attheendof2015,approximately30,000registeredshare-holdersheldabout92%ofthesharecapital.Thetenlargestregisteredshareholdersheldintotalabout45%oftheGNsharecapitalattheendof2015(includingGN’sholdingoftreasuryshares).

SHARE CAPITAL AND VOTING RIGHTS GN’ssharecapitalofDKK648,765,076consistsof162,191,269shares,eachcarryingfourvotes.GNhasoneshareclass,andtherearenorestrictionsonownershiporvotingrights.

TREASURY SHARES OnDecember31,2015,GNheldtreasurysharescor-respondingto6.1%ofthesharecapital,andthevalueofthetreasuryshareswasDKK1,245million.AttheannualgeneralmeetingtobeheldinMarch2016,theboardofdirectorswillproposetoreducethecompany’ssharecapitalbycancelling7,403,340sharesequivalenttoalltreasurysharesheldtodayinexcessof4,000,000shares-whichareheldforhedgingoflong-termincentiveprograms.Untiltheannualgeneralmeeting,theboardofdirectorsisauthorizedtoacquiresharesinGNofupto10%ofthecompany’ssharecapital.

DIVIDEND POLICY AND SHARE BUYBACK PROGRAMS GN’soverallfinancialtargetistodeliveracompetitiveshareholderreturnthroughacombinationofdividendpay-mentsandsharepriceappreciation.GNaimstopayoutadividendcorrespondingto15-25%oftheannualnetprofitandtodistributeadditionalexcesscashtoshareholdersthroughsharebuybackprograms.

Shareholder informationThrough an open and active dialog, GN Store Nord strives to provide all stakeholders with timely and relevant information to ensure a fair pricing of the GN share

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36/MANAGEMENT’SREPORT / SHAREHOLDERiNFORMATiON

SHAREHOLDER INFORMATION


SHAREHOLDER INFORMATION • Corporate governance • Board of directors • Executive management

Contents



SHAREHOLDER INFORMATION & GOVERNANCE




Share price development vs peers

Dividendpaymentsandsharebuybacksaresubjectto,amongotherthings,cashrequirementstosupporttheon-goingoperations,strategicopportunitiesandthecompa-ny’scapitalstructure.itisGN’slong-termtargettomaintainacapitalstructureconsistingofequityanddebtwiththenetinterest-bearingdebtamountingtouptotwotimesEBiTDA.Bytheendof2016,thenetinterest-bearingdebtistargetedtobearound1.7timesEBiTDA.

Attheannualgeneralmeetingin2016,theboardofdirec-torswillproposetopayoutatotaldividendofDKK161mil-lion(equivalenttoDKK0.99pershareand20%ofthe2015netprofit)inrespectofthe2015financialyear,comparedtoDKK151millionin2014(equivalenttoDKK0.90pershareand19%ofthe2014netprofit).

INCENTIVE PROGRAMS Bytheendof2015,thetotalnumberofoutstandingwar-rantsinGNReSoundwas13,533(2.1%ofthesharecapitalinGNReSoundequivalenttoapproximately1.6%ofthesharecapitalinGN).Thetotalnumberofoutstandingwar-rantsinGNNetcomwas7,374(2.2%ofthesharecapitalinGNNetcomequivalenttoapproximately0.8%ofthesharecapitalinGN).

INVESTOR RELATIONS POLICY AspartofGN’sinvestorrelationsactivities,anactivedialogispursuedwithexistingandpotentialshareholdersaswellaswithfinancialanalysts.GNensuresthatrelevantandtimelyinformationisprovidedtothefinancialcommunitytoensurethattheGNshareisfairlypriced.Thisisaccom-plishedthroughinformationcontinuallyannouncedtothe

marketascompanyannouncements,combinedwithinves-tormeetings,conferencesandpresentationsofthecom-pany’sinterimandannualresults.

Followingthereleaseofinterimandannualresults,GNcon-ductsroadshowswheretheexecutivemanagementandtheinvestorrelationsteaminforminvestorsandfinancialana-lystsabouttherecentdevelopmentsinthecompany.GNiscurrentlycoveredby27sell-sideanalystswhocontinuallyreleaseanalystresearchreportsonGNandtheindustrydy-namics.AfulllistoftheanalystscoveringGNcanbefoundonthewebsitewww.gn.com/investor

GNhasafour-weeksilentperiodpriortopublicationofafinancialreport.Duringthesequiteperiods,whichcanbefoundonwww.gn.com/investor,anycommunicationwithstakeholdersisrestricted.

GN’swebsite–www.gn.com–containshistoricandcurrentinformationaboutGN,includingcompanyannouncements,currentandhistoricsharepricedata,investorpresentationsandannualandinterimreports.

Theinvestorrelationsteamcanbecontactedat:[email protected]

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Financial calendar for 2016

Event Date

Annualgeneralmeeting: March10,2016 attheRadissonBluFalconer, Copenhagen

interimReportQ12016: May4,2016

interimReportQ22016: August11,2016

interimReportQ32016: November3,2016

Companyannouncementscanbeviewedon:www.gn.com/news


37/MANAGEMENT’SREPORT / SHAREHOLDERiNFORMATiON


SHAREHOLDER INFORMATION • Corporate governance • Board of directors • Executive management

Contents







http://www.gn.com/Investor

http://www.gn.com

http://www.gn.com/news

Corporategovernancereferstothewayacompanyisman-agedandcontrolledthroughownership,managementstruc-ture,incentiveschemesetc.GNstrivestobuildtrustedrela-tionshipswithcustomers,shareholders,suppliers,employeesandthecommunity,andaimstoincreasetransparencyandactiveownership,includingsharinginformationandengag-inginaregulardialogwithallofthestakeholders.

TheboardofdirectorsfollowsallrecommendationsoncorporategovernanceaimedatcompanieslistedonNas-daqCopenhagen.Onitswebsite,GNprovidesastatutoryreportoncorporategovernance.Thisoverview,aswellastheriskmanagementandinternalcontrolsystemsrelatedtofinancialreportingdescribedintheriskmanagementsectioninthisreport,formsthestatutoryreportoncorpo-rategovernancethatisrequiredundersection107boftheDanishFinancialStatementsAct:www.gn.com/~/media/Documents/Corporate-governance/Statutory-reports/Statutoryreport2015.pdf

BOARD OF DIRECTORS

Composition and responsibilities of the board of directorsGN’sboardofdirectorsconsistsofsixdirectorselectedbytheshareholdersattheannualgeneralmeetingandthreeemployeerepresentativeselectedbytheemployeesbasedinDenmark.Membersoftheboardofdirectors,electedbytheshareholdersattheannualgeneralmeeting,areelectedforanannualtermuntilGN’snextannualgeneralmeeting.

Boardmemberswhoretireareeligibleforre-election.Boardmemberscanbeelectedtotheboardofdirectorsuntiltheannualgeneralmeetinginthecalendaryearinwhichthememberreaches70yearsofage.EmployeerepresentativesareelectedinaccordancewiththeDanishCompaniesActfortermsoffouryears.

Theboardofdirectorsisresponsibleforsafeguardingtheinterestsoftheshareholderswhileatthesametimeconsid-eringallotherstakeholders.Atleastonceayear,theboardofdirectorsassessesthemostimportanttasksbasedontheoverallstrategicdirectionofthecompany,includingthefinan-cialandmanagerialsupervisionofthecompany.Aspartof

Corporate governanceGN Store Nord has a strong focus on corporate governance and has strengthened its processes and control systems in 2015

GN ReSound organization GN Netcom organization

Executive management

Board of directors

Shareholders

GN Store Nord’s framework for corporate governance

GN’sgroupstructureconsistsoftwoseparatelyoperatedbusinesseswithdedicatedmanagement.TheCFOofGNStoreNord,theCEOofGNReSoundandtheCEOofGNNetcomconstituteGNStoreNord’sexecutivemanagement.TheboardmembersofGNStoreNordareelectedatGN’sannualgeneralassembly.


38/MANAGEMENT’SREPORT / CORPORATEGOVERNANCE

CORPORATE GOVERNANCE


Shareholder information • CORPORATE GOVERNANCE • Board of directors • Executive management

Contents







http://www.gn.com/~/media/Documents/Corporate-governance/Statutory-reports/Statutoryreport2015.pdf



thesupervision,theboardofdirectorsevaluatestheperfor-manceoftheexecutivemanagementonacontinuousbasis.

Competencies of the board of directorsGN’sboardofdirectorsstrivestorecruitboardmemberswithadiversifiedrangeofmutuallycomplementarycompe-tencies.Whentheboardofdirectorsproposesnewboardmembers,aCVaswellasathoroughdescriptionofthecan-didate’squalificationswillbeavailabletotheshareholders.GNisagloballeaderandtosuccessfullydevelopandmain-tainthispositioninthemarketplace,GNisdependentuponglobalexpertiseandexperienceattheboardlevel.Theboardofdirectorsistodayadiversifiedgroupintermsofglobalex-perience,functionalcompetenciesandindustrybackground,whichensuresthatitcanfulfillitsobligations.Membersarepossessingmedtechexpertise,innovation,productdevelop-ment,onlinemarketingandcommercializationcapabilities,thoroughunderstandingoffinancialandhumanresourcemattersandin-depthknowledgeofGN’sbusiness.

Attheendof2015,theboardofdirectorscarriedoutaself-evaluation.Theself-evaluationincludestheachievementsoftheboardaswellasthoseofthechairmanandtheindividu-alboardmembers.Theevaluationiscarriedoutannuallyinasystematicwayandisbasedonwell-definedcriteria.

Theself-evaluationconcludedthatmorevisitstosalesandproductionsiteswouldbebeneficial,andincreasedexpo-suretomiddlemanagementaswellasincreasedmarketandcompetitionanalysiswouldbeadvantageous.

Thecompositionoftheboardisamixofboardmemberswithexecutivepositionsandprofessionalboardmembers,butalsoconsistsoffemalesandmalesaswellasofbothDanishandforeignnationalities.Thiscompositionisdeemedtoprovideagoodbalancebetweenknowledge,competen-cies,experienceandavailabilityforthesubstantialworkload.

Diversity and talent managementTheboardofdirectorsfundamentallybelievesthatdiversitystrengthensanygoverningbodyandacknowledgestheimportanceofdiversityingeneral,includingdiversityofgender,nationalityandcompetencies.intheGNStoreNordAnnualReport2012,theboardofdirectorsdeclaredagoaltoseeonetotwowomenelectedfortheboardbytheendof2017.Sincethen,HélèneBarnekowwaselectedfortheboardattheannualgeneralmeetingin2013,andRonicaWangwaselectedin2015.Now,theboardofdirectorsaimstohavethreefemaleboardmembersbytheendof2020.

Moreover,thecompanyfollowsanactionplantoincreasethenumberofwomeninseniormanagementpositions.SpecialattentiontothisareaisgiveninGN’syearlytalentreviewandsuccessorplanningprocess,intalentdevelop-

mentpractices,recruitmentproceduresandleadershipdevelopment.Currently,womenfill15%ofthecompany’sseniormanagementpositions,andGNaimsatincreasingthenumberto25%in2017,atargetsetin2012,althoughrecognizingitwillbechallengingtoachieve.Thus,GNcon-tinuestostrengthenitseffortstobuildapipelineoffuturefemalecandidates.Furtherinitiativesfor2016arepresentlybeingidentifiedandwillbeimplementedin2016tosecurestrongerprogress.

RemunerationGNpursuesapolicyofofferingtheboardofdirectorsandtheexecutivemanagementremunerationthatiscompeti-tivewithindustrypeersandotherglobalcompaniestoat-tractandretaincompetentprofessionalleadersofthebusi-nessesandmembersoftheboardofdirectors.Remunera-tionoftheexecutivemanagementisbasedonafixedbasesalaryplusatargetbonusofupto50%ofthebasesalarywithapotentialtounderperformoroutperformthetargetleadingtoaneffectivepotentialbonusrangeof0-100%ofthebasesalary.Thecompanydoesnotmakepensioncontributionsformembersoftheexecutivemanagement,andtheexecutivemanagementhasseveranceandchange-of-controlagreementsinlinewithmarketterms.Conditionsfornoticeofterminationaredeterminedindividuallyforeachmemberoftheexecutivemanagement.Thecompanyhasfixedaterminationnoticeof12monthsifgivenbythecompanyandsixmonthsifgivenbyamemberoftheexecutivemanagement.

Membersoftheboardofdirectorsreceivefixedremunera-tion.Theyarenotawardedshareoptions,nordotheyparticipateinotherincentiveprograms.Boardmembers,executivemanagementandseniormanagementareencour-agedtobuyandownsharesinGN.

BOARD COMMITTEES

ChairmanshipThechairmanandthevicechairmanformthechairmanshipoftheboard.Thechairmanshippreparesandorganizestheworkoftheboardofdirectorswithaviewtoensurethattheboardperformsitstasks,dutiesandresponsibilitiesinanefficientandresponsiblemanner.Thechairmanshipalsoperformspreparatorytasksforandadvisetheboardinrelationtointeralia:businessstrategy,implementationofstrategy,businessdevelopment,budgetandprojects,andperformsindepthbusinessreviewsofselectedareas.

Audit committeeAccordingtoitscharter,theauditcommittee,amongotherthings,assiststheboardofdirectorsinrelationtointernalaccountingandfinancialcontrolsystems,theintegrityofthecompany’sfinancialreportsandengagementswithexter-





Contents







nalauditors.Theauditcommitteealsocarriesoutongoingassessmentsofthecompany’sfinancialandbusinessrisks.in2015,extensivetimewasspentonreviewingthefinancialimpactofthediscoveredaccountingfraudintheBeltonefran-chisenetworkandthealreadyplannedstrengtheningofthefinancefunctions,controlmechanismsinplaceandtheexter-nalaudit(discussiononthematerialityleveloftheaudit).inaddition,thecommitteereviewedthewhistleblowerreportingsystem,mainaccountingprinciples,taxstrategyandcompli-anceandkeyrisks(includingidentifiedsupplierrisks)etc.

Remuneration committeeAccordingtoitscharter,theremunerationcommitteeassiststheboardofdirectorsinmattersanddecisionsconcern-ingremunerationoftheexecutivemanagementandsenioremployeesandinensuringthatthegeneralremunerationpoliciesreflectanappropriatebalance.Resolutionsonremunerationrecommendedbytheremunerationcommit-teeandadoptedbytheboardofdirectorsareinlinewiththeguidelinesforincentivepay,asapprovedbytheannualgeneralmeetingandbytheboard.The2015remunera-tionpolicyfortheexecutivemanagementisbasedontheremunerationguidelinesandtakesintoaccountthecorpo-rategovernancerecommendationsofNasdaqCopenhagenandtherequirementsoftheDanishCompaniesAct.in2015,theremunerationcommitteesupervisedandreviewedtheremunerationpolicy,salary,bonus,long-termincentiveprocessandresults.italsoreviewedthedesignofsalesincentiveplansandwarrantgrants,talentdevelopmentandsuccessionplanningprocessandresults.Moreover,theGNengagementsurveyresults,developmentofguidelinesonbonussettlementsforemployeesstartingmid-yearandapolicyonexternalboardpositionsforexecutivemanage-mentaswellasasetofnewGNleadershipcompetencies,werealsorevisedandsupervised.

Strategy committeeitisvitalforGNtomaintainandfurtherenhancethetech-nologicalcorecapabilitiesofthecompany.Thus,theboardofdirectorshasdecidedtoinvestinanumberofexplora-toryresearchprojectsaimingatdiscoveringpotentialfuturebusinessopportunitiesoutsidetheimmediateareaofwhereGNResoundandGNNetcomoperatetodaybutleverag-ingcoreknowledgeandcompetenciesofGN.in2015,thestrategycommitteeestablishedtheGNScientificAdvisoryBoardasplanned.TheadvisoryboardisavirtualresearchnetworkinvolvingthebestandmostadvancedresearchspecialistswithincoretechnologiesforexistingandfuturebusinessareasofGN.TheboardgivesGNtheopportunitytoexploretechnologicalinnovationswithinthebroadertechnol-ogyspaceandsupporttheprocessofnewbusinessareas.Thisstrategicinitiative,independentofGNReSoundandGN

Netcom,isacorporateGNinitiativereportedunderOtheractivities.in2016,thestrategycommitteewillcontinueitsexploratorywork.

Nomination committeeAccordingtoitscharter,thenominationcommitteeadvisesandmakesrecommendationstotheboardofdirectorsinrelationtotheskillsthattheboardofdirectorsandtheexecutivemanagementmusthavetobestperformtheirtasks.Annually,thenominationcommitteeevaluatesthestructure,size,compositionandperformanceoftheboardofdirectorsandtheexecutivemanagementandmakesre-commendationstotheboardofdirectorswithregardtoanychanges.Theboardofdirectorsbelievesinaglobal,trans-parentandthoroughsearchandselectionprocessforboardcandidates.Thenominationcommitteepreparestheboardofdirectors’workbyselectingcandidateswiththehelpofaprofessionalglobalsearchfirm.in2015,primaryactivitiesincludedthenominationofRonicaWangasmemberoftheboardofdirectorsandtheauditcommitteeandthenomi-nationofRenéSvendsen-TuneasCEOofGNNetcom.

Internal audit functioninaccordancewithitscharter,theauditcommitteeannuallyconsiderstheneedforaninternalauditfunction.Basedontherecommendationsoftheauditcommittee,theboardofdirectorsdetermineswhethertheinternalcontrolsystemsareadequate.

in2015,areorganizationandconsolidationofGN’sfinancialcontrollingorganizationstookplace,andthefunction’scom-petenceswerestrengthened.ThiswasalreadyintheprocessofbeingimplementedbeforethefraudcaseintheBeltonedistributionnetworkwasdiscovered.However,inlightofthiscase,certainadditionalinitiativestookplace:astrengtheningoftheproceduresforcontrollervisitsatsubsidiaries,revital-izinganinternalcontrolprojectandupdateoftheauthoritylevelpolicy.Moreover,anewFinanceDirectorforBeltonehasbeenrecruitedandwillbereportingtotheVPofFinanceforGNReSoundNorthAmerica.

Theboardofdirectors’assessment,whichisbasedonthecompany’ssizeandtheorganizationofthefinancedepart-ment,isthatthereisnoneedtoestablishaninternalauditfunctionatthistime.

WHISTLEBLOWER REPORTING SYSTEMGNhasimplementedtheAlertline,aglobalwhistleblowersystem,whichcanbeaccessedatgnstorenord.alertline.eu.Thissystemallows,inmultiplelanguages,allemployeesandexternalstakeholderstoconfidentiallyreportillegalorunethicalconductviatheinternetorviaoneofthelocal





Contents







http://www.gnstorenord.alertline.com

Alertlinephonenumbers.Thesystemisanimportanttooltoensurethatallegationsofillegalorunethicalconductarereportedandaddressedfast.Allcomplaintsaretreatedwithconfidentiality,andGNwillnotdischarge,demote,suspend,threaten,harassorinanyotherwaydiscriminateagainstanemployeeduetoanylawfulaction(s)takenbytheem-ployeewithrespecttogoodfaithreportingofcomplaintsorparticipationinarelatedinvestigation.in2015,theAlert-linewasrevitalizedthroughaglobalinternalinformationcampaign.

Business ethics and complianceGN’scommitmenttobusinessethicsandcompliancewithinternationalregulationandinternalpoliciesisanchoredinthecorporateethicsguide,thecodeofconductandotherinternalcorporateguidelines.TheseoutlinethefundamentalrequirementsforhowGNoperatesanddescribetherespon-sibilitiesandethicalstandardsexpectedofallemployeesandrelevantbusinesspartners.Toensureanddocumentemploy-ees’familiaritywiththecodeofethicsandkeypoliciesatalltimes,relevantemployeeselectronicallysignoffontheircompliancewithinspecificareasandtakeGN’snewe-learn-ingcourseswithinanti-corruptionandcompetitioncompli-anceonaregularbasis.Thisissupplementedwithface-to-facecompliancetrainingforselectedgroupsofemployees.

SHAREHOLDERSGNaimstoincreasetransparencyandpromoteactiveowner-shipamongshareholdersthroughanopenandactivedialogbyongoingcommunicationwithourshareholdersattheannualgeneralmeetingandthroughinvestorpresentations,newsletters,conferencecalls,thecompanywebsite,web-casts,interimreports,theannualreport,companyannounce-mentsandmediaoutreachactivities.GNisservicingnationalaswellasinternationalinvestors,andGNensuresacontinu-ingdialogwithshareholders,whetherexistingorpotential,aswellasequityanalysts.Onthecompany’swebsite,www.gn.com,detailedmaterialontheinterestsoftheshareholderscanbefound.GN’ssharesare100%freefloat,andshare-holdershavetheultimateauthorityoverthecompanyandexercisetheirrighttomakedecisionsattheannualgeneralmeetingwheretheyalsoapprovetheannualreportandelectboardmembersandtheindependentauditor.Formoreinfor-mation,pleaseseeshareholdersectiononpages36-37.

Notices for the annual general meetingGNsendsnoticestoconveneannualgeneralmeetingsbyemail.Thus,weencourageallourregisteredshareholderstosignupattheinvestorportalwiththeiremailaddressesandchecktheboxlabeled“email”inthefield“Noticetoconveneannualgeneralmeeting”.Shareholderswillthenreceivethenoticebyemailinthefuture.

Overview of meetings 2015

Board Chairman- Strategy Audit Remuneration Nomination meeting ship committee committee committee committee

January

February

March

April 1

May

June 1 2 2

July

August

September 1

October

November

December

Total 15 16 9 5 7 2

1) Marketing / brand session

2) GN ReSound and GN Netcom strategy meeting





Contents







http://www.gn.com

http://www.gn.com

CARSTEN KROGSGAARD THOMSEN

M.Sc.(Economics).CFO,NNiTA/S.

Memberoftheboards ofGNNetcomA/SandGNReSoundA/S.

Extensiveexpertisewithinfinance, accounting,auditing, riskmanagement,iT,M&A,postmergerinte-grationandinitialpublicofferings(iPO)aswellasbondandhybridcapitalfinancingfromexecutive positionsinboththepublicandprivatesector.

2008

2015/2016

yes

Danish

1957

31,964

750,000

Board positions

Special competencies

Board member since

Term

Considered independent

Nationality

Year of birth

No. of GN shares

Total remuneration DKK

Chairmanship

Audit committee

Nomination committee

Remuneration committee

Strategy committee

GN ReSound A/S board

GN Netcom A/S board

Board of directors

PER WOLD-OLSEN (Chairman)

MBA.FormerlypresidentwithMerck&Co.,inc.,intercontinentalDivision,USA.Chairmansince2008.

ChairmanoftheboardsofGNNetcomA/SandGNReSoundA/S.ChairmanoftheboardofMedicinesforMalariaVentureandmemberoftheboardsofExiqonA/S,GileadSciencesinc.andNovoA/S.

Extensivegloballeader-shipexpertiseandknow-ledgeofthehealthcareindustry.BringsauniquesetofcapabilitiesandvaluestotheboardofGNStoreNordwithinmarketingandproductdevelopmentaswellascommercializationofin-novation.Alsopossessesin-depthknowledgeoftheUSmarketaswellasemergingmarkets.

2008

2015/2016

yes

Norwegian

1947

224,884

1,850,000

WILLIAM E. HOOVER, JR. (Deputy chairman)

MBA.Formerlywith McKinsey&Company for30years.Deputychairmansince2008.

ChairmanoftheboardofReDAssociatesandtheGNStoreNordFounda-tion.Deputychairman oftheboardsofGNNet-comA/SandGNReSoundA/S.MemberoftheboardsofDanfossA/S,LegoFoundation,NeopostSAandSanistålA/S.

in-depthknowledgefromworkingwiththelargestindustrialandhigh-techcompaniesintheNordicregionwithinstrategy,organizationandM&A.Experiencedwithsupplychain/operationsandhaspracticalexperienceinhelpingNordicmultina-tionalsrapidlyscaleupinemergingmarkets,espe-ciallyinChinaandindia.

2007

2015/2016

yes

American

1949

156,500

1,225,000

WOLFGANG REIM

Ph.D.inphysics.Profes-sionalboardmemberandself-employedconsult-antwithinthemedicalindustry.

ChairmanoftheboardofOndalMedicalSystemsGmbH.MemberoftheboardsofElektaA/S,GNNetcomA/SandGNReSoundA/SandMed-LumicsS.L

Globalleadershipexperi-encefromthehealthcareindustryandspecialknowledgeintheareasofbusinessprocessre-engineering,innovationmanagement,globalsourcingandsupplychainmanagement.ContributestotheboardwithextensiveM&Aunderstanding.

2008

2015/2016

yes

German

1956

51,000

900,000


42/MANAGEMENT’SREPORT / BOARDOFDiRECTORS

BOARD OF DIRECTORS


Shareholder information • Corporate governance • BOARD OF DIRECTORS • Executive management

Contents







Employee elected members

HÉLÈNE BARNEKOW

M.Sc.(internationalBusiness).CEO,TeliaSweden.

Memberoftheboards ofGNNetcomA/SandGNReSoundA/S.

Uniquecapabilitieswithingeneralcommer-cialmanagementandmarketing,includinggo-to-market,branding,communications,productmanagementandchan-nelmanagementfromthemobilecommunica-tionsandiTsector.

2013

2015/2016

yes

Swedish

1964

8,900

600,000

RONICA WANG

MBA(BusinessAdminis-tration),B.A.Sc.(industrialEngineering).Co-founder&globalmanagingdirec-torinnoGrowthGroupLtd.

MemberoftheboardsofGNNetcomA/SandGNReSoundA/S.MemberoftheboardsinActiveKidzShanghaiandPan-doraA/S.

in-depthexperienceinbuildingglobalbrands,businesstransformation,aswellasknowledgeofconsumerB2CandprofessionalB2B2Cmar-ketinganddistributionchannelsande-com-merceplatformsinAsia,includingdigitalmarket-ingandsocialmediafromamongotherstheFMCG,consumerhealth,andretailindustries. 2015

2015/2016

yes

HongKong

1962

4,850

450,000

LEO LARSEN

M.Sc.(ElectricalEngi-neering)andadiplomainbusinessadministrationandinternationaltrade.CTO,GNNetcomA/S.

2007

2014–2018

Danish

1959

1,137

250,000

MORTEN ANDERSEN

B.Sc.(MechanicalEngi-neering).VP,ComponentManufacturinginOpera-tions,GNReSoundA/S.

2011

2014–2018

Danish

1963

1,230

250,000

NIKOLAI BISGAARD

M.Sc.(ElectricalEngi-neering).VP,ExternalRelations,GNReSoundA/S.

2006

2014–2018

Danish

1951

5,695

250,000

Pleasevisitgn.comformoreelaboratedescriptionsoftheboardmembers’compe-

tenciesandmanagementduties.

Chairman

Deputychairman

Boardmember


43/MANAGEMENT’SREPORT / BOARDOFDiRECTORS


Shareholder information • Corporate governance • BOARD OF DIRECTORS • Executive management

Contents







http://gn.com

Member of the executive management since

Year of birth

No. of GN shares

Board positions

Executive management

ANDERS HEDEGAARD

President&CEO,GNReSound

2014

1960

10,400

-

ANDERS BOYER

CFO,GNStoreNord

2009

1970

26,000

MemberoftheboardofPandoraA/Sandchair-manoftheauditcommit-teeofPandoraA/S

RENÉ SVENDSEN-TUNE

President&CEO,GNNetcom

2015

1955

73,000

-


44/MANAGEMENT’SREPORT / EXECUTiVEMANAGEMENT

EXECUTIVE MANAGEMENT


Shareholder information • Corporate governance • Board of directors • EXECUTIVE MANAGEMENT

Contents







Additional Financial information 2015

45 ADDITIONAL FINANCIAL INFORMATIONQuarterlyfinancialhighlights 46 Quarterlyreportingbysegment 47 Q4segmentdisclosures 48 Foreignexchangeimpact 49


45/MANAGEMENT’SREPORT / ADDiTiONALFiNANCiALiNFORMATiON

ADDITIONAL FINANCIAL INFORMATION


Quarterly financial highlights • Quarterly reporting by segment • Q4 segment disclosures • Foreign exchange impact

Contents







Q4 2015 Q4 2014 Full year Full year DKK million (unaud.) (unaud.) 2015 (aud.) 2014 (aud.)

GN ReSoundRevenue 1,453 1,226 5,175 4,469-Hearinginstruments 1,267 1,062 4,526 3,892-Otometrics 186 164 649 577

Organicgrowth 9% 8% 8% 8%

-Hearinginstruments 10% 7% 9% 8%-Otometrics 1% 21% 2% 6%Grossprofitmargin 67.0% 67.9% 65.8% 67.1%EBiTA 340 291 995 897EBiTAmargin 23.4% 23.7% 19.2% 20.1% ROiC(EBiTA/Averageinvestedcapital) 15.8% 15.9% 15.8% 15.9%

Freecashflowexcl.companyacquisitionsanddivestments 248 113 592 287Cashconversion(freecashflowexcl.companyacquisitionsanddivestments/EBiTA) 73% 39% 59% 32%

GN NetcomRevenue 1,005 894 3,229 2,871-CC&O 645 550 2,148 1,854-Mobile 360 344 1,081 1,017

Organicgrowth 3% 20% 2% 11%

-CC&O 8% 23% 6% 18%-Mobile (4)% 15% (5)% (1)%Grossprofitmargin 51.5% 54.9% 52.6% 53.6%EBiTA 210 201 540 521EBiTAmargin 20.9% 22.5% 16.7% 18.1% ROiC(EBiTA/Averageinvestedcapital) 46.9% 56.5% 46.9% 56.5%


GN Store NordRevenue 2,458 2,120 8,404 7,340Organicgrowth 7% 13% 6% 9%Grossprofitmargin 60.7% 62.5% 60.7% 61.8%EBiTA 522 477 1,457 1,260EBiTAmargin 21.2% 22.5% 17.3% 17.2%Profit(loss)beforetaxreported 466 437 1,092 1,116Effectivetaxrate 26% 28% 26% 29%

ROiC(EBiTA/Averageinvestedcapital) 19.0% 18.5% 19.0% 18.5%Earningspershare,basic(EPS) 2.26 1.96 5.16 4.89Earningspershare,fullydiluted(EPSdiluted) 2.25 1.94 5.14 4.85


Equityratio 51.6% 55.4% 51.6% 55.4%Netinterest-bearingdebt 2,212 1,631 2,212 1,631Netinterest-bearingdebt(period-end)/EBiTDA 1.4 1.1 1.4 1.1Dividendpayoutratio - - 20% 19%Sharebuybacks* 279 153 1,162 877

Outstandingshares,endofperiod(thousand) 152,254 159,592 152,254 159,592Averagenumberofoutstandingshares,fullydiluted(thousand) 153,898 161,581 156,734 163,619Sharepriceattheendoftheperiod 125 135 125 135Marketcapitalization 19,032 21,513 19,032 21,513

Quarterly financial highlights

ROIC and NIBD/EBITDA are calculated based on reported EBITA and EBITDA for the latest four quarters

* Incl. buybacks as part of share based incentive programs


46/MANAGEMENT’SREPORT / QUARTERLyFiNANCiALHiGHLiGHTS

QUARTERLY FINANCIAL HIGHLIGHTS


QUARTERLY FINANCIAL HIGHLIGHTS • Quarterly reporting by segment • Q4 segment disclosures • Foreign exchange impact

Contents







Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2014 2014 2014 2014 2015 2015 2015 2015 Total TotalDKK million (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (aud.) (aud.)

Income statement Revenue GNReSound 1,027 1,108 1,108 1,226 1,191 1,271 1,260 1,453 4,469 5,175GNNetcom 652 698 627 894 694 764 766 1,005 2,871 3,229Total 1,679 1,806 1,735 2,120 1,885 2,035 2,026 2,458 7,340 8,404 Organic growth GNReSound 7% 8% 8% 8% 9% 8% 6% 9% 8% 8%GNNetcom 4% 11% 7% 20% (3)% (2)% 11% 3% 11% 2%Total 6% 9% 8% 13% 4% 4% 8% 7% 9% 6% Gross profit GNReSound 680 743 742 833 784 843 805 974 2,998 3,406GNNetcom 343 361 343 491 374 411 394 518 1,538 1,697Total 1,023 1,104 1,085 1,324 1,158 1,254 1,199 1,492 4,536 5,103 Gross profit margin GNReSound 66.2% 67.0% 67.0% 67.9% 65.8% 66.3% 63.9% 67.0% 67.1% 65.8%GNNetcom 52.6% 51.8% 54.7% 54.9% 53.9% 53.8% 51.4% 51.5% 53.6% 52.6%Total 60.9% 61.1% 62.5% 62.5% 61.4% 61.6% 59.2% 60.7% 61.8% 60.7% Expensed development costs** GNReSound (98) (106) (96) (105) (112) (128) (127) (117) (405) (484)GNNetcom (43) (48) (48) (64) (44) (52) (55) (58) (203) (209)Other* (3) (3) (1) (1) (2) (2) (4) (6) (8) (14)Total (144) (157) (145) (170) (158) (182) (186) (181) (616) (707) Selling and distribution costs and administrative expenses etc.** GNReSound (412) (427) (420) (437) (472) (497) (441) (517) (1,696) (1,927)GNNetcom (196) (206) (186) (226) (220) (252) (226) (250) (814) (948)Other* (18) (12) (106) (14) (17) (12) (13) (22) (150) (64)Total (626) (645) (712) (677) (709) (761) (680) (789) (2,660) (2,939) EBITA GNReSound 170 210 226 291 200 218 237 340 897 995GNNetcom 104 107 109 201 110 107 113 210 521 540Other* (21) (15) (107) (15) (19) (14) (17) (28) (158) (78)Total 253 302 228 477 291 311 333 522 1,260 1,457 EBITA margin GNReSound 16.5% 18.9% 20.4% 23.7% 16.8% 17.2% 18.8% 23.4% 20.1% 19.2%GNNetcom 15.9% 15.3% 17.4% 22.5% 15.9% 14.0% 14.8% 20.9% 18.1% 16.7%Total 15.1% 16.7% 13.1% 22.5% 15.4% 15.3% 16.4% 21.2% 17.2% 17.3% Depreciation and software amortization GNReSound (23) (26) (26) (26) (27) (26) (29) (25) (101) (107)GNNetcom (7) (7) (8) (10) (9) (9) (9) (10) (32) (37)Other* (9) (9) (9) (9) (7) (7) (7) (8) (36) (29)Total (39) (42) (43) (45) (43) (42) (45) (43) (169) (173) EBITDA GNReSound 193 236 252 317 227 244 266 365 998 1,102GNNetcom 111 114 117 211 119 116 122 220 553 577Other* (12) (6) (98) (6) (12) (7) (10) (20) (122) (49)Total 292 344 271 522 334 353 378 565 1,429 1,630 EBITA 253 302 228 477 291 311 333 522 1,260 1,457 Amortizationofacquiredintangibleassets (10) (14) (12) (19) (18) (18) (17) (24) (55) (77)Gain(loss)ondivestmentofoperationsetc. - - (6) (4) - (4) - (6) (10) (10)BeltoneNetworknon-recurringitems - - - - - (150) - - - (150)Operating profit (loss) 243 288 210 454 273 139 316 492 1,195 1,220 Shareofprofit(loss)inassociates - - - 5 - - - 5 5 5Financialitems,net (7) (24) (31) (22) (21) (34) (47) (31) (84) (133)Profit (loss) before tax 236 264 179 437 252 105 269 466 1,116 1,092 Taxonprofit(loss) (65) (74) (61) (123) (67) (28) (72) (120) (323) (287)Profit (loss) 171 190 118 314 185 77 197 346 793 805 Balance sheet Development projects GNReSound 839 846 866 901 920 926 933 961 901 961GNNetcom 139 146 158 168 180 198 211 223 168 223Other* 8 8 8 - - - - - - -Total 986 1,000 1,032 1,069 1,100 1,124 1,144 1,184 1,069 1,184 Inventories GNReSound 389 401 425 414 488 489 506 491 414 491GNNetcom 158 140 186 202 204 229 257 229 202 229Total 547 541 611 616 692 718 763 720 616 720 Trade receivables GNReSound 974 1,033 1,067 1,146 1,299 1,270 1,307 1,345 1,146 1,345GNNetcom 511 568 538 761 699 752 706 909 761 909Other* 1 1 - 2 1 1 - 1 2 1Total 1,486 1,602 1,605 1,909 1,999 2,023 2,013 2,255 1,909 2,255 Net working capital GNReSound 966 924 907 971 1,140 1,030 1,123 942 971 942GNNetcom 283 245 201 337 436 377 387 486 337 486Other* (50) (52) (76) (41) (49) (22) (39) (59) (41) (59)Total 1,199 1,117 1,032 1,267 1,527 1,385 1,471 1,369 1,267 1,369 Cash flow Free cash flow excl. company acquisitions and divestments GNReSound (50) 134 90 113 (33) 225 152 248 287 592GNNetcom (4) 148 153 43 11 121 71 68 340 271Other* (27) (24) (98) 2 (84) (19) (41) 24 (147) (120)Total (81) 258 145 158 (106) 327 182 340 480 743 Acquisitions and divestments of companies (14) (20) - (12) (18) (7) (4) (18) (46) (47) Free cash flow (95) 238 145 146 (124) 320 178 322 434 696

*"Other"comprisesGroupSharedServices,GNEjendommeandeliminations.**Doesnotincludeamortizationofacquiredintangibleassets,cf.thedefinitionofEBiTA.

Quarterly reporting by segment


47/MANAGEMENT’SREPORT / QUARTERLyREPORTiNGBySEGMENT

QUARTERLY REPORTING BY SEGMENT


2015 in figures • Foreword by the chairman • Making life sound better • Execution of strategy in 2015 • Consolidated financial highlights • Group performance 2015 • Financial outlook

Contents







Quarterly financial highlights • QUARTERLY REPORTING BY SEGMENT • Q4 segment disclosures • Foreign exchange impact

Contents







Q4 segment disclosures

INCOME STATEMENT GN ReSound GN Netcom Other* Consolidated total

Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2015 2014 2015 2014 2015 2014 2015 2014DKK million (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.) (unaud.)

Revenue 1,453 1,226 1,005 894 - - 2,458 2,120 Productioncosts (479) (393) (487) (403) - - (966) (796)Gross profit 974 833 518 491 - - 1,492 1,324 Expenseddevelopmentcosts** (117) (105) (58) (64) (6) (1) (181) (170)Sellinganddistributioncosts** (443) (340) (211) (189) - - (654) (529)Managementandadministrativeexpenses (73) (97) (40) (38) (22) (14) (135) (149)Otheroperatingincomeandcosts,net (1) - 1 1 - - - 1EBITA 340 291 210 201 (28) (15) 522 477 Amortizationofacquiredintangibleassets (21) (17) (3) (2) - - (24) (19)Gain(loss)ondivestmentofoperationsetc. (6) (4) - - - - (6) (4)BeltoneNetworknon-recurringitems - - - - - - - -Operating profit (loss) 313 270 207 199 (28) (15) 492 454 Shareofprofit(loss)inassociates 5 5 - - - - 5 5Financialitems (11) (11) (4) (1) (16) (10) (31) (22)Profit (loss) before tax 307 264 203 198 (44) (25) 466 437 Taxonprofit(loss) (94) (91) (39) (30) 13 (2) (120) (123)Profit (loss) 213 173 164 168 (31) (27) 346 314

CASH FLOW STATEMENT GN ReSound GN Netcom Other* Consolidated total


Operatingactivitiesbeforechangesinworkingcapital 432 386 263 270 (26) (4) 669 652 Cashflowfromchangesinworkingcapital 106 (60) (88) (138) 15 (34) 33 (232)Cash flow from operating activities excluding financial items and tax 538 326 175 132 (11) (38) 702 420 Cashflowfrominvestingactivities: Developmentprojects (92) (84) (36) (35) - - (128) (119)Other (60) (123) (17) (5) (6) (22) (83) (150)Cash flow from operating and investing activities before financial items and tax 386 119 122 92 (17) (60) 491 151 Taxandfinancialitems (156) (18) (54) (49) 41 62 (169) (5)Cash flow from operating and investing activities (free cash flow) 230 101 68 43 24 2 322 146

Free cash flow excl. company acquisitions and divestments 248 113 68 43 24 2 340 158

*"Other"comprisesGroupSharedServices,GNEjendommeandeliminations**Doesnotincludeamortizationofacquiredintangibleassets,cf.thedefinitionofEBiTA

ADDITIONAL INFORMATION GN ReSound GN Netcom Other* Consolidated total


Revenue distributed geographically Europe 33% 32% 49% 54% 0% 0% 40% 41%NorthAmerica 47% 46% 35% 29% 0% 0% 42% 39%Restofworld 20% 22% 16% 17% 0% 0% 18% 20% incurreddevelopmentcosts (141) (127) (69) (73) (6) (1) (216) (201)Capitalizeddevelopmentcosts 92 84 36 35 - - 128 119Amortizationanddepreciationofdevelopmentcosts** (68) (62) (25) (26) - - (93) (88)Expensed development costs (117) (105) (58) (64) (6) (1) (181) (170) EBiTDA 365 317 220 211 (20) (6) 565 522Depreciationandsoftwareamortization (25) (26) (10) (10) (8) (9) (43) (45)EBITA 340 291 210 201 (28) (15) 522 477 EBiTAmargin 23.4% 23.7% 20.9% 22.5% N/A N/A 21.2% 22.5% Numberofemployees,endofperiod ~4,425 ~4,075 ~1,000 ~950 ~75 ~50 ~5,500 ~5.075

*"Other"comprisesGroupSharedServices,GNEjendommeandeliminations**Doesnotincludeamortizationofacquiredintangibleassets,cf.thedefinitionofEBiTA

ORGANIC GROWTH DIVIDED BY BUSINESS SEGMENT Hearing Instruments Otometrics CC&O Mobile

Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2015 2014 2015 2014 2015 2014 2015 2014

Organicgrowth 10% 7% 1% 21% 8% 23% (4)% 15%


48/MANAGEMENT’SREPORT / Q4SEGMENTDiSCLOSURES

Q4 SEGMENT DISCLOSURES


Quarterly financial highlights • Quarterly reporting by segment • Q4 SEGMENT DISCLOSURES • Foreign exchange impact

Contents







Foreign exchange impact

FY 2015 (DKK million) GN ReSound GN Netcom Other* Consolidated total

RevenueFY 2014 reported 4,469 2,871 0 7,340 Constantcurrencydevelopment +9% +2% - +6% TranslationalFXeffect +11% +10% - +11% HedgingeffectFy2015 (4)% 0% - (3)%HedgingeffectFy2014 0% +1% - 0% FY 2015 reported 5,175 3,229 0 8,404 EBiTA FY 2014 reported 897 521 (158) 1,260 Constantcurrencydevelopment +11% +4% +51% +16% TranslationalFXeffect +18% (5)% - +11% HedgingeffectFy2015 (18)% +6% - (10)%HedgingeffectFy2014 +1% (2)% - 0% FY 2015 reported 995 540 (78) 1,457

*"Other"comprisesGroupSharedServices,GNEjendommeandeliminations

Constant currency development: ReflectsthegrowthintheGNbusiness(organicgrowth)includingthedevelopmentfrommergers,acquisitionsanddivestments,butexcludinganyFXeffects.

Translational FX effect: Reflectsthetranslationimpactcomingfromtranslatinglocalcurrenciesfromsubsidiariestothereport-ingcurrencyofthegroup(DKK).

Hedging effect this year: Reflectstherealizedhedginggain/lossinthespecificlineinthisreportingperiod.

Hedging effect last year: Reflectstherealizedhedginggain/lossinthespecificlineinthecomparablereportingperiodlastyear–e.g.ifthespecificlinerealizedahedginglosslastyear,thiswillhaveapositiveimpactthisyear,sincethehedginglossdisappearsfromthereportednumbers.


49/MANAGEMENT’SREPORT / FOREiGNEXCHANGEiMPACT

FOREIGN EXCHANGE IMPACT


Quarterly financial highlights • Quarterly reporting by segment • Q4 segment disclosures • FOREIGN EXCHANGE IMPACT

Contents







Consolidated Financial statements 2015

50/CONSOLiDATED / FiNANCiALSTATEMENTS

GNSTORENORDANNUALREPORT201550/GNSTORENORDANNUALREPORT2015

CONSOLIDATED FINANCIAL STATEMENTS • Parent company Financial statements

Contents





FINANCIAL STATEMENTS


Contents

51 CONSOLIDATED FINANCIAL STATEMENTSConsolidatedincomestatementandstatementofcomprehensiveincome 52Consolidatedbalancesheet atDecember31 53Consolidatedstatementofcashflow 54Consolidatedstatementofequity 55

56 SECTION 1 – BASIS OF PREPARATIONOverviewofthefinancialaccountingpoliciesingeneralandanintroductiontoManagement'skeyaccountingestimatesandjudgements.

1.1 Generalaccountingpolicies 561.2 Significantaccountingestimatesand

judgements 581.3 BeltoneNetworknon-recurringitems 58

59 SECTION 2 – RESULTS FOR THE YEARinsightsintotheresultsfortheyear,includingoperatingsegments,employeecostsandtaxes.

2.1 Segmentdisclosures 592.2 Geographicalinformation 642.3 Staffcosts 642.4 Tax 652.5 incomestatementclassifiedbyfunction 67

68 SECTION 3 – OPERATING ASSETS AND LIABILITIESinsightsintotheassetsthatformthebasisfortheactivitiesinGNStoreNord,andtherelatedliabilities.Mostoftheseareincludedininvestedcapitalandsomeinnetworkingcapital.

3.1 intangibleassets 683.2 Property,plantandequipment 713.3 Depreciation,amortization

andimpairment 723.4 Othernon-currentassets 733.5 Provisions 743.6 inventories 753.7 Tradereceivables 763.8 Otherpayables 76

77 SECTION 4 – CAPITAL STRUCTURE AND FINANCING ITEMSinsightintoGNStoreNord'scapitalstructureandfinancialitemsaswellasfinancialrisks.

4.1 Outstandingsharesandtreasuryshares 774.2 Financialrisksandfinancialinstruments 794.3 Financialincomeandexpenses 82

83 SECTION 5 – OTHER DISCLOSURESStatutorynotesandotherdisclosures.

5.1 Acquisitionsanddivestmentof companiesandoperations 83

5.2 RemunerationofExecutiveManagementandBoardofDirectors 85

5.3 incentiveplans 875.4 Pensionobligations 905.5 Contingentliabilities,otherfinancial

liabilitiesandcontingentassets 915.6 investmentinassociates 925.7 Othernon-cashadjustments 935.8 Leaseobligations 945.9 Feestoauditorsappointedatthe

Annualgeneralmeeting 945.10 Eventsafterthereportingperiod 94

CompaniesintheGNStoreNordGroup 95Glossaryandkeyratiodefinitions 96

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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CONSOLIDATED INCOME STATEMENT

DKK million Note 2015 2014

Revenue 2.2 8,404 7,340Productioncosts 2.3,3.3,3.6 (3,301) (2,804) Gross profit 5,103 4,536 Developmentcosts 2.3,3.3 (707) (616) Sellinganddistributioncosts 2.3,3.3 (2,414) (2,033) Managementandadministrativeexpenses 2.3,3.3,5.9 (533) (629) Otheroperatingincomeandcosts,net 8 2 EBITA1 1,457 1,260 Amortizationofacquiredintangibleassets 2.5,3.3 (77) (55) Gain(loss)ondivestmentofoperationsetc. 5.1 (10) (10) BeltoneNetworknon-recurringitems 1.3 (150) - Operating profit (loss) 1,220 1,195 Shareofprofit(loss)inassociates 5.6 5 5 Financialincome 4.3 97 135 Financialexpenses 4.3 (230) (219) Profit (loss) before tax 1,092 1,116 Taxonprofit(loss) 2.4 (287) (323) Profit (loss) for the year 805 793

Earnings per share (EPS) 4.1 Earningspershare(EPS) 5.16 4.89 Earningspershare,fullydiluted(EPSdiluted) 5.14 4.85

1 ExcludingBeltoneNetworknon-recurringitems,Gain(loss)ondivestmentofoperationsetc.andamortizationofacquiredintangibleassetsbutincludingamortizationofdevelopmentprojectsandsoftware.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Profit (loss) for the year 805 793 Other comprehensive income Items that will not be reclassified to profit or loss Actuarialgains(losses) 14 (40)Taxrelatingtothisitemofothercomprehensiveincome 2.4 (6) 11 Items that may be reclassified subsequently to profit or loss Adjustmentofcashflowhedges 4.2 30 (99)Foreignexchangeadjustments,etc. 462 560Taxrelatingtotheseitemsofothercomprehensiveincome 2.4 (10) 17 Other comprehensive income for the year, net of tax 490 449 Total comprehensive income for the year 1,295 1,242



C INCOME STATEMENTC STATEMENT OF COMPREHENSIVE INCOME



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CONSOLIDATED BALANCE SHEET AT DECEMBER 31


ASSETS

intangibleassets 3.1 5,469 4,935 Property,plantandequipment 3.2 534 472 investmentsinassociates 5.6 25 20 Deferredtaxassets 2.4 507 503 Othernon-currentassets 3.4,4.2 1,239 1,309 Total non-current assets 7,774 7,239 inventories 3.6 720 616 Tradereceivables 3.7,4.2 2,255 1,909 Taxreceivables 2.4 63 21 Otherreceivables 4.2 232 330 Cashandcashequivalents 132 114 Total current assets 3,402 2,990 Total assets 11,176 10,229 EQUITY AND LIABILITIES Sharecapital 649 672 Otherreserves (2,113) (1,807) Proposeddividendsfortheyear 161 151 Retainedearnings 7,067 6,651 Total equity 5,764 5,667 Bankloans 4.2 2,297 1,675 Pensionobligations 5.4 64 77 Provisions 3.5 59 105Deferredtaxliabilities 2.4 496 409 Othernon-currentliabilities 4.2 301 268 Total non-current liabilities 3,217 2,534 Bankloans 4.2 47 70 Tradepayables 4.2 731 593 Taxpayables 2.4 28 106 Provisions 3.5 282 263 Otherpayables 3.8 1,107 996 Total current liabilities 2,195 2,028 Total equity and liabilities 11,176 10,229



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CONSOLIDATED CASH FLOW STATEMENT


Operating activities Operatingprofit(loss) 1,220 1,195Depreciation,amortizationandimpairment 599 527Othernon-cashadjustments 5.7 127 21Cash flow from operating activities before changes in working capital 1,946 1,743 Changeininventories (83) 8Changeinreceivables (260) (466)Changeintradepayablesandotherpayables 192 231Total changes in working capital (151) (227) Restructuring/non-recurringcosts,paid - (30) Cash flow from operating activities before financial items and tax 1,795 1,486 interestanddividends,etc.,received 48 19interestetc.paid (119) (72)Taxpaid,net (274) (80)Cash flow from operating activities 1,450 1,353 Investing activities investmentsinintangibleassets,excludingdevelopmentprojects (161) (130)Developmentprojects (460) (411)investmentsinproperty,plantandequipment (179) (106)investmentsinothernon-currentassets (74) (243)Disposalofintangibleassets 2 1Disposalofproperty,plantandequipment 10 2Disposal/repaymentofothernon-currentassets 155 14Acquisitionofcompanies/operations 5.1 (47) (46)Cash flow from investing activities (754) (919) Cash flow from operating and investing activities (free cash flow) 696 434 Financing activities increaseoflong-termloans 624 472increase/(decrease)ofshort-termloans (23) 8Paiddividends (142) (138)Share-basedpayment(exercised) 65 68Purchase/saleoftreasuryshares (1,162) (877)Otheradjustments (44) (24)Cash flow from financing activities (682) (491) Net cash flow 14 (57) Cashandcashequivalents,beginningofperiod 114 163Adjustmentforeigncurrency,cashandcashequivalents 4 8Cash and cash equivalents, end of period 132 114



C CASH FLOW STATEMENT



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CONSOLIDATED STATEMENT OF EQUITY

Other reserves

Share capital Addi- Foreign Proposed (shares tional exchange dividends of DKK paid-in adjust- Hedging Treasury for the Retained Total DKK million 4 each) capital ments reserve shares year earnings equity

Balance sheet total at December 31, 2013 693 1,109 (1,738) 25 (893) 146 5,988 5,330 Profit(loss)fortheperiod - - - - - - 793 793Actuarialgains(losses) - - - - - - (40) (40)Adjustmentofcashflowhedges - - - (99) - - - (99)Foreignexchangeadjustments,etc. - - 560 - - - - 560Taxrelatingtoothercomprehensiveincome - - (7) 24 - - 11 28Totalcomprehensiveincomefortheyear - - 553 (75) - - 764 1,242 Reductionofsharecapital (21) (518) - - 539 - - -Share-basedpayment(granted) - - - - - - 15 15Share-basedpayment(exercised) - (51) - - 119 - - 68Taxrelatedtoshare-basedincentiveplans - - - - - - 27 27Purchase/saleoftreasuryshares - - - - (877) - - (877)Proposeddividendsfortheyear* - - - - - 151 (151) -Paiddividends - - - - - (138) - (138)Dividends,treasuryshares - - - - - (8) 8 -Balance sheet total at December 31, 2014 672 540 (1,185) (50) (1,112) 151 6,651 5,667

Profit(loss)fortheperiod - - - - - - 805 805Actuarialgains(losses) - - - - - - 14 14Adjustmentofcashflowhedges - - - 30 - - - 30Foreignexchangeadjustments,etc. - - 462 - - - - 462Taxrelatingtoothercomprehensiveincome - - (3) (7) - - (6) (16)Totalcomprehensiveincomefortheyear - - 459 23 - - 813 1,295 Reductionofsharecapital (23) (476) - - 784 - (285) -Share-basedpayment(granted) - - - - - - 19 19Share-basedpayment(exercised) - (64) - - 130 - (1) 65Taxrelatedtoshare-basedincentiveplans - - - - - - 22 22Purchase/saleoftreasuryshares - - - - (1,162) - - (1,162)Proposeddividendsfortheyear* - - - - - 161 (161) -Paiddividends - - - - - (142) - (142)Dividends,treasuryshares - - - - - (9) 9 -Balance sheet total at December 31, 2015 649 - (726) (27) (1,360) 161 7,067 5,764

*EquivalenttoDKK0,99pershare(2014DKK0,90pershare)



C STATEMENT OF EQUITY



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1.1 GENERAL ACCOUNTING POLICIES

TheannualreportofGNStoreNordfor2015hasbeenpre-paredinaccordancewithinternationalFinancialReportingStandards(iFRS)asadoptedbytheEUandtheDanishdis-closurerequirementsforannualreportsoflistedcompanies.

Theannualreporthasbeenpreparedinaccordancewiththehistoricalcostconvention,asmodifiedbytherevaluationofavailable-for-salefinancialassetsandderivativefinancialinstrumentsatfairvalue.

Adoption of New and Revised Accounting StandardsGNStoreNordhasadoptedalltherelevantnewandre-visedinternationalFinancialReportingStandardsandiFRiCinterpretationseffectiveasofJanuary1,2015.ThenewandrevisedStandardsandinterpretationsdidnotaffectrecogni-tionandmeasurementmateriallynordidtheyresultinanymaterialchangestodisclosuresinthenotes.Apartfromtheseminorchanges,theannualreportispresentedinac-cordancewiththeaccountingpoliciesappliedinpreviousyears’annualreports.

Accounting standards not yet AdoptedAnumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiodsbeginningaf-terJanuary1,2015,orhavenotyetbeenadoptedbytheEU,andhavethereforenotbeenappliedinpreparingthisannualreport.Those,whichmayberelevanttoGNStoreNord,arethefollowing:

• iFRS16LeasesappliestoperiodsbeginningonorafterJanuary1,2019.Theeffectsofthestandardhavenotyetbeenanalyzedindetailandthefinancialimpactofthenewstandardwilldependontheleaseagreementsineffectatthetimeofadoption.However,itisexpectedthatEBiTAwillincreasewiththeso-calledimplicitleaseinterestrate.ThisisduetothatleasepaymentsfromoperatingleaseswillbereplacedbydepreciationsincludedaboveEBiTAandacalculatedinterestincludedinfinancialitems.EBiTDAisthereforealsoexpectedtoincreasewithanamountequaltotheoperatingleasepayments. NetinterestBearingDebtisexpectedtoincreasewiththepresentvalueofrecognizedleaseliabilitites.investedcapi-talisexpectedtoincreasewiththevalueoftheleaseassetsmeasuredinitiallyasthepresentvalueoftherecognizedleasingliabilities.Returnoninvestedcapitalisexpectedtobeaffectedslightlynegativeasthereturnontheleaseassetstobeincludedininvestedcapital,intheformofanincreaseinEBiTAwiththeimplicitleaseinterestrate,areexpectedtobelowerthanGNStoreNord'sROiC.TheratioNiBD/EBiTDAisexpectedtoincreaseslightlyasNiBDwillincreasemorethanEBiTDAcomparedtothecurrentratiobetweenNiBDandEBiTDA.

• iFRS9FinancialinstrumentsappliestoannualperiodsbeginningonorafterJanuary1,2018.Thestandardisonlyexpectedtohavealimitedeffectonrecognitionandmeasurementoffinancialassets.Disclosureinthefinancialstatementswillchangeslightlyastheclassificationoffinan-

inordertomaketheannualreportmorereaderfriendlythenoteshavebeengroupedinsections.Furthermore,eachnoteincludetheaccountingpoliciesandsignificantaccountingestimatesapplicabletotherelevantnotes.ThedescriptionoftheaccountingpoliciesinthenotesarepartofthecompletedescriptionofGNStoreNord’saccountingpolicies.Thenotesaregroupedinthesefivesections:

Section1BasisofpreparationSection2ResultsfortheyearSection3OperatingassetsandliabilitiesSection4CapitalstructureandfinancingitemsSection5Otherdisclosures

includedinSection1arerequireddisclosuresandgeneralaccountingpolicies,includingmanagement’sjudgmentsandestimatesunderinternationalFinancialReportingStandards(iFRS),relevantfortheunderstandingofthebasisofpreparationofthecon-solidatedfinancialstatementsofGNStoreNordA/S.Section1.3describesthelineitemBeltoneNetworknon-recurringitems.

NeworrevisedEUendorsedaccountingstandardsandinterpretationsaredescribedinadditiontohowthesechangesareexpectedtoimpactthefinancialperformanceandreportingoftheGNStoreNordGroup.

SECTION 1Basis of preparation

56/CONSOLiDATED / NOTES / SECTiON1


C SECTION 1C 1.1



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cialassetswillbesimplifiedtoincludeonlytwocategories:Financialassetsmeasuredateitheramortizedcostorfairvalue.TheadditionstoiFRS9regardingfinancialliabilityaccountingarenotexpectedtoaffectthefinancialreport-ing.

• iFRS15RevenuefromContractswithCustomersappliestoannualperiodsbeginningonorafterJanuary1,2018.ThestandardisonlyexpectedtohaveaverylimitedeffectontherevenuerecognitioninGNStoreNord.GNStoreNord’sexistingaccountingpolicyforrevenuerecognitionisbasedontransferofrisktothebuyerwhereasrevenuerecogni-tionaccordingtoiFRS15willbebasedontransferofcon-troltothebuyer.ThischangeisnotexpectedtoaffectthetimingofrevenuerecognitioninGNStoreNord.

GNStoreNordexpectstoadoptthementionedstandardsandinterpretationsasoftheeffectivedates.

Consolidated Financial StatementsTheconsolidatedfinancialstatementsrelatetotheparentcompany,GNStoreNord,andtheenterprisesinwhichGNStoreNorddirectlyorindirectlyholdsmorethan50%ofthevotingrightsorwhereit,insomeotherway,hasthepowertogovernthefinancialandoperatingpoliciesofanenterprise.GNStoreNordanditssubsidiariesarereferredtoastheGroup.Groupcompaniesarelistedonpage95.Enterprisesthatarenotsubsidiaries,butwhereGNStoreNordholdsbetween20%and50%ofthevotingrightsandoverwhichitexercisessignificantinfluence,butwhereitdoesnothavepowertogovernthefinancialandoperatingpolicies,areconsideredassociates.WhenassessingwhetherGNStoreNordexercisescontrolorsignificantinfluence,potentialvot-ingrightsthataresubstantiveandoptionsonacquisitionofadditionalownershipinterestsaretakenintoaccount.

Theconsolidatedfinancialstatementsarepreparedasacon-solidationofthefinancialstatementsoftheparentcompanyandthoseoftheindividualsubsidiaries,allofwhicharepre-sentedinaccordancewiththeGroup’saccountingpolicies.intra-groupincomeandexpenses,shareholdings,intra-groupbalancesanddividends,andrealizedandunrealizedgainsandlossesonintra-grouptransactionsareeliminated.Onconsolidation,thecarryingamountofsharesheldbythepar-entcompanyinsubsidiariesissetoffagainstthesubsidiaries’equity.

Foreign Currency TranslationFunctional Currency and Presentation CurrencyFinancialstatementitemsforeachofthereportingenter-prisesintheGrouparemeasuredusingthecurrencyusedintheprimaryfinancialenvironmentinwhichthereportingenterpriseoperates.Transactionsdenominatedinothercur-renciesthanthefunctionalcurrencyareconsideredtransac-tionsdenominatedinforeigncurrencies.TheconsolidatedfinancialstatementsarepresentedinDanishkroner(DKK),whichisthefunctionalcurrencyandpresentationcurrencyoftheparentcompany.

Translation of Transactions and AmountsOninitialrecognition,transactionsdenominatedinforeigncurrenciesaretranslatedtothefunctionalcurrencyattheexchangeratesatthetransactiondate.Foreignexchangedif-ferencesarisingbetweentheexchangeratesatthetransac-tiondateandatthedateofpaymentarerecognizedintheincomestatementasfinancialincomeorfinancialexpenses.Receivables,payablesandothermonetaryitemsdenomi-natedinforeigncurrenciesaretranslatedattheexchangeratesatthebalancesheetdate.Thedifferencebetweentheexchangeratesatthebalancesheetdateandatthedateatwhichthereceivableorpayablearoseorwasrecognizedinthelatestannualreportisrecognizedintheincomestate-mentasfinancialincomeorfinancialexpenses.

Translation of SubsidiariesOnrecognitionintheconsolidatedfinancialstatementsofforeignentitieswithanotherfunctionalcurrencythanGNStoreNord’spresentationcurrency,theincomestatementsaretranslatedattheexchangeratesatthetransactiondate,andthebalancesheetitemsaretranslatedattheexchangeratesatthebalancesheetdate.Anaverageexchangerateforthemonthisusedastheexchangerateatthetransac-tiondatetotheextentthatthisdoesnotsignificantlydistortthepresentationoftheunderlyingtransactions.Foreignexchangedifferencesarisingontranslationoftheopeningbalanceofequityofsuchenterprisesattheexchangeratesatthebalancesheetdateandontranslationoftheincomestatementsfromtheexchangeratesatthetransactiondatetotheexchangeratesatthebalancesheetdatearerecog-nizedinothercomprehensiveincome.

Foreignexchangeadjustmentofbalanceswithforeignenti-tiesthatareconsideredpartoftheinvestmentintheentityarerecognizedinothercomprehensiveincomeinthecon-solidatedfinancialstatementsunderaseparatetranslationreserve.

Cash Flow StatementThecashflowstatementispresentedusingtheindirectmethodbasedontheoperatingprofit(loss).Thecashflowstatementshowsthecashflowfromoperating,investingandfinancingactivitiesfortheyearandtheyear’schangesincashandcashequivalentsaswellasthecashandcashequivalentsatthebeginningandendoftheyear.Thecashfloweffectofacquisitionsanddisposalsofenterprisesisshownseparatelyincashflowsfrominvestingactivities.Cashflowfromacquiredenterprisesisrecognizedinthecashflowstatementfromtheacquisitiondate.Cashflowfromdisposedofenterprisesisrecognizedupuntilthedisposaldate.

Cashflowfromoperatingactivitiescomprisescashflowfromtheyear’soperationsadjustedfornon-cashoperatingitemsandchangesinworkingcapital.Workingcapitalcomprisescurrentassetsexcludingitemsstatedascashandcashequivalentsandexcludingtaxreceivable,aswellascurrentliabilitiesexcludingbankloans,taxpayableandprovisions.Cashflowfrominvestingactivitiescomprisespaymentsinconnectionwithacquisitionsanddisposalsofenterprises


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andactivities,acquisitionsanddisposalsofintangibleassets,property,plantandequipmentandothernon-currentassetsandacquisitionsanddisposalsofsecuritiesthatarenotin-cludedincashandcashequivalents.

Cashflowfromfinancingactivitiescompriseschangesinthesizeorcompositionofthesharecapitalandrelatedcostsaswellastheraisingofloans,repaymentofinterest-bearingdebt,acquisitionanddisposaloftreasurysharesandpay-mentofdividendstoshareholders.

Cashandcashequivalentscomprisecashandshort-termmarketablesecuritieswithatermofthreemonthsorlessandaresubjecttoaninsignificantriskofchangesinvalue.

1.2 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

Therecognitionofcertainitemsofincomeandexpensesandthedeterminationofthecarryingamountofcertainas-setsandliabilitiesimpliesmakingaccountingestimatesandjudgments.Significantaccountingestimatesandjudgmentscompriserevenuerecognition,computationofamortiza-tion,depreciationandimpairment,usefullivesandremainingusefullivesofnon-currentassets.Furthermore,recognitionofpensionobligationsandsimilarnon-currentobligations,provisions,contingentassetsandliabilitiesaswellasmeas-urementofinvestmentinassociatesrecquiressignificantaccountingestimatesandjudgments..

Theestimatesusedarebasedonassumptions,whichbyManagementaredeemedreliable,butbynatureareassoci-atedwithuncertainty.Theassumptionsmaybeincompleteorincorrect,andunexpectedeventsorcircumstancesmayarise.Accordingly,theCompanyissubjecttorisksanduncertain-tiesthatmayleadtoasituationwhereactualresultsdifferfromestimates.

Adescriptionofsignificantaccountingestimatesandjudg-mentsisincludedintherelevantnotes:

2.1Segmentdisclosures2.4Tax3.1intangibleassets3.4Othernon-currentassets3.5Provisions3.6inventories3.7Tradereceivables5.5 Contingentliabilities,otherfinancialliabilitiesandcontin-

gentassets5.6Associates

1.3 BELTONE NETWORK NON-RECURRING ITEMS

Aseparatelineitem,"BeltoneNetworknon-recurringitems",hasbeenincludedintheincomestatement.ThelineitemincludeslossesinrespectofprioryearsduetoidentifiedaccountingfraudintheBeltoneDistributionNetwork.Theaccountingfraudisnotconsideredmaterialtotheyearsinwhichitrelates(2012-2014)andhasconsequentlybeenin-cludedintheincomestatementforthecurrentperiod.



C 1.2C 1.3



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SECTION 2Results for the year

2.1 SEGMENT DISCLOSURES

INCOME STATEMENT 2015 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Externalrevenue 5,175 3,229 - - 8,404internalrevenue - - 57 (57) -Revenue 5,175 3,229 57 (57) 8,404 Productioncosts (1,769) (1,532) - - (3,301)Gross profit 3,406 1,697 57 (57) 5,103

Expenseddevelopmentcosts (484) (209) (14) - (707)Sellinganddistributioncosts (1,596) (818) - - (2,414)Managementandadministrativeexpenses (338) (131) (121) 57 (533)Otheroperatingincomeandcosts,net 7 1 - - 8

EBITA1 995 540 (78) - 1,457

Amortizationofacquiredintangibleassets (66) (11) - - (77)Gain(loss)ondivestmentofoperationsetc. (10) - - - (10)BeltoneNetworknon-recurringitems (150) - - - (150)Operating profit (loss) 769 529 (78) - 1,220

Shareofprofit(loss)inassociates 5 - - - 5Financialincome 74 23 34 (34) 97Financialexpenses (137) (40) (87) 34 (230)Profit (loss) before tax 711 512 (131) - 1,092

Taxonprofit(loss) (203) (115) 31 - (287)Profit (loss) for the year 508 397 (100) - 805

impairmentlossesandreversalsregardingintangibleassets andproperty,plantandequipmentrecognizedin theincomestatement (1) - - - (1)

Transactionsbetweensegmentsarebasedonmarketterms.Eliminationsintheincomestatementconcerninternalrevenue,intersegmentrent,managementfeeandinterest.

in2015therevenueinGNReSoundcomprisedsaleofdiagnosticequipmentofDKK649millionandsaleofhearinginstru-mentsofDKK4,526million.

OTHER SEGMENT DISCLOSURES 2015 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

incurreddevelopmentcosts (532) (260) (14) - (806)Capitalizeddevelopmentcosts 322 138 - - 460Amortizationanddepreciation (274) (87) - - (361)Expensed development costs (484) (209) (14) - (707)

EBITDA 1,102 577 (49) - 1,630 Depreciationandsoftwareamortization (107) (37) (29) - (173)EBITA1 995 540 (78) - 1,457



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2.1 SEGMENT DISCLOSURES (CONTINUED)

INCOME STATEMENT 2014 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Externalrevenue 4,469 2,871 - - 7,340internalrevenue - - 67 (67) -Revenue 4,469 2,871 67 (67) 7,340 Productioncosts (1,471) (1,333) - - (2,804)Gross profit 2,998 1,538 67 (67) 4,536

Expenseddevelopmentcosts (405) (203) (8) - (616)Sellinganddistributioncosts (1,345) (688) - - (2,033)Managementandadministrativeexpenses (352) (127) (217) 67 (629)Otheroperatingincomeandcosts,net 1 1 - - 2

EBITA1 897 521 (158) - 1,260

Amortizationofacquiredintangibleassets (46) (9) - - (55)Gain(loss)ondivestmentofoperationsetc. (10) - - - (10)Operating profit (loss) 841 512 (158) - 1,195

Shareofprofit(loss)inassociates 5 - - - 5Financialincome 59 69 62 (55) 135Financialexpenses (122) (71) (81) 55 (219)Profit (loss) before tax 783 510 (177) - 1,116

Taxonprofit(loss) (237) (110) 24 - (323)Profit (loss) for the year 546 400 (153) - 793

impairmentlossesandreversalsregardingintangibleassets andproperty,plantandequipmentrecognizedin theincomestatement - (4) (1) - (5)

Transactionsbetweensegmentsarebasedonmarketterms.Eliminationsintheincomestatementconcerninternalrevenue,intersegmentrent,managementfeeandinterest.

in2014therevenueinGNReSoundcomprisedsaleofdiagnosticequipmentofDKK577millionandsaleofhearinginstru-mentsofDKK3,892million.

OTHER SEGMENT DISCLOSURES 2014 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

incurreddevelopmentcosts (460) (240) (11) - (711)Capitalizeddevelopmentcosts 290 118 3 - 411Amortizationanddepreciation (235) (81) - - (316)Expensed development costs (405) (203) (8) - (616)

EBITDA 998 553 (122) - 1,429 Depreciationandsoftwareamortization (101) (32) (36) - (169)EBITA1 897 521 (158) - 1,260

1 ExcludingBeltoneNetworknon-recurringitems,Gain(loss)ondivestmentofoperationsetc.andamortizationofacquiredintangibleassetsbutincludingamortizationofdevelopmentprojectsandsoftware.




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BALANCE SHEET 2015 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Assets

Goodwill 3,069 537 - - 3,606Developmentprojects 961 223 - - 1,184 Otherintangibleassets 532 38 109 - 679 Property,plantandequipment 284 71 179 - 534 Loanstodispensersandownershipinterests 1,008 - - - 1,008 Othernon-currentassets 602 158 - 3 763 Total non-current assets 6,456 1,027 288 3 7,774

inventories 491 229 - - 720Tradereceivables 1,345 909 1 - 2,255 Receivablesfromsubsidiaries* - 1,970 - (1,970) - Taxreceivables 57 11 13 (18) 63 Otherreceivables 151 71 10 - 232 Cashandcashequivalents 104 28 - - 132 Total current assets 2,148 3,218 24 (1,988) 3,402 Total assets 8,604 4,245 312 (1,985) 11,176

Equity and Liabilities

Equity 5,996 3,380 (3,612) - 5,764

Bankloans - - 2,297 - 2,297Pensionobligationsanddeferredtax 340 48 184 (12) 560 Provisions 50 8 1 - 59Othernon-currentliabilities 301 - - - 301 Total non-current liabilities 691 56 2,482 (12) 3,217 Bankloans 14 12 21 - 47Tradepayables 335 379 17 - 731 Amountsowedtosubsidiaries* 627 - 1,343 (1,970) - Taxpayables 25 5 1 (3) 28 Provisions 206 69 7 - 282Othercurrentliabilities 710 344 53 - 1,107 Total current liabilities 1,917 809 1,442 (1,973) 2,195 Total equity and liabilities 8,604 4,245 312 (1,985) 11,176

Eliminationsinthebalancesheetconcerntaxandintercompanybalances.*Netamount

CASH FLOW STATEMENT 2015 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Cash flow from operating activities before changes in working capital 1,339 681 (74) - 1,946 Cashflowfromchangesinworkingcapital andrestructuring/non-recurringcostspaid (29) (127) 5 - (151)Cash flow from operating activities before financial items and tax 1,310 554 (69) - 1,795 Cashflowfrominvestingactivities: Developmentprojects (322) (138) - - (460)Otherinvestingactivities (199) (60) (35) - (294)Cash flow from operating and investing activities before financial items and tax 789 356 (104) - 1,041 Taxandfinancialitems (244) (85) (16) - (345)Cash flow from operating and investing activities (free cash flow) 545 271 (120) - 696




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BALANCE SHEET 2014 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Assets

Goodwill 2,779 487 - - 3,266Developmentprojects 901 168 - - 1,069Otherintangibleassets 461 46 93 - 600Property,plantandequipment 233 51 188 - 472Loanstodispensersandownershipinterests 996 - - - 996Othernon-currentassets 700 153 1 (18) 836Total non-current assets 6,070 905 282 (18) 7,239

inventories 414 202 - - 616Tradereceivables 1,146 761 2 - 1,909Receivablesfromsubsidiaries* - 1,667 - (1,667) -Taxreceivables 21 5 - (5) 21Otherreceivables 280 30 20 - 330Cashandcashequivalents 87 27 - - 114Total current assets 1,948 2,692 22 (1,672) 2,990 Total assets 8,018 3,597 304 (1,690) 10,229

Equity and Liabilities Equity 5,033 2,820 (2,186) - 5,667

Bankloans - - 1,675 - 1,675Pensionobligationsanddeferredtax 294 38 172 (18) 486Provisions 81 7 17 - 105Othernon-currentliabilities 268 - - - 268Total non-current liabilities 643 45 1,864 (18) 2,534

Bankloans 8 7 55 - 70Tradepayables 237 326 30 - 593Amountsowedtosubsidiaries* 1,179 - 488 (1,667) -Taxpayables 100 7 4 (5) 106Provisions 185 62 16 - 263Othercurrentliabilities 633 330 33 - 996Total current liabilities 2,342 732 626 (1,672) 2,028 Total equity and liabilities 8,018 3,597 304 (1,690) 10,229

Eliminationsinthebalancesheetconcerntaxandintercompanybalances.*Netamount

CASH FLOW STATEMENT 2014 Consolidated DKK million GN ReSound GN Netcom Other GN Eliminations total

Cash flow from operating activities before changes in working capital 1,204 667 (128) - 1,743 Cashflowfromchangesinworkingcapital andrestructuring/non-recurringcostspaid (159) (109) 11 - (257)Cash flow from operating activities before financial items and tax 1,045 558 (117) - 1,486 Cashflowfrominvestingactivities: Developmentprojects (290) (118) (3) - (411)Otherinvestingactivities (420) (37) (51) - (508)Cash flow from operating and investing activities before financial items and tax 335 403 (171) - 567 Taxandfinancialitems (94) (63) 24 - (133)Cash flow from operating and investing activities (free cash flow) 241 340 (147) - 434




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ACCOUNTING POLICIES

Segment InformationGNStoreNord’smanagementhasidentifiedGNNetcomandGNReSoundasthereportablesegmentsintheGroup.GNNetcomissellinghands-freecommunicationssolutionsintheformofheadsetsformobilephonesandtraditionalphones.GNReSoundisoperatingwithinthehearinginstrumentindustry,primarilyproducingandsellinghearinginstrumentsandproductsrelatedhereto.

SegmentinformationisbasedontheGroup’sAccountingPolicies.intheGroup,segmentperformanceisevaluatedontheba-sisofEBiTAasdefinedunderkeyratiodefinitions.Segmentrevenueandexpenseandsegmentassetsandliabilitiescompriseitemsdirectlyattributabletoasegmentanditemsthatcanbeallocatedtoasegmentonareasonablebasis.

RevenueRevenuefromsaleofgoodsandrenderingofservicesisrecognizedintheincomestatementprovidedthatdeliveryandtrans-ferofrisktothebuyerhastakenplacebeforeyear-endandthattheincomecanbereliablymeasuredandisexpectedtobereceived.Extendedwarrantiesareseparatedfromthesaleofgoodsandrecognizedonastraight-linebasisoverthetermofthecontract.Thevalueofextendedwarrantiesthatisnotseparatelypricedisestimated.RevenueismeasuredexcludingVAT,taxesandgrantedcashandquantitydiscountsinrelationtothesaleandexpectedreturnsofgoods.Theportionofgoodssoldthatisexpectedtobereturnedisdeterminedbasedonhistoricalproductreturnsdata.

Development costsDevelopmentcostscomprisecosts,salaries,anddepreciationofoperatingassetsandequipmentdirectlyorindirectlyattribut-abletotheGroup’sdevelopmentactivities.Furthermore,amortizationandwrite-downofcapitalizeddevelopmentprojectsareincluded.

Production CostsProductioncostscomprisecosts,includingdepreciationandsalaries,incurredingeneratingtherevenuefortheyear.Produc-tioncostsincludedirectandindirectcostsforrawmaterialsandconsumables,wagesandsalaries,maintenanceanddeprecia-tionandimpairmentofproductionplantandcostsandexpensesrelatingtotheoperation,administrationandmanagementoffactories.Alsoincludedareinventorywrite-downs.

Selling and Distribution CostsSellinganddistributioncostscomprisecostsrelatingtothesaleanddistributionofproductsandservices,includingsalaries,salescommissions,advertisingandmarketingcosts,depreciationandimpairment,etc.Alsoincludedarelossesontradere-ceivables.

Management and Administrative ExpensesManagementandadministrativeexpensescompriseexpensesincurredformanagementandadministration.Administrativeexpensesincludeofficeexpenses,depreciationandimpairment,etc.

Other Operating Income and CostsOtheroperatingincomeandcostscompriseitemssecondarytotheprincipalactivitiesoftheenterprises

SIGNIFICANT ACCOUNTING ESTIMATES

Revenue RecognitionSignificantaccountingestimatesandjudgmentsinvolvedeterminingtheportionofexpectedreturnsofgoods.Theportionofgoodssoldthatisexpectedtobereturnedisestimatedbasedonhistoricalproductreturnsdata




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2.2 GEOGRAPHICAL INFORMATION

Intangible assets and property, plant Revenue and equipmentDKK million 2015 2014 2015 2014

Denmark 264 241 2,170 1,916RestofEurope 2,890 2,659 414 502 NorthAmerica 3,580 2,966 3,203 2,857 Asiaandrestofworld 1,670 1,474 216 132 Consolidated Total 8,404 7,340 6,003 5,407

Revenuesareattributedtocountriesonthebasisofthecustomer'slocation.intangibleassetsandproperty,plantandequip-mentareattributedbasedonthephysicallocationoftheassets.OnlytheUS(includedundertheheadlineNorthAmerica)representsamaterialsinglecountry.

2.3 STAFF COSTS

DKK million 2015 2014

Wages,salariesandremuneration (2,294) (2,021) Pensions (101) (92)Othersocialsecuritycosts (243) (203) Share-basedpayments (19) (15) Total (2,657) (2,331) includedin: Productioncostsandchangeinpayrollcostsincludedininventories (477) (419) Developmentcosts (467) (417) Sellinganddistributioncosts (1,329) (1,131) Managementandadministrativeexpenses (384) (364) Total (2,657) (2,331) Averagenumberofemployees 5,300 5,050 Numberofemployees,year-end 5,500 5,075

ForinformationregardingtheremunerationoftheBoardofDirectorsandExecutiveManagement,pleaserefertonote5.2.



C 2.2C 2.3



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2.4 TAX

TAX ON PROFIT (LOSS)


Tax on profit (loss) Currenttaxfortheyear (166) (252)Deferredtaxfortheyear (144) (75)Effectofchangeinincometaxrates 18 -Withholdingtax (4) -Adjustmenttocurrenttaxwithrespecttoprioryears 6 15Adjustmenttodeferredtaxwithrespecttoprioryears 3 (11)Total (287) (323) Reconciliation of effective tax rate Danishtaxrate 23.5% 24.5%Effectoftaxratesinforeignjurisdictions 2.6% 2.0%Non-taxableincome (0.3%) (0.3%)Non-deductableexpenses 1.9% 3.1%Utilizationofpreviouslynotrecognizedtaxassets (2.2%) 0.0%Unrecognizedtaxassets 3.4% 0.0%Withholdingtax 0.4% 0.0%Effectofchangeinincometaxrates (1.7%) 0.0%Shareofprofit(loss)inassociates (0.1%) (0.1%)Adjustmentoftaxwithrespecttoprioryears (0.8%) (0.4%)Other (0.4%) 0.1%Effective tax rate 26.3% 28.9% Tax relating to other comprehensive income Actuarialgains(losses) (6) 11Adjustmentofcashflowhedges (7) 24Foreignexchangeadjustments,etc. (3) (7)Total (16) 28

CURRENT TAX


Tax payable and tax receivable TaxpayableatJanuary1,net (85) 56Foreignexchangeadjustments (1) (2)Adjustmentwithrespecttoprioryears 6 15Paymentrelatingtoprioryears 79 (71)Currenttaxfortheyear (166) (252)Currenttaxfortheyearrecognizedinothercomprehensiveincomefortheyear (2) 1Withholdingtaxfortheyear (4) -Paymentofwithholdingtaxfortheyear 4 -Taxrelatedtoshare-basedincentiveplans 13 17Paymentsrelatingtothecurrentyear 191 151Tax receivable (payable) at December 31, net 35 (85) Current tax is recognized as follows in the balance sheet: Taxreceivable(assets) 63 21Taxpayable(liabilities) (28) (106)Tax receivable (payable) at December 31, net 35 (85)



C 2.4



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2.4 TAX (CONTINUED)

DEFERRED TAX


Deferred tax, net DeferredtaxatJanuary1,net 94 99Adjustmentwithrespecttoprioryears 3 (11)Effectofchangeinincometaxrates 18 -Additionofdeferredtaxonacquisitionofenterprises (1) -Deferredtaxfortheyearrecognizedinprofit(loss)fortheyear (144) (75)Deferredtaxfortheyearrecognizedinothercomprehensiveincomefortheyear (14) 27Taxrelatedtoshare-basedincentiveplans 9 10Foreignexchangeadjustments 46 44Deferred tax at December 31, net 11 94 Deferred tax is recognized in the balance sheet as follows: Deferredtaxassets 507 503Deferredtaxliabilities (496) (409)Deferred tax at December 31, net 11 94 Deferred tax, net relates to: intangibleassets (406) (364)Property,plantandequipment 32 24Othersecurities 56 61Currentassets 71 96Currentliabilities 6 32intercompanyliabilities - (1)Taxlosscarryforwards 190 157Retaxation (152) (152)Provisions 189 214Other 25 27Total 11 94 Tax value of unrecognized tax assets Taxlosscarryforwards 219 236Othertaxassets 32 -Unrecognized tax assets at December 31 251 236

UnrecognizedtaxassetsarebasedontheGroup'sexpectationstothefutureutilizationofthetaxassets.Anumberoftaxlosscarryforwardsexpirebetween2016-2026.

Deferredtax,netincludesDKK10millionexpectedtobeutilizedwithin12months.




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2.4 TAX (CONTINUED)

ACCOUNTING POLICIES

Tax on Profit (Loss) for the yearTheparentcompanyisjointlytaxedwithallDanishsubsidiaries.ThecurrentDanishcorporationtaxisallocatedbetweenthejointlytaxedcompaniesinproportiontotheirtaxableincome.Thejointlytaxedcompaniesaretaxedundertheon-accounttaxscheme.

Taxfortheyearcomprisescurrenttaxandchangesindeferredtaxfortheyear.Thetaxexpenserelatingtotheprofit(loss)fortheyearisrecognizedintheincomestatement,andthetaxexpenserelatingtoamountsrecognizedinothercomprehensiveincomeisrecognizedinothercomprehensiveincome.

Currenttaxpayableisrecognizedincurrentliabilitiesanddeferredtaxisrecognizedinnon-currentliabilities.Taxreceivableisrecognizedincurrentassetsanddeferredtaxassetsarerecognizedinnon-currentassets.

Deferred taxDeferredtaxassets,includingthetaxbaseoftaxlosscarryforwards,arerecognizedattheexpectedvalueoftheirutilization,eitherasaset-offagainsttaxonfutureincomeorasaset-offagainstdeferredtaxliabilitiesinthesamelegaltaxentityandjurisdiction.Deferredtaxismeasuredusingthebalancesheetliabilitymethodonalltemporarydifferencesbetweenthecar-ryingamountandthetaxbaseofassetsandliabilities.Deferredtaxisnotrecognizedongoodwillunlessthisisdeductiblefortaxpurposes.Deferredtaxismeasuredaccordingtothetaxrulesandatthetaxratesapplicableintherespectivecountriesatthebalancesheetdatewhenthedeferredtaxisexpectedtocrystallizeascurrenttax.Thechangeindeferredtaxasaresultofchangesintaxratesisrecognizedintheincomestatement.ifataxdeductiononcomputationofthetaxableincomeinDenmarkorinforeignjurisdictionsisobtainedasaresultofshare-basedpaymentprograms,thetaxbenefitforthedeductionisrecognizeddirectlyinthebalancesheet.Deferredtaxassetsaresubjecttoannualimpairmenttests


Deferred taxManagementhasmadejudgmentsindeterminingtheCompany’sprovisionsfortax,deferredtaxassetsanddeferredtaxli-abilitiesandtheextenttowhichdeferredtaxassetsarerecognized.GNStoreNordrecognizesdeferredtaxassetsonlytotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthetemporarydifferencesandunusedtaxlossescanbeutilized

2.5 INCOME STATEMENT CLASSIFIED BY FUNCTION

Thegrouppresentstheincomestatementbasedonaclassficationofcostsbyfunction.However,inordertopresentEBiTA(asdefinedonpage96)intheincomestatement,whichisthemeasureofprofitusedbymanagement,amortisationofacquiredintangibleassetsareseparatedfromtheindividualfunctionsandpresentedasaseparatelineitem.ifamortisationofacquiredintangibleassetsareallocatedtotheindividuallineitemsbyfunctiontheincomestatementwillpresentasfollows:


Revenue 8,404 7,340Productioncosts (3,301) (2,804) Gross profit 5,103 4,536 Developmentcosts (714) (623) Sellinganddistributioncosts (2,484) (2,081) Managementandadministrativeexpenses (533) (629) Otheroperatingincomeandcosts,net 8 2 Gain(loss)ondivestmentofoperationsetc. (10) (10) BeltoneNetworknon-recurringitems (150) - Operating profit (loss) 1,220 1,195 In the above income statement amortization of acquired intangible assets has been allocated to functions as follows: Developmentcosts (7) (7) Sellinganddistributioncosts (70) (48) Amortization of acquired intangible assets (77) (55)



C 2.5



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SECTION 3Operating assets and liabilities

3.1 INTANGIBLE ASSETS

Develop- ment projects, developed Patents DKK million Goodwill in-house Software and rights Other Total

CostatJanuary1 3,266 3,033 475 334 738 7,846Additionsoncompanyacquisitions 34 - - - 43 77Additions - 460 99 40 57 656Disposals - (184) (3) (1) (62) (250)Transfers - 3 - - - 3Foreignexchangeadjustments 306 - 10 16 48 380CostatDecember31 3,606 3,312 581 389 824 8,712AmortizationandimpairmentatJanuary1 - (1,964) (290) (244) (413) (2,911)Amortization - (347) (58) (7) (70) (482)Disposals - 184 3 1 20 208impairment - (1) - - - (1)Foreignexchangeadjustments - - (10) (16) (31) (57)AmortizationandimpairmentatDecember31 - (2,128) (355) (266) (494) (3,243)Carrying amount at December 31, 2015 3,606 1,184 226 123 330 5,469

CostatJanuary1 2,974 2,627 396 311 618 6,926Additionsoncompanyacquisitions 15 - - - 11 26Additions - 411 86 8 36 541Disposals (34) (5) (21) (1) (6) (67)Transfers - - - - 32 32Foreignexchangeadjustments 311 - 14 16 47 388CostatDecember31 3,266 3,033 475 334 738 7,846AmortizationandimpairmentatJanuary1 - (1,668) (236) (221) (315) (2,440)Amortization - (299) (63) (7) (48) (417)Disposals - 7 21 1 - 29impairment - (4) (1) - - (5)Transfers - - - - (21) (21)Foreignexchangeadjustments - - (11) (17) (29) (57)AmortizationandimpairmentatDecember31 - (1,964) (290) (244) (413) (2,911)Carrying amount at December 31, 2014 3,266 1,069 185 90 325 4,935

GNStoreNordhasnotcapitalizedanyborrowingcostsinthecurrentorprecedingperiodsasnon-currentassetsarenotfinancedwithdebt.

impairmentofdevelopmentprojectsrelatestoprojectsforwhichthesalesforecastscannotjustifythecapitalizedvalue.

ThecarryingamountofdevelopmentprojectsandsoftwareinprogressamounttoDKK674million(2014:DKK602million).



C SECTION 3C 3.1



Contents







3.1 INTANGIBLE ASSETS (CONTINUED)GoodwillAdditionsduringtheyearofDKK34millionmainlyrelatetotheacquisitionofequitysharesinhearinginstrumentchainsanddistributors,cf.note5.1.

ManagementhasperformedanimpairmenttestofthecarryingamountofgoodwillatDecember31,2015.TheimpairmenttestcoveredtheGroup'scash-generatingunits(CGU)towhichthecarryingamountofgoodwillisallocated.

Carrying amount Pre-tax Weighted average cost of goodwill discount rate of capitalDKK million 2015 2014 2015 2014 2015 2014

Cash-generating units Hearinginstruments 2,922 2,638 8 9 7 7AudiologicDiagnosticsEquipment 147 141 11 10 8 8ContactCenter&OfficeHeadsets 319 291 11 12 9 9MobileHeadsets 218 196 13 14 11 11Total 3,606 3,266

intheimpairmenttest,thediscountedfuturecashflowsofeachCGUwerecomparedwiththecarryingamounts.Futurecashflowsarebasedonthebudgetfor2016,marketforecastsfor2017-2020,strategyplans,etc.BudgetsandstrategyplansarebasedonspecificassumptionsfortheindividualCGUregardingsales,operatingprofit,workingcapital,investmentsinnon-cur-rentassets,etc.Thecalculationsapplyexpectedgrowthintheterminalperiodsof2.5%p.a.

TherecoverableamountforHearinginstrumentsatDecember31,2015hasbeendeterminedbasedonavaluationusingcashflowprojectionsfrombudgetsandfinancialforecasts,coveringafive-yearperiod,andthecommunicatedstrategyplanasap-provedbytheBoardofDirectors.

HearinginstrumentsconstitutesthevastmajorityofthecarryingamountofthegoodwillandistheonlyCGUconsideredtobematerialforthegroup.Theannualgrowthinthehearingaidmarket,invalue,isexpectedtobebetween1-4%inaveragefrom2016to2018.GN’sHearinginstrumentssegmentexpectstodeliverorganicgrowthabovethemarketgrowth.Themarketgrowthinthehearingaidindustryisdrivenbyfourmainfactors:• Thedemographictrendsincludingtheincreasednumberofelderlypeople,• increasedprevalenceofhearinglossduetotheincreasingnoiseintheenvironment,• increasedpenetrationratesasmorepeoplewithahearinglosswillusehearingaidsinthefuture,and• increaseduseoftwohearingaidsinsteadofonlyone,whichisrelativelycommontoday.

TheexpectedrevenuegrowthinGN’sHearinginstrumentsegmentisbasedonthecurrentdifferentiatedproductofferingwithuniquewirelesstechnologyaswellasnewproductstobelaunchedduring2016and2017.TheEBiTAmarginisexpectedtobemaintainedatacompetitivelevelbasedoncontinuedefficienciesinmanufacturingaswellasastrictapproachtooperat-ingcosts.Basedontheimpairmenttestsandrelatedassumptions,managementhasnotidentifiedanygoodwillimpairmentatDecember31,2015.

Development projects and softwarein-progressandcompleteddevelopmentprojectscomprisedevelopmentanddesignofhearinginstruments,audiologicdiag-nosticsequipment,headsetsandotherhandsfreeaudiosolutions.Mostdevelopmentprojectsareexpectedtobecompletedin2016and2017,afterwhichproductsalesandmarketingcanbecommenced.Managementperformsatleastoneannualimpairmenttestofthecarryingamountofrecognizeddevelopmentcosts.Therecoverableamountisassessedbasedonsalesforecasts.inManagement'sassessment,therecoverableamountexceedsthecarryingamount.

Softwarecomprisesdevelopment,designandtestofproductionandplanningsoftwareandreportingsystems,businessintel-ligenceetc.implementationofthesesystemsisexpectedtooptimizeinternalproceduresandprocesses.in2015,managementassessedthattheexpectedusefulliveswerereflectedinthecarryingamountsatDecember31,2015.

Patents and rightsPatentsandrightsprimarilycompriseacquiredpatentsandrights.ThemostsignificantpatentsandrightsrelatetotechnologiesforthedevelopmentofnewhearinginstrumentsforGNReSound,manufacturinganddistributionrightsregardingearscannertechnologyinGNReSoundandrightstotheuseofcertaintechnologiesfordevelopmentofheadsets.

OtherTheGroup'sotherintangibleassetscompriseDKK125million(2014:DKK95million)relatedtocustomerlists,DKK91million(2014:DKK102million)relatedtotrademarksandDKK114million(2014:DKK128million)relatedtosupplyagreements.




Contents







3.1 INTANGIBLE ASSETS (CONTINUED)

ACCOUNTING POLICIES

GoodwillAttheacquisitiondategoodwillisrecognizedinthebalancesheetatcostasdescribedunderBusinesscombinations.Subse-quently,goodwillismeasuredatcostlessaccumulatedimpairmentlosses.Goodwillisnotamortizedbutistestedforimpair-mentatleastonceayear.ThecarryingamountofgoodwillisallocatedtotheGroup’scash-generatingunitsattheacquisitiondate.identificationofcash-generatingunitsisbasedonthemanagementstructureandinternalfinancialcontrol.

Asaresultoftheintegrationofacquiredenterprisesintheexistinggroup,Managementassessesthatthesmallestcash-gener-atingunitstowhichthecarryingamountofgoodwillcanbeallocatedare:ContactCenter&OfficeHeadsets,MobileHeadsets,HearinginstrumentsandAudiologicDiagnosticsEquipment.

Development projects, Software, Patents, Licenses and Other Intangible Assetsintangibleassetsaremeasuredatcostlessaccumulatedamortizationandimpairment.Amortizationisprovidedonastraight-linebasisovertheexpectedusefullivesoftheassets.Whenchangingthedepreciationperiodortheresidualvalue,theeffectonthedepreciationisrecognizedprospectivelyasachangeinaccountingestimates.Amortizationandimpairmentisrecog-nizedintheincomestatementasproductioncosts,developmentcosts,distributioncostsandadministrativeexpenses.Theexpectedusefullivesareasfollows:

Completeddevelopmentprojects 1-5yearsSoftware 1-7yearsPatents,licenses,trademarksand otherintellectualpropertyrights upto20years

Developmentprojectsthatareclearlydefinedandidentifiable,wherethetechnicalutilizationdegree,sufficientresourcesandapotentialfuturemarketordevelopmentopportunitiesintheCompanyisevidenced,andwhereGNStoreNordintendstoproduce,marketorusetheproject,arerecognizedasintangibleassetsifitisprobablethatcostsincurredwillbecoveredbyfutureearnings.Thecostofsuchdevelopmentprojectsincludesdirectwages,salaries,materialsandotherdirectandindi-rectcostsattributabletothedevelopmentprojects.Amortizationandwrite-downofsuchcapitalizeddevelopmentprojectsarestartedatthedateofcompletionandareincludedindevelopmentcosts.Otherdevelopmentcostsarerecognizedintheincomestatementasincurred.

Gainsorlossesonthedisposalofintangibleassetsaredeterminedasthedifferencebetweenthesellingpricelesssellingcostsandthecarryingamountatthedisposaldate,andarerecognizedintheincomestatementasotheroperatingincomeorotheroperatingcosts,respectively.

Impairment of Goodwill and in-process development projectsGoodwillissubjecttoatleastoneannualimpairmenttest,initiallybeforetheendoftheacquisitionyear.Similarly,in-processdevelopmentprojectsaretestedforimpairmentatleastannually.

Thecarryingamountofgoodwillistestedforimpairmenttogetherwiththeothernon-currentassetsinthecash-generatingunittowhichthegoodwillisallocated.Goodwilliswrittendowntotherecoverableamountifthecarryingamountishigherthanthecomputedrecoverableamount.Therecoverableamountiscomputedasthepresentvalueoftheexpectedfuturenetcashflowsfromtheenterprisesoractivitiestowhichthegoodwillisallocated.

Recognition of impairment losses in the income statementAnimpairmentlossisrecognizedifthecarryingamountofanassetoritscash-generatingunitexceedstherecoverableamountoftheassetorthecash-generatingunit.impairmentofgoodwillisrecognizedinaseparatelineitemintheincomestatement.impairmentofgoodwillisnotreversed




Contents







3.1 INTANGIBLE ASSETS (CONTINUED)


GoodwillDeterminingwhethergoodwillisimpairedrequiresacomparisonoftherecoverableamountwiththecarryingamount.Therecoverableamountisdeterminedasthenetpresentvalueofthefuturecashflowsexpectedtoarisefromthecashgeneratingunittowhichgoodwillisallocated.

Development projectsDevelopmentprojectsaremeasuredatcostlessaccumulatedamortizationandimpairment.Animpairmenttestisperformedofthecarryingamountofrecognizeddevelopmentprojects.Theimpairmenttestisbasedonassumptionsregardingstrategy,productlifecycle,marketconditions,discountratesandbudgets,etc.,aftertheprojecthasbeencompletedandproductionhascommenced.ifmarket-relatedassumptionsetc.,arechanged,developmentprojectsmayhavetobewrittendown.Man-agementexaminesandassessestheunderlyingassumptionswhendeterminingwhetherornotthecarryingamountshouldbewrittendown.inaddition,managementcontinouslyassesstheusefullivesofitsproductstoensurethatamortizationofdevelopmentprojectsreflectstheusefullives.

3.2 PROPERTY, PLANT AND EQUIPMENT

Lease- Operating Leased Assets Factory hold assets and plant and under and office improve- Plant and equip- equip- con- DKK million buildings ments machinery ment ment struction Total

CostatJanuary1 374 147 657 322 4 7 1,511Additionsoncompanyacquisitions - - - 3 - - 3Additions 32 22 58 32 1 34 179Disposals (7) (13) (7) (10) (1) 2 (36)Transfers 7 (4) 23 3 2 (31) -Foreignexchangeadjustments 4 8 13 17 - - 42CostatDecember31 410 160 744 367 6 12 1,699DepreciationandimpairmentatJanuary1 (139) (114) (517) (267) (2) - (1,039)Depreciation (14) (14) (62) (25) (1) - (116)Disposals 2 12 4 10 1 - 29Transfers (1) 1 3 (2) (1) - -Foreignexchangeadjustments (2) (6) (14) (17) - - (39)DepreciationandimpairmentatDecember31 (154) (121) (586) (301) (3) - (1,165)Carrying amount at December 31, 2015 256 39 158 66 3 12 534 CostatJanuary1 365 132 600 298 4 4 1,403Additionsoncompanyacquisitions - - 1 1 - - 2Additions 5 7 43 21 1 29 106Disposals (1) (2) (28) (20) (1) - (52)Transfers - - 25 1 - (26) -Foreignexchangeadjustments 5 10 16 21 - - 52CostatDecember31 374 147 657 322 4 7 1,511DepreciationandimpairmentatJanuary1 (127) (92) (474) (243) (2) - (938)Depreciation (10) (16) (56) (22) (1) - (105)Disposals 1 1 25 17 1 - 45Transfers - - - 1 (1) - - -Foreignexchangeadjustments (3) (7) (13) (18) - - (41)DepreciationandimpairmentatDecember31 (139) (114) (517) (267) (2) - (1,039)Carrying amount at December 31, 2014 235 33 140 55 2 7 472

GNStoreNordhasnotcapitalizedanyborrowingcostsinthecurrentorprecedingperiodsasnon-currentassetsarenotfinancedwithdebt.



C 3.2



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3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

ACCOUNTING POLICIES

Property, plant and EquipmentLandandbuildings,plantandmachineryandfixturesandfittings,otherplantandequipmentaremeasuredatcostlessaccu-mulateddepreciationandimpairmentlosses.Costcomprisesthepurchasepriceandcostsofmaterials,components,suppliers,directwagesandsalariesandindirectproductioncostsuntilthedatewhentheassetisavailableforuse.Liabilitiesrelatedtodismantlingandremovingtheassetandrestoringthesiteonwhichtheassetislocatedareaddedtothecost.Whereindividualcomponentsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems,whicharedepreciatedseparately.Depreciationisprovidedonastraight-linebasisovertheexpectedusefullivesofproperty,plantandequipment.Theexpectedusefullivesareasfollows:

Buildingsandinstallations(landisnotdepreciated) 10-50yearsLeaseholdimprovements 5-20yearsPlantandmachinery 1-7yearsOperatingassetsandequipment 2-7years

Thebasisofdepreciationiscalculatedastheresidualvalueoftheassetlessimpairmentlosses.Theresidualvalueisdeter-minedattheacquisitiondateandreassessedannually.iftheresidualvalueexceedsthecarryingamount,depreciationisdis-continued.Whenchangingthedepreciationperiodortheresidualvalue,theeffectonthedepreciationisrecognizedprospec-tivelyasachangeinaccountingestimates.Depreciationandimpairmentisrecognizedintheincomestatementasproductioncosts,developmentcosts,distributioncostsandadministrativeexpenses.

Expensesforrepairsandmaintenanceofproperty,plantandequipmentareincludedintheincomestatement.Gainsorlossesondisposalorscrappingofanitemofproperty,plantandequipmentaredeterminedasthedifferencebetweenthesalespricereducedbycostsrelatedtodismantlingandremovingtheasset,sellingcostsandcostsrelatedtorestoringthesiteonwhichtheassetislocatedandthecarryingamount.GainsorlossesarerecognizedintheincomestatementasOtheroperatingin-comeorOtheroperatingcosts,respectively

3.3 DEPRECIATION, AMORTIZATION AND IMPAIRMENT


Depreciation,amortizationandimpairmentfortheyearofproperty,plantand equipmentandintangibleassetsarerecognizedintheincomestatementasfollows:

Productioncosts (64) (55) Developmentcosts (361) (316) Sellinganddistributioncosts (36) (30) Managementandadministrativeexpenses (61) (71) Amortizationofacquiredintangibleassets (77) (55) Total (599) (527) Amortizationofintangibleassetsisrecognizedintheincomestatementasfollows: Productioncosts (3) (4) Developmentcosts (351) (303) Sellinganddistributioncosts (19) (18) Managementandadministrativeexpenses (32) (37) Amortizationofacquiredintangibleassets (77) (55) Total (482) (417) impairmentofintangibleassetsisrecognizedintheincomestatementasfollows: Developmentcosts (1) (4) Managementandadministrativeexpenses - (1) Total (1) (5)



C 3.3



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3.4 OTHER NON-CURRENT ASSETS


LoanstodispensersofGNReSoundproducts 775 814Ownershipinterests 233 182RAP,SiPandDCP* 190 170Owedbyassociates 30 129Other 11 14Total 1,239 1,309

GNReSound'sassessmentofcreditriskassociatedwithnon-currentloanstodispensersdependsprimarilyonchangeinpay-mentbehaviorandcurrenteconomicconditions.Beforealoanisextendedthecreditworthinessoftheindividualdispenserisanalyzed.Noindividualdispenseraccountsformorethan10%oftotalnon-currentloanstodispensers.

*RAP(RetirementAdvantagePlan)andSiP(SavingsandinvestmentPlan)areprogramsinwhichcustomersearnfundsbasedonpurchasesmade.DCP(DeferredCompensationPlan)isaprograminwhichmanagementincertainforeignsubsidiariesmaychoosetodefercompensation.TheamountsinvestedbytheGrouponbehalfofcustomersandmanagementarerecognizedinOthernon-currentassets.TheGroupsliabilitiesrelatedtotheprogramsarerecognizedinOthernon-currentliabilitiesatDKK233million(2014:DKK203million).

ACCOUNTING POLICIES

Loans to dispensersLoanstodispensersandotherreceivablesaremeasuredatamortizedcostlesswrite-downforforeseenbaddebtlosses.

Ownership Interests and savings plansOwnershipinterestsbetween20%and50%inunlistedenterprisesinwhichGNStoreNorddoesnotexercisesignificantinflu-enceonthefinancialandoperatingpoliciesarerecognizedundernon-currentassetsatcostandaresubsequentlymeasuredatcostifareliablemeasurementofthefairvaluecannotbemade.ThesavingsplansRAP,SiPandDCParemeasuredcost.

Impairment of Other non-current assetsThecarryingamountofOthernon-currentassets,issubjecttoanannualimpairmenttestforindicationsofimpairment.Whenthereisanindicationthatassetsmaybeimpaired,therecoverableamountoftheassetisdetermined.Therecoverableamountisthehigherofanasset'sfairvaluelessexpectedcoststosellanditsvalueinuse.Valueinuseisthepresentvalueofthefu-turecashflowsexpectedtobederivedfromanassetorthecash-generatingunittowhichtheassetbelongs.

Recognition of impairment losses in the income statementAnimpairmentlossisrecognizedifthecarryingamountofanassetoritscash-generatingunitexceedstherecoverableamountoftheassetorthecash-generatingunit.impairmentlossesarerecognizedintheincomestatementundertherespec-tivefunctions.impairmentlossesofOwnershipinterestsarerecognizedunderfinancialexpensesintheincomestatement.

impairmentofotherassetsisreversedonlytotheextentofchangesintheassumptionsandestimatesunderlyingtheimpair-mentcalculation.impairmentisonlyreversedtotheextentthattheasset’snewcarryingamountdoesnotexceedthecarryingamountoftheassetafteramortizationhadtheassetnotbeenimpaired


Loans to and investments in dispensers GNStoreNordgrantsloanstodispensersandacquiresownershipinterestsindispensers.Theagreementsaretypicallycom-prehensive,complexandcoverseveralaspectsoftherelationshipbetweentheparties.Managementassessestherecognitionandclassificationofincomeandexpensesforeachoftheseagreements,includingwhethertheagreementhasanembeddedsupplyagreementorrepresentadiscountonfuturesales.Managementalsoassesseswhethercurrenteconomicconditionsandchangesincustomers'paymentbehaviorcouldindicateimpairmentoftheoutstandingbalances.

Ownershipinterestwhicharenotmeasuredatfairvaluearesubjecttoanannualimpairmenttestforindicationsofimpairment.Whenthereisanindicationthatassetsmaybeimpaired,therecoverableamountoftheassetisdetermined



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3.5 PROVISIONS Warranty Other DKK million provisions provisions Total

ProvisionsatJanuary1 125 243 368Additions 48 70 118Consumed (30) (81) (111)Reversed (21) (27) (48)Foreignexchangeadjustments 8 6 14Provisions at December 31, 2015 130 211 341 Of which is recognized in the consolidated balance sheet: Non-currentliabilities 38 21 59Currentliabilities 92 190 282Provisions at December 31, 2015 130 211 341

Warrantyprovisionsconcernproductssold.Thewarrantyprovisioncoversanydefectsindesign,materialsandworkmanshipforaperiodof1-4yearsfromdeliveryandcompletion.Otherprovisionsprimarilyincludeobligationstotakebackhearingaidsandheadsetssold,obligationsregardingonerouscontractsandpropertyleasesandprovisionsforlegaldefence.

ACCOUNTING POLICIES

ProvisionsWarrantyprovisionsarerecognizedastheunderlyinggoodsandservicesaresoldbasedonwarrantycostsincurredinprevi-ousyearsandexpectationsoffuturecosts.

Otherprovisionsprimarilycompriseonerouscontractsandreturnobligationsrelatedtosoldproducts.Provisionsarerecog-nizedwhen,asaresultofeventsbeforeoratthebalancesheetdate,theGrouphasalegaloraconstructiveobligationanditisprobablethattheremaybeanoutflowofresourcesembodyingeconomicbenefitstosettletheobligation.Onmeasurementofprovisions,thecostsrequiredtosettletheliabilityarediscountediftheeffectismaterialtothemeasurementoftheliability.

AprovisionforonerouscontractsisrecognizedwhentheexpectedbenefitstobederivedbytheGroupfromacontractarelowerthantheunavoidablecostsofmeetingitsobligationsunderthecontract(onerouscontracts).Aprovisionforonerouscontractsisrecognizede.g.whentheCompanyhasenteredabindinglegalagreementforthepurchaseofcomponentsfromsuppliersthatexceedsthebenefitsfromtheexpectedfutureuseofthecomponentsandtheCompanycanonlysellthecom-ponentsataloss


ProvisionsWarrantyprovisionsarerecognizedbasedonhistoricalandfuturewarrantycostsrelatedtotheGroup’sproducts.Futurewar-rantycostsmaydifferfrompastpracticesandthelevelofcosts.TheamountrecognizedasaprovisionisManagement’sbestestimateoftheexpensesrequiredtosettletheobligation.

inaccordancewithGNStoreNord’sbusinesspolicy,someproductsaresuppliedwitharightofreturn.Provisionsforfuturere-turnsofgoodsarerecognizedbasedonhistoricalproductreturnsdata.Theprobabilityoffuturereturnsmaydifferfrompastpractices.AtDecember31,2015,thecarryingamountofprovisionswithrespecttoobligationstotakebackgoodswasDKK114million(2014:DKK76million).

Agreementhasbeenmadewithanumberofthesuppliersthatthesupplierspurchasecomponentsfortheproductionofhearinginstruments,headsetsandaudiologicdiagnosticsequipmentbasedonsalesestimatespreparedbyGNStoreNord.TotheextentthatGNStoreNord'sactualpurchasesfromsuppliersarelowerthansalesestimates,GNStoreNordwillbeunderanobligationtopurchaseanyremainingcomponentsfromthesuppliers.Managementassessessalesestimatesonanongo-ingbasis,andtotheextentthatcomponentinventoriesatsuppliersarenotexpectedtobeused,GNStoreNordrecognizesaprovisionforonerouspurchasecontracts



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3.6 INVENTORIES


Rawmaterialsandconsumables 269 229Workinprogress 11 9Finishedgoodsandmerchandise 440 378Total 720 616

Theaboveincludeswrite-downsamountingto 119 127Write-downsrecognizedintheincomestatementunderproductioncosts 14 25

Reversedwrite-downsrecognizedunderproductioncosts - -Productioncostsincludecostsofgoodssoldof 2,876 2,432

ACCOUNTING POLICIES

InventoriesinventoriesaremeasuredatcostinaccordancewiththeFiFO-principle.inventoriesinGNReSoundaremeasuredatcostusingthestandardcostmethod.Standardcoststakeintoaccountnormallevelsofrawmaterialsandconsumables,staffcosts,ef-ficiencyandcapacityutilization.StandardcostsarereviewedregularlyandadjustedinaccordancewiththeFiFO-principle.

Rawmaterialsandgoodsforresalearemeasuredatcost,comprisingpurchasepriceplusdeliverycosts.

Workinprogressandfinishedgoodsaremeasuredatcost,comprisingthecostofdirectmaterials,wagesandsalariesandin-directproductionoverheads.indirectproductionoverheadscompriseindirectmaterials,wagesandsalaries,maintenanceanddepreciationofproductionmachinery,buildingsandequipmentaswellasfactoryadministrationandmanagement.

Wherethenetrealizablevalueislowerthancost,inventoriesarewrittendowntothislowervalue.Thenetrealizablevalueofinventoriesiscalculatedasthesalesamountlesscostsofcompletionandcostsnecessarytomakethesale


Measurement of inventoriesThenetrealizablevalueofinventoriesiscalculatedbasedonthesizeoftheinventoryanddecreasesintherecoverableamountofpurchasedrawmaterials,technicalobsolescence(e.g.,faultyproducts),physicalobsolescence(e.g.damagedproducts)andfinancialobsolescence(e.g.,reduceddemandorsubstitutingproducts).GNStoreNordperformswrite-downsofinventoriesbasedonanindividualassessmentofproductsorproductgroupsandexpectedproductsalesfrom12to24monthsfollowingthebalancesheetdate



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3.7 TRADE RECEIVABLES


Tradereceivables 2,255 1,909 Total 2,255 1,909 Tradereceivableshavethefollowingmaturities: Notdue 1,757 1,494Due30daysorless 168 154 Duemorethan30daysbutlessthan90days 135 124 Duemorethan90days 195 137 Total 2,255 1,909 Write-downs,whichareincludedintotaltradereceivables,havedevelopedasfollows: Write-downsatJanuary1 (114) (89) Write-downsmadeduringtheyear (55) (49) Realizedduringtheyear 15 3 Reversedwrite-downs 45 21 Foreignexchangeadjustments (3) - Write-downs at December 31 (112) (114)

Totalwrite-downsofDKK112millionareincludedintradereceivablesattheendof2015.in2015nomaterialwrite-downshavebeenrecognizedregardingindividualreceivables(2014:nomaterialwrite-downshavebeenrecognizedregardingindi-vidualreceivables).GNStoreNord'sassessmentofcreditriskassociatedwithindividualreceivablesdependsprimarilyonag-ing,changeincustomerpaymentbehavior,currenteconomicconditionsetc.asdescribedinsignificantaccountingestimates.Basedonpastexperience,GNStoreNordbelievesthatnowrite-downisnecessaryinrespectoftradereceivablesnotpastdue.

NosecurityhasbeenpledgedtoGNStoreNordfortradereceivables.

Tradereceivablesincludethefollowingoverduebutnotwrittendownreceivables: Due30daysorless 125 130Duemorethan30daysbutlessthan90days 65 69Duemorethan90days 37 55Total 227 254

ACCOUNTING POLICIES

Tradereceivablesaremeasuredatamortizedcostlesswrite-downforforeseenbaddebtlosses.Write-downforbaddebtlossesisbasedonanindividualassessmentofeachreceivableandatportfoliolevel


Measurement of trade receivablesifacustomer’sfinancialconditiondeteriorates,furtherwrite-downsmayberequiredinfutureperiods.inassessingthead-equacyofwrite-downsforbaddebtlosses,Managementspecificallyanalyzesreceivables,includingdoubtfuldebts,concen-trationsofcreditrisk,creditratings,currenteconomicconditionsandchangesincustomers’paymentbehavior

3.8 OTHER PAYABLES


Employeecostspayable 360 354Bonusesanddiscountstocustomers 313 250Other 434 392Total 1,107 996



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4.1 OUTSTANDING SHARES AND TREASURY SHARES Nominal value Nominal Nominal Treasury of out- value of value of shares Out- Total standing treasury total as a standing Treasury number shares shares shares percent- shares shares of shares (DKK (DKK (DKK age of (thou- (thou- (thou- thou- thou- thou- share sands) sands) sands) sands) sands) sands) capital

NumberofsharesatJanuary1,2015 159,592 8,429 168,021 638,368 33,715 672,083 5.0%Purchaseofownershipinterestinsubsidiaries 1,040 (1,040) - 4,160 (4,160) - Sharesacquired/soldbyGNStoreNordA/S (8,378) 8,378 - (33,512) 33,512 - Sharescancelled - (5,830) (5,830) - (23,318) (23,318) Number of shares at December 31, 2015 152,254 9,937 162,191 609,016 39,749 648,765 6.1%

ThetreasuryshareshadamarketvalueofDKK1,245millionatDecember31,2015(2014:DKK1,136million).Thetotalcostofacquiredtreasurysharesin2015wasDKK1,162million(2014:DKK877million).

Shares thousands 2015 2014

Weightedaveragenumberofoutstandingshares 156,013 162,238Dilutiveeffectofsharebasedpaymentwithpositiveintrinsicvalue–averagefortheperiod 721 1,381Diluted weighted average number of shares 156,734 163,619

DKK million

Profit(loss)fortheyearusedforthecalculationofearningspershare 805 793Dilutiveeffectofprofit(loss)fortheyear - -Profit (loss) for the year used for the calculation of diluted earnings per share 805 793

SECTION 4Capital structure and financing items



C SECTION 4C 4.1



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4.1 OUTSTANDING SHARES AND TREASURY SHARES (CONTINUED)

ACCOUNTING POLICIES

Earnings per Share and Diluted Earnings per ShareEarningspershare(EPS)iscalculatedbydividingtheprofitfortheyearaftertaxbytheweightedaveragenumberofsharesoutstandingintheyear.Dilutedearningspersharearecalculatedbyincreasingtheweightedaveragenumberofsharesout-standingbythenumberofadditionalordinarysharesthatwouldbeoutstandingifpotentiallydilutiveshareswereissued.ThedilutiveeffectofoutstandingsharebasedpaymentiscalculatedusingtheTreasuryStockmethod.

EquityDividendsTheexpecteddividendpaymentfortheyearisdisclosedasaseparateiteminequity.Proposeddividendsarerecognizedasaliabilityatthedatetheyareadoptedbytheannualgeneralmeeting(declarationdate).

Additional paid-in capitalAdditionalpaid-incapitalincludesamountsexceedingthenominalsharecapitalpaidinbyshareholdersinrelationtocapitalincreasesandgains/lossesonthesaleoftreasuryshares.ThisreserveformspartofGN’sdistributablereserves.

Hedging reserveThehedgingreserveincludestheaccumulatednetchangeinthefairvalueofhedgingtransactionsqualifyingforhedgeac-counting.

Treasury SharesTreasurysharesarerecognizedatcost.GainsandlossesondisposalofownsharesarecalculatedasthedifferencebetweenthepurchasepricemeasuredinaccordancewiththeFiFO-principleandthesellingprice.Gainsorlossesarerecognizeddi-rectlyinadditionalpaid-incapital.Dividendsreceivedfromtreasurysharesarerecognizeddirectlyinretainedearnings.Capitalreductionsfromthecancellationoftreasurysharesaredeductedfromthesharecapitalatanamountcorrespondingtothenominalvalueoftheshares.

Foreign exchange adjustmentsThetranslationreserveintheconsolidatedfinancialstatementscomprisesforeignexchangedifferencesarisingontranslationoffinancialstatementsofforeignsubsidiariesfromtheirfunctionalcurrenciesintothepresentationcurrencyusedby GNStoreNord(DKK)andforeignexchangeadjustmentsofbalancesconsideredtobepartofthetotalnetinvestmentinforeignentities




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4.2 FINANCIAL RISKS AND FINANCIAL INSTRUMENTS

Foreign currency riskGNStoreNordhasexposuretowardsseveralforeigncurrenciesinconnectionwithcommercialtransactions.Theoverallobjec-tiveofhedgingGNStoreNord'scurrencyexposureistoreducetheshort-termimpactofexchangeratefluctuationsonearningsandcashflow,therebyincreasingthepredictabilityofthefinancialresults.GNStoreNordusesforwardexchangecontractstohedgeanysignificantcurrencyrisk,whichin2015hasbeenfutureincome(longpositions)intheUSD,GBP,CADandJPyandfuturecosts(shortpositions)intheCNy.Expectedcashflowsarecontinuallyassessedusingbudgetandsalesforecasts.GNStoreNorddoesnotraiseloansorplacesurpluscashinforeigncurrencyunlessdoingsoreducesacurrencyexposure.

GNStoreNordhasseveralbalancesheetitemsdenominatedinUSD,includingmostofitsgoodwill.Althoughintercompanybalancesareeliminatedintheconsolidatedfinancialstatementsthesecanalsoresultinforeignexchangerategainsandlosses.

Atyear-endahypotheticalincreaseof5%intheUSD/DKKandCNy/DKKexchangerateswouldaffecttheincomeStatementandOtherComprehensiveincomeasoutlinedinthetablebelow:


incomestatement (2) 13OtherComprehensiveincome (35) (26)

Thesensitivityanalysiscomprisescashandcashequivalents,currentreceivables,tradepayables,currentandnon-currentloans,currentintercompanybalancesandderivativeexchangerateinstrumentsasofDecember31,2015.Theeffectsofachangeinforeignexchangeratesrelatedtotheseitemswouldbeincludedinfinancialitemsintheincomestatement.AchangeinthederivativeexchangerateinstrumentsusedforhedgingwouldbeincludedinOtherComprehensiveincome.

Interest rate riskGNStoreNordhashedgedthemajorityoftheinterestrateexposureonloanswithinterestrateswaps.Hedgeaccountinghasbeenappliedduring2015.Thefairvalueoftheinterestrateswapsaredeterminedusingforwardinterestratesandcanbecategorizedaslevel2(observableinputs)inthefairvaluehierarchy.Currently,90%ofthedrawndebtasofDecember31,2015isfixedwithamajorityoftheloanshavingmorethanoneyeartomaturity.ThemarketvalueofthehedgingportfoliowillincreasewithDKK0.8millionforevery1bpsparallelincreaseintheunderlyingfloatinginterestrates. Basedonthebankloansandtheinterestrateswapsatyear-enda1percentagepointincreaseintheinterestratelevelwouldresultinanetincreaseintheannualinterestexpensesofDKK2.3million.OthercomprehensiveincomewouldincreasebyDKK84millionduetoachangeinthevalueoftheinterestrateswapsconcerningfutureinterestpayments.

Funding, liquidity and capital structureAtDecember31,2015,GNStoreNordhadanequityratioof51.6%(2014:55.4%)andnetinterest-bearingdebtofDKK2,212million(2014:1,631million).Basedonthefavorablemacroeconomicenvironment,GNStoreNordnowintendstotakethenetinterest-bearingdebttoaround1.7timesEBiTDAbytheendof2016.GNStoreNord'slongtermcapitalstructurepolicy(netdebtuptoamaximumoftwotimesEBiTDA)remainsunchanged.AsofDecember31,2015GNStoreNordhadundrawnbor-rowingfacilitiesofDKK2,806million(2014:DKK1,234million).GNStoreNordaimstopayoutadividendcorrespondingto15-25%oftheannualnetresultsandwillinitiatesharebuybackprogramswhendeemedappropriatesubjecttotheauthoriza-tionbytheshareholdersinannualgeneralmeeting.

Financial credit riskSurpluscashpositionsinGNStoreNord’ssubsidiariesarere-circulatedbacktotheparentcompanyassoonaspossible,andcashismainlyheldincurrentaccountsorasshort-termmoneymarketdeposits.CashpositionsareprimarilyheldwithbanksthroughwhichGNStoreNordconductsitsday-to-daybankingbusinessandwhichhaveasatisfactoryratingwithMoody’sandStandard&Poor’s.GNStoreNordhasapolicyofneverhavinganexposuretoasinglefinancialcounterpartyofmorethan2.5%ofthatparty’scapitalandreserves.GNStoreNordhadcashandcashequivalentsofDKK132millionatDecember 31,2015(2014:DKK114million).

GNStoreNordhasestablishedpoliciesforcreditriskmanagementrelatedtocustomersincludingtheuseofcreditratingagencies.Assessmentofcreditrisksrelatedtocustomersisfurtherdescribedinnote3.7Tradereceivablesandnote3.4Othernon-currentassets.



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4.2 FINANCIAL RISKS AND FINANCIAL INSTRUMENTS (CONTINUED)

Specification of net interest-bearing debt Total Total DKK million 2015 2014

Cashandcashequivalents 132 114Bankloans,non-currentliabilities (2,297) (1,675)Bankloans,currentliabilities (47) (70)Total (2,212) (1,631)

Contractual maturity analysis for financial liabilities

Between Less than one and More than DKK million one year five years five years Total

2015Long-termbankloans - 2,074 223 2,297Otherlong-termpayables - 236 - 236Short-termbankloans 47 - - 47Tradepayables 731 - - 731Totalnon-derivativefinancialliabilities 778 2,310 223 3,311Derivativefinancialliabilities 38 - - 38Total financial liabilities 816 2,310 223 3,349

2014Long-termbankloans - 1,675 - 1,675Otherlong-termpayables - 215 - 215Short-termbankloans 70 - - 70Tradepayables 593 - - 593Totalnon-derivativefinancialliabilities 663 1,890 - 2,553Derivativefinancialliabilities 67 - - 67Total financial liabilities 730 1,890 - 2,620

Thematurityanalysisisbasedonnon-discountedcashflowsexcludinginterestpayments.

Categories of financial assets and liabilities DKK million 2015 2014

Derivativefinancialinstrumentsincludedinownershipinterests,cf.note3.4 22 -Financial assets held for trading 22 -

OwnershipinterestsandRAP,SiP,DCP,cf.note3.4 401 352Financial assets available-for-sale 401 352

Tradereceivables 2,255 1,909Otherreceivables 232 330Otherreceivables,non-current 805 943Loans and receivables 3,292 3,182

Bankloans,non-current 2,297 1,675Otherlong-termpayables 236 215Bankloans 47 70Tradepayables 731 593Financial liabilities measured at amortized cost 3,311 2,553

DerivativefinancialinstrumentsincludedinOtherpayables 38 67Financial liabilities measured at fair value 38 67

Forfinancialassetsandliabilities,thefairvalueisapproximatelyequaltothecarryingamount.GNStoreNord'sbankloanscarryfloatinginterestratesandareprimarilyfundedbasedonarollingonemonthEURiBORloan.




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Derivative financial instruments

Exchange rate instruments and interest rate swaps

2015 2014

Contract Fair value, Fair value, Contract Fair value, Fair value, DKK million amount, net assets liabilities amount, net assets liabilities

USD 1,237 4 24 1,409 - 117JPy 144 - 3 123 4 -GBP 229 3 1 204 - 6CAD 81 4 - 79 - 3CNy 190 2 4 896 62 -EUR* 3,087 - 19 1,005 - 7Total 4,968 13 51 3,716 66 133

*interestrateswapsdenominatedinEURandDKK.

Allexchangerateinstrumentsmaturewithin12monthsfromthebalancesheetdate.Theinterestrateswapsmaturebetween4and5yearsfromthebalancesheetdate.

Fair value adjustments of cash flow hedges


FairvalueadjustmentfortheyearrecognizedinOthercomprehensiveincome (101) (97)Reclassifiedfromequitytorevenueduringtheyear 191 31Reclassifiedfromequitytoproductioncostsduringtheyear (52) (32)Reclassifiedfromequitytosellinganddistributioncostsduringtheyear (8) (1)Adjustment of cash flow hedges in Other comprehensive income 30 (99) Fairvalueadjustmentofcashflowhedgesrecognizedinfinancialitems (13) -

ThegainsandlossesoncashflowhedgesrecognizedinOthercomprehensiveincomeasofDecember31,2015willberecog-nizedintheincomestatementintheperiodduringwhichthehedgedforecastedtransactionaffectstheincomestatement.

in2015netgainsonderivativefinancialinstrumentsrelatedtoownershipinterestsofDKK42millionwererecognizedinfinan-cialitems(2014:DKK0million).Attheendof2015thefairvalueofthederivativefinancialinstrumentsrelatedtoownershipinterestswereestimatedtoDKK22million(2014:DKK0million).

Fair value hierachyThefairvalueoftheexchangerateinstrumentsandinterestrateswapsaredeterminedusingquotedforwardexchangeratesandforwardinterestrates,respectivelyatthebalancesheetdateandcanbecategorizedaslevel2(observableinputs)inthefairvaluehierarchy.Atthedateofacquisitionthefairvalueofthederivativefinancialinstrumentsrelatedtoownershipinter-estsaredeterminedbycalculatingthedifferencebetweenthefairvalueofthedispensersandtheagreedpurchasepriceofthedispensers.Thefairvalueofthedispensersaredeterminedusingcashflowprojectionsfromfinancialforecastscoveringafiveyearperiod.Thekeyinputsusedaresalesgrowthinunits,averagesellingpricesandexpectedgrowthintheterminalperiod.Thefairvalueissensitivetotheassumedvaluesofthesekeyinputsandcanbecategorizedaslevel3(unobservableinputs)inthefairvaluehierachy.

ACCOUNTING POLICIES

Derivative Financial InstrumentsDerivativefinancialinstrumentsareinitiallyandsubsequentlyrecognizedinthebalancesheetatfairvalue,exceptforderiva-tivefinancialinstrumentsrelatedtoownershipinterestsindispensersofGNResoundproducts.Suchinstrumentsareonlymeasuredatfairvaluewhenexerciseisconsideredhighlyprobablyandsufficientinformationforafairvaluemeasurementisavailable.inotherinstances,thecostofthederivativefinancialinstrumentsrelatedtounquotedownershipinterestsisconsid-eredthebestestimateofthefairvalue.Positiveandnegativefairvaluesofderivativefinancialinstrumentsarerecognizedasotherreceivablesandpayables,respectively,andset-offofpositiveandnegativevaluesisonlymadewhenGNStoreNordhas




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ACCOUNTING POLICIES (CONTINUED)

therightandtheintentiontosettleseveralfinancialinstrumentsnet.Fairvaluesofderivativefinancialinstrumentsarecom-putedonthebasisofmarketdataandgenerallyacceptedvaluationmethods.

Changesinthefairvalueofderivativefinancialinstrumentsdesignatedasandqualifyingforrecognitionasahedgeofthefairvalueofarecognizedassetorliabilityarerecognizedintheincomestatementtogetherwithchangesinthevalueofthehedgedassetorliabilityasfarasthehedgedportionisconcerned.Changesintheportionofthefairvalueofderivativefinancialinstrumentsdesignatedasandqualifyingasacashflowhedgethatisaneffectivehedgeofchangesinthevalueofthehedgeditemarerecognizedinothercomprehensiveincome.ifthehedgedtransactionresultsingainsorlosses,amountspreviouslyrecognizedinothercomprehensiveincomearetransferredfromequitytothesameitemasthehedgeditem.

Forderivativefinancialinstrumentsthatdonotqualifyforhedgeaccounting,changesinfairvaluearerecognizedinthein-comestatementunderfinancialitems.

Financial LiabilitiesAmountsowedtocreditinstitutions,financelessorsandbanksarerecognizedatthedateofborrowingatfairvalueoftheproceedsreceivedlesstransactioncostspaid.insubsequentperiods,thefinancialliabilitiesaremeasuredatamortizedcost,correspondingtothecapitalizedvalueusingtheeffectiveinterestrate.Accordingly,thedifferencebetweentheproceedsandthenominalvalueisrecognizedintheincomestatementoverthetermoftheloan.

Otherliabilities,comprisingtradepayables,amountsowedtogroupenterprisesandassociatesaswellasotherpayables,aremeasuredatamortizedcost

4.3 FINANCIAL INCOME AND EXPENSES


Financial Income: interestincome* 37 32Financialincome,other 11 21Fairvalueadjustmentsofderivativefinancialinstruments 42 -Foreignexchangegain 7 82Total 97 135

Financial expenses: interestexpenses* (57) (37)Financialexpenses,other (38) (41)Fairvalueadjustmentsofderivativefinancialinstrumentsandimpairments (105) (31)Foreignexchangeloss,net (30) (110)Total (230) (219)

GNStoreNordhasnotincludedborrowingcostsinthecostpriceofnon-currentassetsasthesearenotfinancedwithdebt.

FairvalueadjustmentsofderivativefinancialinstrumentsandimpairmentsincludeanimpairmentlossofDKK92millionrelatedtoLoanstodispensersofGNReSoundproducts(2014:DKK31million).

*interestincomeandexpensesfromfinancialassetsandliabilitiesatamortizedcost.

ACCOUNTING POLICIES

Financial Income and ExpensesFinancialincomeandexpensescompriseinterestincomeandexpense,costsofpermanentloanfacilities,gainsandlossesonsecurities,receivables,payablesandtransactionsdenominatedinforeigncurrencies,creditcardfees,amortizationandimpair-mentoffinancialassetsandliabilities,etc.Alsoincludedarerealizedandunrealizedgainsandlossesonderivativefinancialinstrumentsthatarenotdesignatedashedges.

Borrowingcoststhataredirectlyattributabletotheconstructionorproductionofaqualifyingassetformpartofthecostofthatasset.Otherborrowingcostsarerecognizedasanexpense.Aqualifyingassetisanassetthatnecessarilytakesasubstan-tialperiodoftimetogetreadyforitsintendeduse



C 4.3



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5.1 ACQUISITION AND DIVESTMENT OF COMPANIES AND OPERATIONS

AcquisitionsDuring2015,GNReSoundacquiredanumberofminorhearinginstrumentchainsanddistributors,primarilyintheUS.TheacquisitionsallstrengthensGNReSound'ssalesanddistributionchannelsandthegoodwillrelatedtotheacquisitionismainlyattributabletothis. Fair value at acquisition dateDKK million 2015 2014

Identifiable assets acquired and liabilities assumed and consideration transferred

Non-currentassets 3 2Currentassets 6 12Non-currentliabilities (2) (4)Currentliabilities (11) (6)Fair value of identified net assets (4) 4 Goodwill 34 15Otherintangibleassets 43 11Consideration transferred 73 30 Fairvalueofassetstransferred (41) (5)Contingentconsideration (5) (3)Acquiredcashandcashequivalents - (1)Cash consideration paid 27 21

Goodwillrelatingtotheabovetransactionsisallocatedtothecash-generatingunitsHearinginstrumentsandAudiologicDiag-nosticsEquipmentwithDKK10million(2014:DKK5million)andDKK0million(2014:DKK10million),respectively.

in2015,GNReSoundpaidoutDKK20million(2014:DKK25million)incontingentconsiderationsrelatedtoprioryearsaquisi-tions.ThepaymentsweremainlyrelatedtotheacquisitionofDanskHøreCenterApSanddispenseraquisitionsintheUS.Attheendof2015,thefairvalueofcontingentconsiderationsamountstoDKK28million,whereofDKK25millionareexpectedtobepaidduring2016.Noadjustmenthasbeenrecognizedintheincomestatement.

Therecognitionofthefairvalueofidentifiednetassetsisbasedonavailableinformationattheaquisitiondate.intheeventofnewinformation,therecognitionissubjecttochangewithinaone-yearmeasurementperiod.


Theshareofrevenueandprofit(loss)fortheyearfromtheacquisitiondate canbespecifiedasfollows:

Revenue 27 17EBiT 2 1Profit(loss)fortheyear - -

Acquiredoperationsiftheyhadbeenownedthroughouttheyear:

Revenue 31 27EBiT 2 1Profit(loss)fortheyear - -

SECTION 5Other disclosures



C SECTION 5C 5.1



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5.1 ACQUISITION AND DIVESTMENT OF COMPANIES AND OPERATIONS (CONTINUED)

Divestments etc.in2015GNReSounddivestedanumberofminorhearinginstrumentdistributorsprimarilyintheUS.Otheradjustmentsrelatetoalegaldispute.


Non-currentassets (4) (42)Currentliabilities - -Disposed net assets (4) (42)Directlyattributablecost - -Fairvalueofassetsrecieved 6 42Cashconsiderationreceived - -Gain (loss) on divestment of operations 2 0Otheradjustments (12) (10)Gain (loss) on divestment of operations etc. (10) (10)

ACCOUNTING POLICIES

Business CombinationsEnterprisesacquiredorformedduringtheyeararerecognizedintheconsolidatedfinancialstatementsfromthedateofac-quisitionorformation.Theacquisitiondateisthedatewhentheparentcompanyeffectivelyobtainscontroloftheacquiredenterprise.Enterprisesdisposedofarerecognizedintheconsolidatedincomestatementuntilthedisposaldate.Thecompara-tivefiguresarenotrestatedforacquisitions.

Foracquisitionsofnewenterprisesinwhichtheparentcompanyisabletoexercisecontrolovertheacquiredenterprise,thepurchasemethodisused.Theacquiredenterprises’identifiableassets,liabilitiesandcontingentliabilitiesaremeasuredatfairvalueattheacquisitiondate.identifiableintangibleassetsarerecognizediftheyareseparableorarisefromacontractualright.Deferredtaxonrevaluationsisrecognized.

Anyexcessofthecostoverthefairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesacquiredisrecognizedasgoodwillunderintangibleassets.Goodwillisnotamortizedbutistestedatleastannuallyforimpairment.Thefirstimpairmenttestisperformedwithintheendoftheacquisitionyear.Uponacquisition,goodwillisallocatedtothecash-generatingunits,whichsubsequentlyformthebasisfortheimpairmenttest.Goodwillandfairvalueadjustmentsinconnectionwiththeacquisi-tionofaforeignentitywithanotherfunctionalcurrencythanthepresentationcurrencyusedbyGNStoreNordaretreatedasassetsandliabilitiesbelongingtotheforeignentityandtranslatedintotheforeignentity’sfunctionalcurrencyattheexchangerateatthetransactiondate.

Thecostofabusinesscombinationcomprisesthefairvalueoftheconsiderationagreedupon.Whenabusinesscombinationagreementprovidesforanadjustmenttothecostofthecombinationcontingentonfutureevents,theamountofthatadjust-mentisincludedinthecostofthecombinationiftheadjustmentisprobableandcanbemeasuredinareliablemanner.Subse-quentchangestocontingentconsiderationsarerecognizedintheincomestatement.ifuncertaintiesregardingmeasurementofidentifiableassets,liabilitiesandcontingentliabilitiesexistattheacquisitiondate,initialrecognitionwilltakeplaceonthebasisofpreliminaryfairvalues.ifidentifiableassets,liabilitiesandcontingentliabilitiesaresubsequentlydeterminedtohavedifferentfairvalueattheacquisitiondatethanfirstassumed,goodwillisadjustedupuntiltwelvemonthsaftertheacquisition.Theeffectoftheadjustmentsisrecognizedintheopeningbalanceofequityandthecomparativefiguresarerestatedaccordingly.

Whenacquiringacontrollinginterestinsteps,GNStoreNordassessesthefairvalueoftheacquirednetassetsatthetimecon-trolisobtained.Atsuchtime,interestsacquiredpreviouslyarealsoadjustedtofairvalue.Thedifferencebetweenthefairvalueandthecarryingamountisrecognizedintheincomestatement.

Acquisitionofadditionalequityinterestafterabusinesscombinationisnotaccountedforusingtheacquisitionmethod,butratherasequitytransactions.Disposalsofequityinterestwhileretainingcontrolarealsoaccountedforasequitytransactions.Transactionsresultinginalossofcontrolresultinagainorlossbeingrecognizedintheincomestatement.

Whenacquiringlessthan100%ofthesharesinacompany,GNStoreNordrecognizesthegoodwillonatransaction-by-trans-actionbasisorasaproportionofgoodwillinaccordancewithGNStoreNord’sownershipinterest




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5.2 REMUNERATION OF THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT

ExecutiveManagementremunerationcanbespecifiedasfollows:

2015 2014

Share- Share- based based Fixed pay- Fixed pay- DKK million salary Bonus ments Total salary Bonus ments Total

AndersHedegaard,CEOof GNReSoundfromAugust1,2014 (5.9) (5.1) (1.1) (12.1) (2.3) (1.3) (0.2) (3.8)LarsViksmoen,CEOof GNReSounduntilJuly31,2014 - - - - (2.9) (1.7) (1.5) (6.1)RenéSvendsen-Tune,CEOof GNNetcomfromApril1,2015 (4.3) (2.1) (0.6) (7.0) - - - -NielsSvenningsen,CEOof GNNetcomuntilMarch31,2015 (1.2) (1.6) (0.2) (3.0) (4.6) (2.5) (0.6) (7.7)AndersBoyer,CFOofGNStoreNord (4.4) (3.3) 1.2 (6.5) (4.1) (2.5) (0.9) (7.5)Total (15.8) (12.1) (0.7) (28.6) (13.9) (8.0) (3.2) (25.1)


Otherkeymanagementpersonnelremuneration:Fixedsalary (5.2) (4.2)Bonus (0.5) (1.6)Share-basedpayments (1.5) (0.2)Total (7.2) (6.0)

Incentive plansTheGroup'sshare-basedincentiveplansarespecifiedanddescribedinnote5.3.

Executive Management and Board of Directors RemunerationThetotalremunerationoftheExecutiveManagementisbasedonthe“GeneralGuidelinesforincentivePaytoManagement”,asadoptedatGN´sAnnualGeneralMeeting.ThetotalremunerationoftheExecutiveManagementincreasedby14%orDKK3.5millionfrom2014to2015.AsannouncedAndersBoyerhasdecidedtoleaveGNStoreNordduring2016.Duetothis,non-vestedsharebasedincentivesforAndersBoyerhavebeenterminated.ThechangeofCEOinGNNetcomasofApril1,2015isreflectedinthesenumberswithremunerationtotheformerCEONielsSvenningsenforthefirst3monthsof2015andremu-nerationtothecurrentCEORenéSvendsen-Tunefortheremaining9monthsof2015.

RemunerationoftheExecutiveManagementisbasedonafixedbasesalaryplusatargetbonusofupto50%ofthebasesalarywithapotentialbonusearnedrangingfrom0-100%ofthebasesalary.TheExecutiveManagement´sbonusisbasedonthreeparametersinlightoftheGroup'sfocusareas.AndersHedegaard’sandAndersBoyer'sbonusesaresubjecttotheperfor-manceofGNReSound’sEBiTA,GNReSound’srevenueandindividualperformancetargets.RenéSvendsen-Tune’sbonusissubjecttotheperformanceofGNNetcom’sEBiTA,GNNetcom’srevenueandindividualperformancetargets.TheGroupdoesnotmakepensioncontributionsinrespectofmembersoftheExecutiveManagement.ExecutiveManagementhasseveranceagreementsandchange-of-controlagreementsonmarketterms.

in2015OtherkeymanagementpersonnelremunerationincludesremunerationofDKK2.3milliontotheformerCEOofGNNetcomNielsSvenningsenfortheperiodfromApril1,2015.

MembersoftheBoardofDirectorsreceiveafixedremunerationasapprovedbytheshareholdersattheAnnualGeneralMeet-ingonMarch19,2015.ThefixedremunerationisbasedonGNStoreNord´scorporategovernancestructureinwhichanauditcommittee,astrategycommittee,aremunerationcommitteeandanominationcommitteehavebeenestablished.Further,theappointedboardmembersofGNStoreNordalsoserveontheBoardofDirectorsofGNReSoundA/SandGNNetcomA/S.



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5.2 REMUNERATION OF THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT (CONTINUED)

Thefull-yearremunerationoftheBoardofDirectorsisasfollows(DKKthousand):

GN Store Nord A/S GN ReSound A/SChairman 750 Chairman 250DeputyChairman 500 DeputyChairman 175OtherBoardmembers 250 OtherBoardmembers 100RemunerationCommitteeChairman 300 RemunerationCommittee,othermembers 150 GN Netcom A/S AuditCommitteeChairman 300 Chairman 250AuditCommittee,othermembers 150 DeputyChairman 175StrategyCommitteeChairman 300 OtherBoardmembers 100StrategyCommittee,othermembers 150 NominationCommitteeChairman 150 NominationCommittee,othermembers 75

DKK thousand 2015 2014

PerWold-Olsen(Chairman) 1,850 1,850WilliamE.Hoover,Jr.(Deputychairman) 1,225 1,225WolfgangReim 900 900CarstenKrogsgaardThomsen 750 750HeleneBarnekow 600 600RenéSvendsen-Tune(untilMarch2015) 150 600RonicaWang 450 -LeoLarsen 250 250MortenAndersen 250 250NikolaiBisgaard 250 250Total Board of Directors remuneration 6,675 6,675

inadditiontotheremuneration,membersoftheBoardofDirectorswhoarenotDanishresidentsareentitledtoafixedtravelallowanceinconnectionwithparticipationinboardmeetingsinDenmark.ForEuropean-basedboardmemberstheallowanceamountstoDKK22thousandpr.meetingandforNon-EuropeanbasedboardmemberstheallowanceamountstoDKK45thousandpr.meeting.in2015,acompanyownedbyamemberoftheBoardofDirectorsreceivedafeeofDKK3.2millionforconsultancyworkrelatedtoaspecificproject.




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5.3 INCENTIVE PLANS

Warrants programsGNStoreNordhaswarrant-basedlong-termincentiveprogramswherebytheExecutiveManagementandothersenioremploy-eesaregrantedwarrants,entitlingtheholdertosubscribesharesinGNReSoundorGNNetcom.

WarrantsgrantedwillvestthedayafterthereleaseofGNStoreNord'sannualreportinthethirdyearafterthegrant.Vestedwarrantsmaybeexercisedduringafour-weekperiodopeningeachquarterofeachofthethird,fourthandfifthyearafterallocation.Thequarterlyfour-weekwindowwillopenfollowingthereleaseofaValuationReportconcerningthevalueofthesharesofGNReSoundandGNNetcom.WarrantsvestprovidedthesharevalueofGNStoreNordhasincreasedandthatthesharevalueofGNResoundandGNNetcomhasoutperformedapeergroupindexofcompetitorsandindustrysegmentindica-torsasdefinedbytheBoardofDirectorsofGNReSoundandGNNetcom,respectivelybyacertainpercentageduringthesametimeperiod.Warrantsaregrantedatnoconsideration.

TheexercisepriceforthewarrantsisbasedontheaveragesharepriceforGNStoreNordinthefivedaysfollowingthereleaseoftheannualreportintheyearinwhichtherelevantwarrantsareallocated.

Warrants program, GN ReSound Average Executive Other exercise Management employees Total price

Warrants granted at January 1, 2014 3,356 11,791 15,147 12,691Warrantsgrantedduringtheyear 954 3,092 4,046 25,019Warrantsexercisedduringtheyear (423) (4,281) (4,704) 8,714Warrantsforfeitedduringtheyear/corrections (2,672) 2,246 (426) 13,288Outstanding warrants at December 31, 2014 1,215 12,848 14,063 17,550Warrantsgrantedduringtheyear 1,014 4,280 5,294 26,551Warrantsexercisedduringtheyear (217) (3,319) (3,536) 10,875Warrantsforfeitedduringtheyear/corrections (1,083) (1,205) (2,288) 22,961Outstanding warrants at December 31, 2015 929 12,604 13,533 21,901

Grantdatemarketvalueofwarrantsgrantedin2015 4 17 21 MarketvalueofoutstandingwarrantsatDecember31,2015 2 48 50

Averagesharepriceatexercise:DKK26,705(2014:DKK24,801)

OutstandingwarrantsinGNReSoundbygrantdateareshownbelow.

Market % of GN Number of value Executive Other ReSound exercisable Exercise Years to in DKK Grant date Management employees Total A/S warrants price expiry million

March2011 - 809 809 0.1% 809 8,836 0.8 12March2012 - 1,139 1,139 0.2% 1,139 11,084 1.8 15March2013 - 3,508 3,508 0.6% - 19,270 2.8 9November2013 - 195 195 0.0% - 24,290 2.8 -March2014 - 2,965 2,965 0.5% - 24,711 3.8 5June2014 - 71 71 0.0% - 24,711 3.8 -July2014 235 - 235 0.0% - 30,064 3.8 -September2014 - 53 53 0.0% - 24,489 3.8 -March2015 694 3,495 4,189 0.7% - 26,729 4.8 8August2015 - 244 244 0.0% - 23,807 4.8 1November2015 - 125 125 0.0% - 24,896 4.8 -Outstanding warrants at December 31, 2015 929 12,604 13,533 2.1% 1,948 50



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5.3 INCENTIVE PLANS (CONTINUED)

Warrants program, GN Netcom Average Executive Other exercise Management employees Total price

Warrants granted at January 1, 2014 614 6,956 7,570 12,998 Warrantsgrantedduringtheyear 435 2,159 2,594 24,693Warrantsexercisedduringtheyear (67) (2,468) (2,535) 10,462Warrantsforfeitedduringtheyear/corrections (280) (13) (293) 16,132Outstanding warrants at December 31, 2014 702 6,634 7,336 17,884 Warrantsgrantedduringtheyear 627 2,328 2,955 30,600Warrantsexercisedduringtheyear (69) (2,314) (2,383) 11,104Warrantsforfeitedduringtheyear/corrections (722) 188 (534) 26,379Outstanding warrants at December 31, 2015 538 6,836 7,374 24,555 Grantdatemarketvalueofwarrantsgrantedin2015 3 10 13 MarketvalueofoutstandingwarrantsatDecember31,2015 - 9 9

Averagesharepriceatexercise:DKK30,578(2014:DKK24,612)

OutstandingwarrantsinGNNetcombygrantdateareshownbelow.

Market % of GN Number of value Executive Other Netcom exercisable Exercise Years to in DKK

Grant date Management employees Total A/S warrants price expiry million

March2011 - 41 41 0.0% 41 10,542 0.8 -October2011 - 25 25 0.0% 25 10,542 0.8 -March2012 - 186 186 0.1% 186 11,234 1.8 2March2013 - 1,944 1,944 0.6% - 17,797 2.8 3November2013 - 132 132 0.0% - 23,652 2.8 -March2014 - 2,207 2,207 0.7% - 24,596 3.8 2July2014 - 43 43 0.0% - 28,473 3.8 -September2014 - 39 39 0.0% - 24,399 3.8 -December2014 - 58 58 0.0% - 26,178 3.8 -March2015 538 2,161 2,699 0.8% - 30,600 4.8 2Outstanding warrants at December 31, 2015 538 6,836 7,374 2.2% 252 9




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5.3 INCENTIVE PLANS (CONTINUED)

ThemarketvalueofthewarrantshasbeencalculatedusingtheprinciplesoftheBlack&Scholespricingmodel.Themarketvalueoftheoutstandingwarrantsatthebalancesheetdateiscalculatedonthebasisofunderlyingmarketpricesonthefinalbusinessdayoftheyear,whereasthemarketvalueofwarrantsgrantedduringtheyearisbasedontheunderlyingmarketpricesatthegrantdate.Thefollowingassumptionswereappliedforthecalculationofthemarketvalueatthebalancesheetdateandatthegrantdateofwarrants:

Market conditions

2015 year end Grant date 2015 2014 year end Grant date 2014 GN ReSound GN Netcom GN ReSound GN Netcom GN ReSound GN Netcom GN ReSound GN Netcom 134 134 151 134 160Shareprice 124 160 132GNStoreNord 123 123 127 151 134 134 132 134 70% 37%Shareof 70% 70% 37%GNStoreNord 78% 73% 38%marketvalue 81% 39% 80% 43% 72% 41% 72% 41% 24,711 24,596 26,729 24,711 28,473 23,807 30,064 24,399Shareprice 23,968 21,399 24,896 30,600 24,588 26,083 24,489 26,178 20% 25% 23% 20% 26% 24% 18% 26%Volatility 24% 23% 25% 24% 19% 21% 18% 21%

Dividend pershare 0 0 0 0 0 0 0 0 0.00% 0.00% 0.00% 0.00% 1.03% 1.03% 0.00% 0.00% 0.00% 1.03% 0.57%Risk-free 0.08% 0.04% 0.04% 0.57% 0.51%interestrate 0.00% 0.00% 0.18% 0.00% 0.12% 0.12% 0.51% 0.20% 0.8 0.8 0.8 0.8 1.8 1.8 1.8 1.8 5.7 5.7 2.8 2.8 5.7 2.8 2.8 5.7 5.4Expected 3.8 3.8 5.2 3.8 3.8 5.4 5.2term(years) 4.8 4.8 5.0 5.7 4.8 4.8 5.2 4.9

inthecalculationofmarketvalue,theshareofmarketvalueandvolatilityisestimatedbyexternalexperts.

ACCOUNTING POLICIES

Incentive plansTheExecutiveManagementandanumberofkeyemployeesareincludedinshare-basedpaymentplans(equity-settledplans).Forequity-settledprograms,thewarrantsaremeasuredatthefairvalueatthegrantdateandrecognizedintheincomestate-mentasastaffcostoftherespectivefunctionsoverthevestingperiod.Thecounteritemisrecognizedinequity.Oninitialrec-ognition,anestimateismadeofthenumberofwarrantsexpectedtovest.Thisestimateissubsequentlyrevisedforchangesinthenumberofwarrantsexpectedtovest.Accordingly,recognitionisbasedonthenumberofwarrantsthatareultimatelyvested.ThefairvalueofgrantedwarrantsisestimatedusingtheBlack-Scholesoptionpricingmodel.Vestingconditionsaretakenintoaccountwhenestimatingthefairvalueofthewarrants




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5.4 PENSION OBLIGATIONS


Presentvalueofdefinedbenefitobligations (345) (339)Fairvalueofplanassets 281 262Net obligations (64) (77) Thepresentvalueofdefinedbenefitobligationsincludesunfundedpensionobligationsnot coveredbypaymentstoinsurancecompanyofDKK14millionin2015(2014:DKK11million).

Development in present value of defined benefit obligations ObligationsatJanuary1 (339) (269)Foreignexchangeadjustments (33) (27)Costsfortheyear (3) (3)interestexpense (13) (13)Actuarialgains(losses)regardingdemographicassumptions 14 (10)Actuarialgains(losses)regardingfinancialassumptions 12 (32)Pensionpayments,unfunded 1 -Pensionpayments 16 15Obligations at December 31 (345) (339) Maturity of pension obligations Lessthanoneyear (17) (15)Betweenoneandfiveyears (73) (62)Morethanfiveyears (255) (262)Total (345) (339) Development in fair value of plan assets PlanassetsatJanuary1 262 225Foreignexchangeadjustments 26 24interestincome 9 11Returnonplanassetsinexcessofinterestincome (12) 2PaymentbyGNStoreNord 12 14Pensionpayments (16) (14)Plan assets at December 31 281 262 Pension costs recognized in the income statement Costsfortheyear (3) (3)interestexpense (13) (13)interestincomefromplanassets 9 11Definedbenefitplanstotal (7) (5)Definedcontributionplanstotal (97) (89)Total pension costs recognized in the income statement (104) (94)

The costs are recognized in the following income statement items: Productioncosts (18) (17)Developmentcosts (23) (21)Sellinganddistributioncosts (34) (31)Managementandadministrativeexpenses (26) (23)Financialexpenses (3) (2)Total (104) (94) The following accumulated actuarial gains(losses) since January 1, 2005 are recognized in the Statement of other Comprehensive Income: Accumulatedactuarialgains(losses) (75) (89) Breakdown of plan assets: Shares 64% 65%Bonds 35% 33%Cashandcashequivalents 1% 2%Total 100% 100%



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5.4 PENSION OBLIGATIONS (CONTINUED)

AtthebalancesheetdatetheactuarialcalculationsfortheprevailingAmericandefinedbenefitplanarebasedonadiscountrateof4.25%(2014:4.00%).

A25basispointdecreaseinthediscountratewillresultinaDKK8millionincreaseinthedefinedbenefitobligationanda25basispointincreasewillresultinaDKK8milliondecreaseinthedefinedbenefitobligation.

Defined contribution plansTheGrouphaspensioncommitmentsregardingcertaingroupsofemployeesinDenmarkandabroad.Pensionplansaregener-allydefinedcontributionplans.Thepensionplansarefundedbycurrentpaymentstoindependentpensionfundsandinsur-ancecompanies,whichareresponsibleforpaymentofthepensionbenefits.Whencontributionstodefinedcontributionplanshavebeenpaid,theGrouphasnofurthercommitmentstopresentorformeremployees.Contributionstodefinedcontributionplansarerecognizedintheincomestatementwhentheyaredue.

Defined benefit plansTheGrouphasanAmericanpensionplan,whichisnotcoveredbypaymentstoinsurancecompaniesbutispartlyoff-setbythefairvalueofreservedpensionfunds.AtJuly1,2003,thepensionplanwasfrozen,meaningthatemployeescoveredbytheplanwillcontinuetobeentitledtothepensionpaymentsearneduptothisdate.However,employeeswillnotearnfurtherpen-sionpayments.

Other plansTheGrouphasnootherpensionobligationsorsimilarobligationstoitsemployees.

ACCOUNTING POLICIES

PensionsContributionstodefinedcontributionplansarerecognizedintheincomestatementintheperiodtowhichtheyrelateandanycontributionsoutstandingarerecognizedinthebalancesheetasotherpayables.

Definedbenefitplansaresubjecttoanannualactuarialestimateofthepresentvalueoffuturebenefitsunderthedefinedben-efitplan.Thepresentvalueisdeterminedonthebasisofassumptionsaboutthefuturedevelopmentinvariablessuchassalarylevels,interestrates,inflationandmortality.ThepresentvalueisdeterminedonlyforbenefitsearnedbyemployeesfromtheiremploymentwiththeGroup.Theactuarialpresentvaluelessthefairvalueofanyplanassetsisrecognizedinthebalancesheetunderpensionobligations.Pensioncostsfortheyeararerecognizedintheincomestatementbasedonactuarialestimatesandfinancialexpectationsatthebeginningoftheyear.Anydifferencebetweentheexpecteddevelopmentinplanassetsandthedefinedbenefitobligationandactualamountsresultsinactuarialgainsorlosses.Actuarialgainsorlossesarerecognizedinothercomprehensiveincome

5.5 CONTINGENT LIABILITIES, OTHER FINANCIAL LIABILITIES AND CONTINGENT ASSETS


Guarantees, warranties and other liabilities 9 19

Contingent liabilitiesOutstanding lawsuitsGNStoreNordanditssubsidiariesandassociatesarepartiestovariouslawsuits,includingvariouscasesinvolvingpatentinfringements.Apartfromthecasesdescribedbelow,theoutcomeofcasespendingisnotexpectedtobeofmaterialimpor-tancetotheGroup’sfinancialposition.

Other financial liabilitiesGuaranteesGNStoreNordhasissuedaguaranteeofUSD30millionrelatedtoanassociatedcompany'sbankcreditfacility.

SecurityTheGrouphasnotpledgedanyassetsassecurityinthepresentorpriorfinancialyears.



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5.5 CONTINGENT LIABILITIES, OTHER FINANCIAL LIABILITIES AND CONTINGENT ASSETS (CONTINUED)

Purchase obligationsGNStoreNordhasagreedwithanumberofsuppliersthatthesupplierswillpurchasecomponentsfortheproductionofhear-inginstruments,headsetsandaudiologicdiagnosticsequipmentbasedonsalesestimatespreparedbyGNStoreNord.TotheextentthatGNStoreNord'ssalesestimatesexceedactualpurchasesfromsuppliers,GNStoreNordisunderanobligationtopurchaseanyremainingcomponentsfromthesuppliers.Managementassessessalesestimatesonanongoingbasis.Totheextentthatcomponentinventoriesatsuppliersexceedthevolumesexpectedtobeused,GNStoreNordrecognizesaprovisionforonerouspurchasecontracts.

Contingent assetsClaim against Plantronics Inc.in2012,GNNetcomfiledsuitagainstPlantronicsforattemptedmonopolizationofthedistributors’marketintheUS.OnSep-tember23,2013,thefederaldistrictcourtinWilmington,Delaware,dismissedPlantronics’“motiontodismiss”thecaseinitsentirety.ThecourtalsostatedthatGNNetcom’sallegationsweresufficientlysubstantiatedtoallowthecasetoproceedintodiscovery.Duringthediscoveryphase,GNlearnedofallegedintentionaldocumentdestructionandhassubmittedamotionforsanctionsaskingtheCourttodeterminetheappropriateremedyforPlantronics’allegedmisconduct.itisexpectedthatthecourtwillscheduleahearingonthematterinQ12016.

Apartfromtheabove,managementisnotawareofanymatterthatcouldbeofmaterialimportancetotheGroup'sfinancialposition.


Provisions, Contingencies and LawsuitsGNStoreNord’sManagementassessesprovisions,contingentassetsandcontingentliabilitiesandthelikelyoutcomeofpend-ingorthreatenedlawsuitsonanongoingbasis.Theoutcomedependsonfutureeventsthatarebynatureuncertain.inassess-ingthelikelyoutcomeoflawsuitsandtaxdisputes,etc.,Managementbasesitsassessmentonexternallegalassistanceanddecidedcases

5.6 ASSOCIATES

Investments in associates


Aggregated financial information for associates is provided below: Revenue 190 169Profit(loss)fortheyearaftertax (41) (31)Totalassets 122 100Totalliabilities 175 125

Totalshareofprofit(loss)fortheyearaftertax 5 5Totalshareofnetassets 14 12

TransactionswithassociatescomprisesaleofgoodsofDKK56million(2014:DKK30million)andsaleofservicesofDKK20million(2014:DKK12million)onnormalcommercialtermsandconditions.

Associatesarelistedonpage95.

ACCOUNTING POLICIES

Investments in Associates in the Consolidated Financial StatementsOnacquisitionofinvestmentsinassociates,thepurchasemethodisused,cf.BusinessCombinations.intheconsolidatedfinancialstatementsinvestmentsinassociatesarerecognizedaccordingtotheequitymethod.investmentsinassociatesaremeasuredattheproportionateshareoftheenterprises’netassetvaluescalculatedinaccordancewiththeGroup’saccountingpoliciesminusorplustheproportionateshareofunrealizedintra-groupprofitsandlossesandplusthecar-ryingamountofgoodwill.



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5.6 ASSOCIATES (CONTINUED)

Profit (Loss) from Investments in AssociatesTheproportionateshareoftheprofit(loss)aftertaxoftheindividualassociatesisrecognizedintheincomestatementoftheGroupaftereliminationoftheproportionateshareofintra-groupprofits(losses)


Investments in Associates and Profit (Loss) from Investments in AssociatesUndertheequitymethod,oninitialrecognitiontheinvestmentinanassociateorajointventureisrecognizedatcost,andthecarryingamountisincreasedordecreasedtorecognizetheinvestor'sshareoftheprofitorlossoftheinvestee.Aninvestorinanassociateshouldrecognizeitsshareofthelossesoftheassociateuntilitsshareoflossesequalsorexceedsitsinterestintheassociate,atwhichpointtheinvestordiscontinuesrecognizingitsshareoffurtherlosses.Forthispurpose,theinvestor'sinterestinanassociateisthecarryingamountoftheinvestmentintheassociateundertheequitymethodtogetherwithanylong-termintereststhat,insubstance,formpartoftheinvestor'snetinvestmentintheassociate.Oncetheinvestor'sinter-estisreducedtozero,additionallossesareprovidedfor,andaliabilityisrecognized,onlytotheextentthattheinvestorhasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.

GNStoreNordhasa40%equityinterestinAudiologySystemsinc.,whichhasrealizedalossofDKK51millionin2015(2014:DKK42million).inadditiontotheequityinterestGNStoreNordhasprovidedaloanofDKK20million(notconsideredpartofthenetinvestment)toAudiologySystemsinc.,andissuedaguaranteeofUSD30millionforexternaldebtofAudiologySystemsinc.GNStoreNord’sshareofthelosscorrespondingtoDKK(20)million(2014:DKK(17)million)isnotrecognizedinthefinancialstatementsasthecarryingamountoftheequityinterestis0.TheloanhasnotbeenimpairedasManagementas-sessesthattherecoverableamountofAudiologySystemsinc.exceedsthecarryingamountoftheinvestmentintheassociate.ifAudiologySystemsinc.doesnotimproveperformanceasexpectedbyManagement,alossofuptoDKK200millionshouldberecognizedinthefinancialstatements.

5.7 OTHER NON-CASH ADJUSTMENTS


Share-basedpayment(granted) 19 15(Gain)lossondivestmentofoperationsetc. 10 10Provisionforbaddebt,inventorywrite-downs,etc. (24) 10BeltoneNetworknon-recurringitems 150 -Adjustmentofprovisions (28) (14)Total 127 21



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5.8 LEASE OBLIGATIONS


Futureleaseobligationsaredistributedasfollows:

Operating leases: Lessthanoneyear 129 118Betweenoneandfiveyears 215 214Morethanfiveyears 111 127Total 455 459

OperatingleasesprimarilyrelatetoleaseofpropertyonmarkettermsinDenmark,theUnitedStatesandtheUnitedKingdom.Theremainingleasetermsarebetweenoneandfifteenyears.

OperatingleasesincluderentalobligationsrelatedtopropertiesinDenmarkintheamountofDKK31million(2014:DKK68million).DKK1million(2014:DKK16million)oftherentalobligationinDenmarkisprovidedforinthebalancesheetincon-nectionwithvacatingthepremises.

LeasepaymentsrecognizedintheincomestatementrelatingtooperatingleasesamounttoDKK124million(2014:DKK112million).

ACCOUNTING POLICIES

Rental and Lease MattersLeasesthatdonotmeetthecriteriaforclassificationasafinancialassetaretreatedasoperatingleases.Operatingleasepay-mentsarerecognizedintheincomestatementoverthetermofthelease

5.9 FEES TO AUDITORS APPOINTED AT THE ANNUAL GENERAL MEETING


Auditfees (6) (5)Total (6) (5)

Otherassistance: Otheraudit-relatedservices (5) (9)Taxassistanceandadvice (4) (3)Total (9) (12) Total (15) (17)

ConsolidatedauditfeesincludeDKK2million(2014:DKK2million)toErnst&youngP/S.Consolidatedotherassistancein-cludesDKK2million(2014:DKK7million)toErnst&youngP/S.

5.10 EVENTS AFTER THE REPORTING PERIOD

OnJanuary7,2016GNStoreNordandWilliamDemantHoldingreachedanagreementtosettleallpatentdisputesbetweenthetwocompanies,therebyterminatingallpatentlitigations–bothinEurope,includingDenmark,andinNorthAmerica–withimmediateeffect.

Thesettlementincludesbroad-basedcross-licensingof15differentpatentsrelatedtohistoric,pendingaswellassomepoten-tialfuturedisputes.Thedetailsofthefinancialarrangementareundisclosed.However,thesettlementofthe15patentsincludesanannualnetlicensepaymenttoWilliamDemant,whichwillhavenomaterialfinancialimpactontheresultsofeitherparty.



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GN Store Nord A/S Denmark DKK N/A 672,083,012GNEjendommeA/S Denmark DKK 100 10,600,000 GN Netcom A/S Denmark DKK 100 33,647,500GNNetcom,inc. USA USD 100 35,900,000GNNetcom(Canada),inc. Canada CAD 100 1,000GNCommunications, EquipamentoseSolucoes deComunicacaoLtda. Brazil BRL 100 407,820GNNetcom(China)Ltd. China USD 100 8,000,000GNNetcomLogistic(Xiamen)Ltd. China USD 100 500,000GNCommunications (Shanghai)Co.,Ltd China CNy 100 15,481,000GNNetcom(Japan)Ltd. Japan JPy 100 10,000,000GNNetcom(Singapore)PteLtd. Singapore SGD 100 700,000GNNetcomAsiaLtd. HongKong HKD 100 2,000,000GNNetcomAustraliaPty.Ltd. Australia AUD 100 2,500,000GNNetcom(Spain)S.A. Spain EUR 100 60,111GNNetcom(italia)S.r.l. italy EUR 100 10,200GNNetcom(UK)Ltd. GreatBritain GBP 100 100,000GNNetcomAB Sweden SEK 100 5,100,000GNNetcomBeneluxB.V. Netherlands EUR 100 18,000GNNetcomGmbH Germany EUR 100 51,129GNNetcomS.A. France EUR 100 80,000

GN ReSound A/S Denmark DKK 100 62,867,000GNReSoundPty.Ltd. Australia AUD 100 4,000,002GNReSoundShanghaiLtd. China CNy 100 3,000,000GNReSoundChinaLtd. China CNy 100 34,000,000GNGROCLtd China CNy 100 500,000GNReSoundindiaPrivateLimited india iNR 100 7,352,000GNResoundJapanK.K. Japan JPy 100 499,000,000GNReSound(NZ)Ltd. NewZealand NZD 100 2,000,000GNHearingPte.Ltd. Singapore SGD 100 1,500,000GNReSoundHörtechnologieGmbH Austria EUR 100 500,000SluchadlovaAkustikaspol.S.R.O. CzechRepublic CZK 100 102,000intertonDanmarkA/S Denmark DKK 100 200,000BeltoneEuropeHoldingsApS Denmark DKK 100 200,000DanskHørecenterApS Denmark DKK 100 125,000GNHearingSAS France EUR 100 285,957GNHearingGmbH Germany EUR 100 296,549GNResoundGmbHHörtechnologie Germany EUR 100 2,162,253GNHearingS.r.l. italy EUR 100 181,190GNHearingBeneluxbv Netherlands EUR 100 680,670GNReSoundNorgeAS Norway NOK 100 2,000,000intertonSlovakias.r.o. Slovakia SLK 100 170,000GNHearingCareS.A. Spain EUR 100 1,562,631GNHearingSverigeAB Sweden SEK 100 100,000GNReSoundAG Switzerland CHF 100 420,000BeltoneSchweizGmbH Switzerland CHF 100 20,000

GNReSoundLtd. UnitedKingdom GBP 100 7,376,000GNReSoundProdutos MédicosLtda. Brazil BRL 100 1,019,327GNReSoundKoreaCo.Ltd.* Korea KRW 90 136,700,000GNReSoundLLC Russia RUB 100 10,000GNReSoundFinlandOy/Ab Finland EUR 100 100,913GNUSHoldings,inc. USA USD 100 34,000,000GNHearingCareCorporation USA USD 100 180,000GNReSoundHoldings,inc. USA USD 100 10BeltoneHoldingsiiinc. USA USD 100 1BeltoneHoldingsiiiinc. USA USD 100 10BeltoneHoldingsiVinc. USA USD 100 30BeltoneHoldingsVinc. USA USD 100 30BeltoneFoundation USA USD 100 10BeltoneCorporation USA USD 100 10AmericanHearingSystemsinc. USA USD 100 10AudioElectronics,inc. USA USD 100 198,890DBSpecialinstrumentsinc. Canada CAD 100 137GNHearingCareCanadaLtd. Canada CAD 100 10,0005837946Manitoba,Ltd. Canada CAD 100 10,000810720Alberta,Ltd. Canada CAD 100 50,000GNReSound(Malaysia)SdnBhd Malaysia RM 100 100

AudioNovaS.R.L Romania ROL 49 10,000,000 AudiologySystemsinc. USA USD 40 1,724,000 HimppA/S Denmark DKK 11 2,400,000 HiMSAA/S Denmark DKK 25 1,000,000 HiMSAiiA/S Denmark DKK 17 600,000 HimsaiiK/S Denmark DKK 15 3,250,000 K/SHimpp Denmark DKK 9 114,782,415

GN Otometrics A/S Denmark DKK 100 23,240,000inmedicoA/S Denmark DKK 100 500,000GNOtometricsGmbH Germany EUR 100 1,800,000GenieAudioinc. Canada CAD 100 232GNOtometricsShanghaiLtd China USD 100 800,000GNOtometricsS.a.S France EUR 100 1,200,000

Associates *GNStoreNordcurrentlyhold90%ownershipbutconsolidates100%,asthe anticipatedacquisitionmethodisapplied.

Afewminorcompanieshavebeenomittedfromthelist. .

Cur- Owner- Share Domicile rency ship % capital

Cur- Owner- Share Domicile rency ship % capital

COMPANIES IN THE GN STORE NORD GROUP


95/CONSOLiDATED / COMPANiESiNTHEGNSTORENORDGROUP

C COMPANIES IN THE GN STORE NORD GROUP



Contents







In this annual report the following financial terms are used:

Operatingprofit(loss) Profit(loss)beforetaxandfinancialitems. EBiTDA Operatingprofit(loss)beforedepreciationandimpairmentofproperty,plantandequip-

ment,amortizationandimpairmentofintangibleassets,exceptdevelopmentprojects,impairmentofgoodwillandgains(losses)ondivestmentofoperationsetc.

EBiTA Operatingprofit(loss)beforeamortizationandimpairmentofacquiredintangibleas-

sets,impairmentofgoodwillandgains(losses)ondivestmentofoperationsetc. Key Ratio Definitions Organicgrowth = Absoluteorganicsalesgrowth Salesyear0 Organicgrowthisameasureofgrowthexcludingtheimpactofacquisitions,

divestmentsandforeignexchangeadjustmentsfromyear-on-yearcomparisons. Networkingcapital(NWC) = inventories+receivables+otheroperatingcurrentassets-tradepayables

-otheroperatingcurrentliabilities Netinterest-bearingdebt = Cashandcashequivalents-bankloans Dividendpayoutratio = Totaldividend Profit(loss)fortheyear Grossmargin = Grossprofit Revenue EBiTAmargin = EBiTA Revenue ROiC(Returnoninvestedcapital = EBiTAincludinggoodwill) Averageinvestedcapitalincludinggoodwill investedcapital = NWC+property,plantandequipmentandintangibleassets+loanstodispensersofGN

ReSoundproducts+ownershipinterests-provisions Cashconversion = Freecashflowexcl.companyacquisitionsanddivestments EBiTA Returnonequity(ROE) = Profit(loss)fortheyear AverageequityoftheGroup Equityratio = EquityoftheGroup Totalassets Earningspersharebasic(EPS) = Profit(loss)fortheyear Averagenumberofsharesoutstanding Earningspershare,fullydiluted = Profit(loss)fortheyear(EPSdiluted) Averagenumberofsharesoutstanding,fullydiluted Marketcapitalization Numberofsharesoutstandingxsharepriceattheendoftheperiod Outstandingshares Numberofshareslisted-treasuryshares


96/CONSOLiDATED / GLOSSARyANDKEyRATiODEFiNiTiONS

C GLOSSARY AND KEY RATIO



Contents







Parent company Financial statements 2015

97 FINANCIAL STATEMENTSincomestatementandstatementofcomprehensiveincome 98BalancesheetatDecember31 99Statementofcashflow 100Statementofequity 101

102 NOTES - INCOME STATEMENT1 Staffcosts 1022 Depreciation,amortization

andimpairment 1023 Feestoauditorsappointedatthe

AnnualGeneralMeeting 1024 Financialincomeandexpenses 1035 Tax 103

104 NOTES - BALANCE SHEET6 intangibleassets 1047 investmentinsubsidiaries 1048 Deferredtax 1049 Currenttax 104

105 NOTES - OTHER DISCLOSURES10 Contingentliabilities,otherfinancial

liabilitiesandcontingentassets 10511 Financialinstruments

andfinancialrisks 10512 Outstandingshares

andtreasuryshares 10613 Relatedpartytransactions 10614 Othernon-cashadjustments 10715 Accountingpolicies 107

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

GN STORE NORD ANNUAL REPORT 2015GNSTORENORDANNUALREPORT2015

97/PARENTCOMPANy / FiNANCiALSTATEMENTS

FINANCIAL STATEMENTS PARENT - CONTENTS


Consolidated Financial statements • PARENT COMPANY FINANCIAL STATEMENTS

Contents







PARENT COMPANY INCOME STATEMENT


Revenue 18 27Gross profit 18 27 Developmentcosts (14) (8)Managementandadministrativeexpenses 1,2,3 (90) (168)Operating profit (loss) (86) (149) Financialincome 4 85 119Financialexpenses 4 (136) (134)Profit (loss) before tax (137) (164) Taxonprofit(loss) 5 33 23Profit (loss) for the year (104) (141) Proposed profit appropriation/distribution of loss Retainedearnings (265) (292)Proposeddividendsfortheyear 161 151 (104) (141)

STATEMENT OF COMPREHENSIVE INCOME DKK million 2015 2014

Profit(loss)fortheyear (104) (141) Other comprehensive income Items that may be reclassified subsequently to profit or loss Adjustmentofcashflowhedges (11) (6)Taxrelatingtothisitemofothercomprehensiveincome 3 2Comprehensive income for the year (112) (145)



P INCOME STATEMENTP STATEMENT OF COMPREHENSIVE INCOME



Contents







PARENT COMPANY BALANCE SHEET AT DECEMBER 31


ASSETS

intangibleassets 6 109 93investmentsinsubsidiaries 7 6,374 6,167Amountsowedbysubsidiaries 11 714 1,313Total non-current assets 7,197 7,573 Taxreceivables 9 13 -Otherreceivables 11 8 18Total current assets 21 18 Total assets 7,218 7,591 EQUITY AND LIABILITIES Sharecapital 649 672Otherreserves (1,064) (84)Proposeddividendsfortheyear 161 151Retainedearnings 2,938 3,194Total equity 2,684 3,933 Bankloans 11 2,297 1,675Provisions - 12Deferredtaxliabilities 8 180 172Total non-current liabilities 2,477 1,859 Bankloans 11 21 55Tradepayables 11 13 24Taxpayables 9 - 4Amountsowedtosubsidiaries 11 1,963 1,681Provisions 6 -Otherpayables 54 35Total current liabilities 2,057 1,799 Total equity and liabilities 7,218 7,591



P BALANCE SHEET



Contents







PARENT COMPANY STATEMENT OF CASH FLOW


Operating activities Operatingprofit(loss) (86) (149)Depreciation,amortizationandimpairment 18 27Othernon-cashadjustments 14 (6) (4)Cash flow from operating activities before changes in working capital (74) (126) Changeinreceivables 10 (9)Changeintradepayablesandotherpayables (5) 18Total changes in working capital 5 9 Cash flow from operating activities before financial items and tax (69) (117) interestanddividends,etc.received 13 21interestpaid (57) (40)Taxpaid,net 27 37Cash flow from operating activities (86) (99) Investing activities investmentsinintangibleassets (34) (36)Cash flow from investing activities (34) (36) Cash flow from operating and investing activities (free cash flow) (120) (135) Financing activities increaseoflong-termloans 622 459increaseofshort-termloans 802 691Paiddividends (142) (138)Purchase/saleoftreasuryshares (1,162) (877)Cash flow from financing activities 120 135 Net cash flow - - Cashandcashequivalents,beginningofperiod - -Cash and cash equivalents, end of period - -



P CASH FLOW STATEMENT



Contents







PARENT COMPANY STATEMENT OF EQUITY

Other reserves

Share capital Additional Proposed (shares of paid-in Hedging Treasury dividends Retained Total DKK million DKK 4 each) capital reserve shares for the year earnings equity

Balance sheet total at December 31, 2013 693 1,491 (1) (893) 146 3,478 4,914

Profit(loss)fortheperiod - - - - - (141) (141)Adjustmentofcashflowhedges - - (6) - - - (6)Taxrelatingtoothercomprehensiveincome - - 2 - - - 2Totalcomprehensiveincomefortheyear - - (4) - - (141) (145) Reductionofthesharecapital (21) (518) - 539 - - -Purchase/saleoftreasuryshares - - - (877) - - (877)Purchaseofownershipinterestsin subsidiariesbypaymentintreasuryshares - 60 - 119 - - 179Proposeddividendsfortheyear - - - - 151 (151) -Paiddividends - - - - (138) - (138)Dividends,treasuryshares - - - - (8) 8 -Balance sheet total at December 31, 2014 672 1,033 (5) (1,112) 151 3,194 3,933 Profit(loss)fortheperiod (104) (104)Adjustmentofcashflowhedges (11) (11)Taxrelatingtoothercomprehensiveincome 3 3Totalcomprehensiveincomefortheyear - - (8) - - (104) (112) Reductionofthesharecapital (23) (761) - 784 - - -Purchase/saleoftreasuryshares - - - (1,162) - - (1,162)Purchaseofownershipinterestsin subsidiariesbypaymentintreasuryshares - 37 - 130 - - 167Proposeddividendsfortheyear - - - - 161 (161) -Paiddividends - - - - (142) - (142)Dividends,treasuryshares - - - - (9) 9 -Balance sheet total at December 31, 2015 649 309 (13) (1,360) 161 2,938 2,684



P STATEMENT OF EQUITY



Contents







1 STAFF COSTS


Wages,salariesandremuneration (65) (57)Pensions (4) (2)Total (69) (59) ExecutiveManagementremunerationcanbespecifiedasfollows:

AndersBoyer,CFOofGNStoreNord*) (7.7) (6.6)Total (7.7) (6.6) StaffcostsareincludedinManagementandadministrativeexpenses. BoardofDirectorsremuneration (5.0) (5.0) Averagenumberofemployees 69 53 Numberofemployees,year-end 75 54 ForinformationregardingExecutiveManagementandBoardofDirectorsremunerationpleaserefertonote5.2inthe consolidatedfinancialstatements.

*)Doesnotincludesharebasedpayments.

2 DEPRECIATION, AMORTIZATION AND IMPAIRMENT

AmortizationandimpairmentofintangibleassetsofDKK18millionandDKK0million,respectively,arerecognizedintheincomeStatementasManagementandadministrativeexpenses(2014:DKK26millionandDKK1million).

3 FEES TO AUDITORS APPOINTED AT THE ANNUAL GENERAL MEETING


Auditfees (1) (1)Total (1) (1) Other assistance Otheraudit-relatedservices - (5)Taxassistanceandadvice - (1)Total - (6) Total (1) (7)

102/PARENTCOMPANy / iNCOMESTATEMENT / NOTES


P NOTE 1P NOTE 2P NOTE 3



Contents







4 FINANCIAL INCOME AND EXPENSES


Financial income interestincomefromsubsidiaries* 62 86interestincomefrombankbalances* 23 14Financialincome,other - 1Foreignexchangegain - 18Total 85 119 Financial expenses interestexpensetosubsidiaries* (72) (80)interestexpenseonbankbalances* (49) (35)Financialexpenses,other (9) (5)Foreignexchangeloss (6) (14)Total (136) (134) *interestincomeandexpensesfromfinancialassetsandliabilitiesatamortizedcost.

5 TAX


Tax on profit (loss) Currenttaxfortheyear 36 19Deferredtaxfortheyear (6) (3)Adjustmenttocurrenttaxinrespectofprioryears 5 7Adjustmenttodeferredtaxinrespectofprioryears (2) -Total 33 23 Reconciliation of effective tax rate Danishtaxrate 23.5% 24.5%Non-taxableincome 0.0% 0.1%Non-deductableexpenses (1.8%) (15.0%)Other 2.4% 4.3%Effective tax rate 24.1% 13.9% in2015,theparentcompanypaidDKK167millioninDanishcorporationtaxagainstDKK121millionin2014.

103/PARENTCOMPANy / iNCOMESTATEMENT / NOTES


P NOTE 4P NOTE 5



Contents







6 INTANGIBLE ASSETS SoftwareDKK million 2015 2014

CostatJanuary1 154 118Additions 34 36CostatDecember31 188 154AmortizationandimpairmentatJanuary1 (61) (34)Amortization (18) (26)impairment - (1)AmortizationandimpairmentatDecember31 (79) (61)

Carrying amount at December 31 109 93 Amortizedover 1-7years 1-7years GNStoreNordhasnotcapitalizedanyborrowingcostsinthecurrentorprecedingperiodsasnon-currentassetsarenot financedwithdebt.

7 INVESTMENTS IN SUBSIDIARIES


CostatJanuary1 6,167 5,988Additions,capitalcontribution 207 179Cost at December 31 6,374 6,167 Groupcompaniesarelistedonpage95.

8 DEFERRED TAX


Deferred tax, net DeferredtaxatJanuary1,net (172) (169)Adjustmentinrespectofprioryears (6) -Deferredtaxfortheyearrecognizedinprofit(loss)fortheyear (2) (3)Deferred tax at December 31, net (180) (172)

Deferred tax, net relates to: intangibleassets (23) (23)Retaxation (152) (152)Provisions (5) 3Total (180) (172)

9 CURRENT TAX


Tax receivable TaxreceivableatJanuary1 (4) 5Adjustmentinrespectofprioryears 5 7Paymentrelatingtoprioryears* (1) (12)Currenttaxfortheyear 36 19Currenttaxfortheyearrecognizedinothercomprehensiveincomefortheyear 3 2Paymentsrelatingtothecurrentyear* (26) (25)Tax receivable (payable) at December 31 13 (4) *GNStoreNordA/SreceivedDKK27million,net,relatedtothejointtaxationscheme(2014:DKK37million).

104/PARENTCOMPANy / BALANCESHEET / NOTES


P NOTE 9P NOTE 6P NOTE 7P NOTE 8



Contents







10 CONTINGENT LIABILITIES, OTHER FINANCIAL LIABILITIES AND CONTINGENT ASSETS

Pleaserefertonote5.5intheconsolidatedfinancialstatements. ThecompanyisjointlytaxedwithallDanishsubsidiaries.ThecompanyisjointlyandseverallyliablewiththeothercompaniesinthejointtaxationforDanishcorporatetaxesandwithholdingtaxesondividend,interestsandroyaltieswithinthejointtaxation.

11 FINANCIAL INSTRUMENTS AND FINANCIAL RISK

Contractual maturity analysis for financial liabilities

Between Less than one and More than DKK million one year five years five years Total

2015 Long-termbankloans - 2,074 223 2,297Short-termbankloans 21 - - 21Tradepayables 13 - - 13Amountsowedtosubsidiaries - 1,963 - 1,963Totalnon-derivativefinancialliabilities 34 4,037 223 4,294Derivativefinancialliabilities - 19 - 19Total financial liabilities 34 4,056 223 4,313 2014 Long-termbankloans - 1,452 223 1,675Short-termbankloans 55 - - 55Tradepayables 24 - - 24Amountsowedtosubsidiaries - 1,681 - 1,681Totalnon-derivativefinancialliabilities 79 3,133 223 3,435Derivativefinancialliabilities - 7 - 7Total financial liabilities 79 3,140 223 3,442 Thematurityanalysisisbasedonnon-discountedcashflowsexcludinginterestpayments. Categories of financial assets and liabilities DKK million 2015 2014

Otherreceivables 8 18Receivablesfromsubsidiaries 714 1,313Loans and receivables 722 1,331 Bankloans,non-current 2,297 1,675Bankloans 21 55Tradepayables 13 24Amountsowedtosubsidiaries 1,963 1,681Financial liabilities measured at amortized cost 4,294 3,435 DerivativefinancialinstrumentsincludedinOtherpayables 19 7Financial liabilities measured at fair value 19 7 Forfinancialassetsandliabilities,thefairvalueisapproximatelyequaltothecarryingamount.RegardingGNStoreNord'sbankloans,thisisduetothefactthattheloanscarryfloatinginterestratesandhavematurityoflessthanoneyear.

105/PARENTCOMPANy / OTHERDiSCLOSURES / NOTES


P NOTE 10P NOTE 11



Contents







11 FINANCIAL INSTRUMENTS AND FINANCIAL RISKS (CONTINUED)

Derivative financial instruments

Cash flow hedges, interest rate swaps

2015 2014 Contract Fair value, Fair value, Contract Fair value, Fair value, amount, net assets liabilities amount, net assets liabilities

EUR* 3,087 - 19 1,005 - 7Total 3,087 - 19 1,005 - 7

*interestrateswapsdenominatedinEUR

GNhashedgedfutureinterestrateswithinterestrateswaps.Hedgeaccountinghasbeenappliedduring2015.Thefairvalueoftheinterestrateswapsisdeterminedusingforwardinterestratesandcanbecategorizedaslevel2(observableinputs)inthefairvaluehierarchy. .


Fairvalueadjustmentfortheyearrecognizedin Othercomprehensiveincome 11 6

12 OUTSTANDING SHARES AND TREASURY SHARES

Forinformationregardingoutstandingsharesandtreasurysharespleaserefertonote4.1intheconsolidatedfinancial statements.

13 RELATED PARTY TRANSACTIONS

GNStoreNordA/S'relatedpartiesexercisingsignificantinfluencecomprisemembersoftheBoardofDirectorsandthe ExecutiveManagementandsenioremployeesandtheirfamilymembers. inaddition,relatedpartiescomprisegroupenterprisesandassociatesoverwhichGNStoreNordA/Sexercisescontrolor significantinfluence. Groupenterprisesandassociatesarelistedonpage95. Board of Directors, Executive Management and Senior Employees Managementremunerationandincentiveplansaredescribedinnotes5.2and5.3intheconsolidatedfinancialstatements. Group enterprises and associates Tradewithgroupenterprisesandassociatescomprised: DKK million 2015 2014

Saleofservicestogroupenterprises 96 71Leaseincomefromgroupenterprises 12 13Purchaseofservicesfromgroupenterprises (27) (28)Leasecostspaidtogroupenterprises (13) (13)Purchaseofintangibleassets (33) (35) TransactionswithgroupenterprisesareeliminatedintheconsolidatedfinancialstatementsinaccordancewithGNStoreNord'sAccountingPolicies.Purchaseofproductsandservicesareboughtfromgroupenterprisesonnormalcommercialtermsandconditions.



P NOTE 12P NOTE 13



Contents







13 RELATED PARTY TRANSACTIONS (CONTINUED)

Theparentcompany'sbalanceswithgroupenterprisesatDecember31,2015arerecognizedinthebalancesheet.interestincomeandexpenseswithrespecttogroupenterprisesaredisclosedinnote4.Further,balanceswithgroupenterprises comprisetradebalancesrelatedtothepurchaseandsaleofgoodsandservices.

Saleofservicestogroupenterprisesconsistsoffacilityservices,canteenservices,managementfeeandiTcosts.Purchaseofservicesfromgroupenterprisesmainlyconsistsoffacilityservicesandcanteenservices.in2015,theparentcompanyhasboughtsoftwarefromsubsidiariesforatotalamountofDKK33million.ThetransactionswerecarriedoutinpreparationfortheimplementationofanewERPplatformfortheentireGroup.Theassetsweretradedatnetbookvalues.Furthermore,theparentcompanyhaspurchaseddevelopmentservicesonmarkettermsfromsubsidiariesrelatedtotheexploringresearchprojectsundertakeninGNOther. NotransactionshavebeencarriedoutwiththeBoardofDirectors,theExecutiveManagement,senioremployees,major shareholdersorotherrelatedparties,apartfromordinaryremuneration.

14 OTHER NON-CASH ADJUSTMENTS


Adjustmentofprovisions (6) (4)Total (6) (4)

15 ACCOUNTING POLICIES

Thefinancialstatementsoftheparentcompany,GNStoreNordA/Sfor2015hasbeenpreparedinaccordancewithinterna-tionalFinancialReportingStandardsasadoptedbytheEUandDanishdisclosurerequirementsforannualreportsoflistedcompanies.inaddition,thefinancialstatementshavebeenpreparedincompliancewiththeinternationalFinancialReportingStandardsissuedbytheinternationalAccountingStandardsBoard(iASB). Thefinancialstatementshavebeenpreparedinaccordancewiththehistoricalcostconvention,asmodifiedbytherevaluationofavailable-for-salefinancialassetsandderivativefinancialinstrumentsatfairvalue. Theaccountingpoliciesforthefinancialstatementsoftheparentcompanyareunchangedfromthelastfinancialyearandarethesameasfortheconsolidatedfinancialstatementswiththefollowingadditions. Supplementary accounting policies for the parent company Investments in Subsidiaries investmentsinsubsidiariesarerecognizedatcostlessimpairmentlosses.Wheretherecoverableamountislowerthancost,investmentsarewrittendowntothislowervalue. Dividendsreceivedfrominvestmentsinsubsidiariesandassociatesarerecognizedintheincomestatementinthefinancialyearinwhichthedividendsaredeclared. Share-basedpaymentgrantedbyGNStoreNordtoemployeesinsubsidiariesareforaccountingpurposestreatedasacapitalinjectionandincreaseGNStoreNord’scostofthesubsidiaries.ifGNStoreNordsubsequentlyrequiresthesubsidiariestopaytheintrinsicvalueoftheoptionsattheexercisedate,thecostisreducedcorrespondingly. Intra-Group Transactions in the Parent Company Financial Statements intra-grouptransactionsarerecognizedintheparentcompanyfinancialstatementsatthecarryingamount.Accordingly, additionstoordisposalsofinvestmentsarerecognizedatthecarryingamount,andanydifferencebetweenthecarryingamountofnetassetsandtheconsiderationpaidisrecognizeddirectlyinequity.Comparativefiguresarenotrestated.

Intercompany balances intercompanybalanceswhichareexpectedtobesettledaspartofthenormaloperatingcycle,orwhereanunconditionalrighttodefersettlementoftheliabilityforatleasttwelvemonthsafterthereportingperioddoesnotexist,areclassifiedascurrentliabilities.



P NOTE 14P NOTE 15



Contents







Statement by the executive management and the board of directorsToday,theexecutivemanagementandtheboardofdirec-torshavediscussedandapprovedtheGNStoreNordA/SAnnualReport2015.

TheannualreporthasbeenpreparedinaccordancewithinternationalFinancialReportingStandardsasadoptedbytheEUandDanishdisclosurerequirementsforlistedcom-panies.

inouropiniontheconsolidatedfinancialstatementsandtheparentcompanyfinancialstatementsgiveatrueandfairviewofthegroup'sandtheparentcompany'sassets,liabili-tiesandfinancialpositiononDecember31,2015andoftheresultsofthegroup'sandtheparentcompany'soperations

andcashflowsforthefinancialyearJanuary1-December31,2015.

Further,inouropinionthemanagement'sreportincludesafairreviewofthedevelopmentandperformanceofthegroup'sandtheparentcompany'sbusinessandfinancialcondition,theprofit/lossfortheyearandofthegroup'sandtheparentcompany'sfinancialposition,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthatthegroupandtheparentcompanyface.

Werecommendthattheannualreportfor2015beap-provedattheannualgeneralmeeting.

Ballerup, February 12, 2016

EXECUTIVE MANAGEMENT

Anders Hedegaard René Svendsen-Tune Anders BoyerCEO, GN ReSound CEO, GN Netcom CFO, GN Store Nord

BOARD OF DIRECTORS

Per Wold-Olsen William E. Hoover Jr. Wolfgang ReimChairman Deputy chairman

Ronica Wang Hélène Barnekow Carsten Krogsgaard Thomsen

Leo Larsen Nikolai Bisgaard Morten Andersen


108/MANAGEMENTSTATEMENT

STATEMENT BY THE EXECUTIVE MANAGEMENT


Contents






INDEPENDENT AUDITORS' REPORT

Independent auditors' reportTO THE SHAREHOLDERS OF GN STORE NORD A/S

INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDAT-ED FINANCIAL STATEMENTS AND THE PARENT COMPANY FINANCIAL STATEMENTSWehaveauditedtheconsolidatedfinancialstatementsandtheparentcompanyfinancialstatementsofGNStoreNordA/Sforthefinancialyear1January–31December2015,whichcompriseincomestatement,statementofcomprehen-siveincome,balancesheet,statementofequity,statementofcashflowandnotes,includingasummaryofsignificantaccountingpolicies,fortheGroupaswellasfortheparentcompany.Theconsolidatedfinancialstatementsandthepar-entcompanyfinancialstatementsarepreparedinaccordancewithinternationalFinancialReportingStandardsasadoptedbytheEUandDanishdisclosurerequirementsforlistedcom-panies.

Management's responsibility for the consolidated financial statements and the parent company financial statementsManagementisresponsibleforthepreparationofconsoli-datedfinancialstatementsandparentcompanyfinancialstatementsthatgiveatrueandfairviewinaccordancewithinternationalFinancialReportingStandardsasadoptedbytheEUandDanishdisclosurerequirementsforlistedcompa-niesandforsuchinternalcontrolthatManagementdeter-minesisnecessarytoenablethepreparationofconsolidatedfinancialstatementsandparentcompanyfinancialstate-mentsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditors' responsibilityOurresponsibilityistoexpressanopinionontheconsoli-datedfinancialstatementsandtheparentcompanyfinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithinternationalStandardsonAuditingandadditionalrequirementsunderDanishauditregulation.Thisrequiresthatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceastowhethertheconsolidatedfinancialstatementsandtheparentcompanyfinancialstatementsarefreefrommaterialmis-statement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsoli-datedfinancialstatementsandtheparentcompanyfinancialstatements.Theproceduresselecteddependontheauditors'judgment,includingtheassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatementsandtheparentcompanyfinancialstatements,whetherdueto

fraudorerror.inmakingthoseriskassessments,theaudi-torsconsiderinternalcontrolrelevanttotheCompany'spreparationofconsolidatedfinancialstatementsandparentcompanyfinancialstatementsthatgiveatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcon-trol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccount-ingestimatesmadebyManagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatementsandtheparentcompanyfinancialstatements.

Webelievethattheauditevidencewehaveobtainedissuf-ficientandappropriatetoprovideabasisforouropinion.

Ouraudithasnotresultedinanyqualification.

Opinioninouropinion,theconsolidatedfinancialstatementsandtheparentcompanyfinancialstatementsgiveatrueandfairviewoftheGroup'sandtheparentcompany'sfinancialpositionat31December2015andoftheresultsoftheGroup'sandtheparentcompany'soperationsandcashflowsforthefinancialyear1January–31December2015inaccordancewithinter-nationalFinancialReportingStandardsasadoptedbytheEUandDanishdisclosurerequirementsforlistedcompanies.

STATEMENT ON THE MANAGEMENT'S REVIEWPursuanttotheDanishFinancialStatementsAct,wehavereadtheManagement'sreview.Wehavenotperformedanyfurtherproceduresinadditiontotheauditoftheconsoli-datedfinancialstatementsandtheparentcompanyfinancialstatements.Onthisbasis,itisouropinionthattheinforma-tionprovidedintheManagement'sreviewisconsistentwiththeconsolidatedfinancialstatementsandtheparentcom-panyfinancialstatements.

Copenhagen,February12,2016

ERNST & YOUNGGodkendtRevisionspartnerselskab CVRno.30700228

TorbenBender AndersStigLauritsenStateAuthorised StateAuthorisedPublicAccountant PublicAccountant


109/iNDEPENDENTAUDiTORS’REPORT

INDEPENDENT AUDITORS REPORT


Contents






INDEPENDENT AUDITORS' REPORT


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FORWARD-LOOKING STATEMENTSTheforward-lookingstatementsinthisannualreportreflectGNStoreNord’smanagement’scurrentexpectationsofcertainfutureeventsandfinancialresults.Statementsregardingthefutureareinherentlysubjecttorisksanduncertaintieswhichmayresultinmaterialdeviationsfromexpectations.Furthermore,someoftheseexpectationsarebasedonassump-tionsregardingfutureeventswhichmayproveincorrect.Factorsthatmaycauseactualresultstodeviatemateriallyfromexpectationsinclude–butarenotlimitedto–generaleconomicdevelopmentsanddevelopmentsinthefinancialmarkets,technologicaldevelopments,changesandamendmentstolegislationandregulationsgoverningGN’smarkets,changesinthedemandforGN'sproducts,competition,fluctuationsinsub-contractorsuppliesanddevelopmentsinongoinglitiga-tion(includingbutnotlimitedtoclassactionandpatentinfringementlitigationintheUnitedStates).Formoreinformation,seethe"Management'sreport"and"Riskmanagement”elsewhereinthisannualreport.ThisannualreportshouldnotbeconsideredanoffertosellsecuritiesinGN.


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GN Store Nord A/S

Lautrupbjerg 72750 BallerupDenmark

Co.reg. no 24257843

+45 45 75 00 [email protected]

Cover Business consultant James Raath woke up one morning nine years ago and had overnight gone almost completely deaf. In 2014, he was fitted with ReSound Enzo hearing aids. Now he can think of work, family, friends and socializing – and serve as a great example of how GN’s intelligent audio solutions trans-form lives through the power of sound.