Annual Report 2020

GN Store Nord A/S

2 Management's report ⋅ Contents Contents

GN Store Nord A/S

Management’s report

Group development 2020

Navigating safely through rough waters 3

Chairman’s foreword 3

2020 highlights 5

Consolidated financial highlights 6

Group performance 2020 7

GN Hearing performance 2020 10

GN Audio performance 2020 18

Financial guidance 2021 23

Serving attractive markets 25

Lean and agile business model 26

Global reach, local presence 27

Business areas and brands 28

Awards and accolades 29

Sustainability - ESG 30

Risk management 31

Corporate governance 38

Shareholder information 44

Board of Directors 46

Executive Management 49

Additional financial information (unaudited) 50

Q4 financial highlights 51

Financial statements

Consolidated - Financial statements 2020 56

Parent company - Financial statements 2020 113

Statement by the Executive Management

and the Board of Directors 128

Independent Auditors’ Report 129

Contents

Investment

case

Focused innovation within

sound processing that can

benefit users in select

important market segments

Market leading positions in

attractive markets with high

entry barriers

Focused growth model,

dedicated innovator,

developer, manufacturer

and distributor, refraining

from vertical integration

Clear strategy underpinned

by deep technology

expertise and strategic

global partnerships

Profitability aligned with or

better than peers

Strong cash conversion

and asset light business

model

3 Management's report ⋅ Chairman’s foreword Contents

GN Store Nord A/S

Protecting people and business in a world in lockdown

The COVID-19 pandemic overshadowed everything else in

2020. The entire world suffered. At GN, we were impacted

early on, when a contract security guard at GN Hearing’s

manufacturing site in China was infected in late January. We

temporarily suspended operations at the site, and from then

on, our leadership managed professionally through un-

charted waters.

Looking back over the course of the year, I would argue that

GN handled the challenges well. Our priority was to protect

people’s health, livelihoods, our innovation engine, our supply

chain, and our business in a world of various lockdowns.

Management steered the ship firmly, managing cost wisely,

while never compromising on the innovation that would

allow the business to bounce back when the day comes. Our

leaders and employees around the world demonstrated

remarkable stamina and heart, helping each other, helping

customers, and helping the company by working efficiently in

difficult circumstances and accepting furlough and reduced

pay.

The Board and I appreciate the many personal sacrifices that

have been made. For this we are thankful to each and every

one of GN’s more than 6,000 employees throughout the

world – and we trust our shareholders feel the same.

Diversely affected businesses proved the strength of GN

Throughout 2020, the pandemic affected GN’s two business

divisions very differently:

• GN Audio entered the year with a strong track-record of

growth in attractive enterprise markets based on an indus-

try leading product portfolio, excellent execution, and im-

proved brand recognition. The already high demand rose

sharply as enterprises and organizations increased invest-

ments in collaboration tools allowing employees to work

effectively from home. GN Audio’s investments over the

recent years in a highly scalable setup for manufacturing

and logistics ensured that customers’ needs could be met

with as little delay as possible. This helped GN Audio take

significant market share during 2020.

• For GN Hearing the pandemic resulted in sharply declining

revenue. As elderly, more vulnerable populations were ad-

vised to stay home and local restrictions shut down many

hearing clinics, the sale of hearing aids dropped dramati-

cally, especially in March through May.

In such challenging times, it proved beneficial for GN to oper-

ate with limited forward integration and within both the hear-

ing aid and audio & collaboration space.

Major product launches successfully moved online

Both GN Audio and GN Hearing kept up momentum in prod-

uct innovation and development and executed on extensive

product launches digitally. In March – with most markets in

full lockdown – GN Audio launched the second generation of

the Evolve range, Evolve2, its best-selling and market leading

Unified Communications headset. This was all done online

with no ability to meet customers face-to-face, and still

ended up being GN Audio’s most successful product launch

to date.

In August, GN Hearing launched ReSound ONE, an entirely

new class of hearing aids that offers a truly individualized

hearing experience and the best sound quality for every user.

A 24-hour online global launch event on September 1 had

10,000 attendees sign up, which is more than any regular

hearing industry conference had ever attracted.

Both examples show the agility and ability of GN’s organiza-

tion to rapidly adapt to new circumstances and execute suc-

cessfully in a turbulent world with numerous headwinds.

Preceding these major product innovations lay significant

work and investments in research and development. While

the pandemic required diligent cost control and savings

throughout GN, the decision to not save on the company’s in-

novation engine was deliberate. We already saw the benefit

of this in 2020 and will see this even more in years to come.

New opportunities during and post pandemic

We strongly believe that GN continues to be well positioned

for success. Our fundamental strategy for 2020 and beyond

is unchanged by the pandemic and has already proven robust

Navigating safely through rough waters

With professional leadership and proactive management, GN fared well through

unprecedented challenges in 2020

. In a year when the entire world was heavily

burdened by the global pandemic, GN adjusted appropriately but never compro-

mised on our innovation agenda, launching multiple well

-received state-of-the-

art products, and

managing expenditure diligently

Chairman’s foreword

4 Management's report ⋅ Chairman’s foreword Contents

GN Store Nord A/S

for a rapidly changing and uncertain world, as has GN’s busi-

ness model and organization.

In the coming years GN will continue to take individualized

customer experiences to a whole new level and further

broaden the reach and appeal of GN’s hearing, audio, and

video product portfolios, where we see ample opportunities

for continued growth. As new market segments open up, we

will further leverage GN’s technological expertise and com-

mercial platform, where these provide a particular competi-

tive advantage.

While COVID-19 temporarily hampered hearing clinics from

serving their clients face-to-face, the pandemic also demon-

strated that the need for hearing is greater than ever when

people are physically distanced from each other. With in-

creased mask wearing and social distancing there is clearly a

greater need and awareness is increasing of how crucial it is

for people to be able to hear and understand one another,

aided by technology and proper remote care. The hearing

market fundamentals continue to be healthy with a growing

elderly and more affluent population and we see the markets

as being fundamentally intact.

GN Hearing is well positioned as a leader in connectivity and

audiology designed for the individual, as demonstrated by our

latest product families. We will continue to invest in expand-

ing what a hearing aid can do for the user. A hearing aid

should, obviously, deliver the best possible sound for the

user, but increasingly we will engineer hearing aids to assist

users and their relatives with much more than ”just” hearing.

We think of these multiple new opportunities as beyond hear-

ing enabling people to hear more, do more, and be more.

Also in GN Audio’s enterprise business, we believe that our

markets are intact. Large enterprise customers across the

world are preparing for more permanent flexible and hybrid

work initiatives which will continue after COVID-19. GN Audio

is strongly positioned to capture the market opportunities

and the current trends, which has contributed to significant

market expansion. Professional collaboration tools based on

sound, vision, and artificial intelligence will open up for a

range of new ways to improve work efficiency, collaboration,

and compliance with e.g. health restrictions. We will continue

to invest into our business to capture growth in audio and

video collaboration.

The near future remains uncertain

As COVID-19 continues to make life and business difficult

around the world, and blur the world economic outlook, the

near future expectations for both GN’s business divisions re-

main significantly more uncertain than normal. In entering

2021, we see that the trying times are not over.

However, GN’s market fundamentals remain healthy. Based

on GN’s attractive market prospects, focused strategic execu-

tion and a strong track record for developing industry-

leading, user-friendly, and increasingly-individualized hearing,

audio and video products and solutions, GN continues to be

well positioned beyond 2020.

GN has a robust business platform and a well-established or-

ganization with strong leadership and talented employees.

Our financial foundation is solid, and our strategy is un-

changed: driving growth by delivering uniquely and increas-

ingly individualized customer experiences in our products and

solutions through innovation leadership and commercial &

eco-system excellence.

Making Life Sound Better

Predicting the future is subject to many uncertainties right

now. Just as the company has done for more than 150 years,

GN will focus on managing what we can control. Manage-

ment and our employees did this exceptionally well in 2020.

With the experience and talent available throughout the

company, with the right strategy in place, and with market

leading positions in attractive markets, the Board of Directors

is confident that GN will continue its highly successful growth

journey, whatever challenges the future may hold. We will

continue delivering on our purpose: Making Life Sound Bet-

ter. The world needs that more than ever right now.

Per Wold-Olsen, Chairman of the Board

5 Management's report ⋅ 2020 highlights Contents

GN Store Nord A/S

Revenue (DKK)

13.4bn

+9% organic growth vs 2019

EBITA (DKK)

1.9bn

-20% vs 2019

Cash conversion

100%

Shareholder returns (DKK)

356m

via share-buybacks and dividends

Revenue split by region

Earnings per share (DKK)

9.72

-13% vs 2019

2020 highlights

The pandemic

affected GN’s two business divisions very differently: GN Audio ex-

perienced strong demand as enterprises invested in employees working from

h

ome, and GN Hearing experienced severe impact on revenue from restrictions

and lockdown. Operating in both segments proved beneficial for GN

6 Management's report ⋅ Consolidated financial highlights Contents

GN Store Nord A/S

DKK million

2016

2017

2018

2019

2020

GN Hearing

Revenue

5,156

5,615

5,833

6,351

4,725

Revenue growth

14%

9%

4%

9%

-26%

Organic growth

6%

7%

-24%

Gross profit margin

69.0%

69.4%

69.2%

69.0%

61.5%

EBITA*

1,062

1,153

1,194

1,284

41

EBITA margin*

20.6%

20.5%

20.2%

0.9%

ROIC (EBITA*/Average invested capital)

17%

18%

19%

1%

Free cash flow excl. company acquisitions and divestments

704

866

574

672

127

Cash conversion (free cash flow excl. company acquisitions and divestments/EBITA*)

66%

75%

48%

52%

310%

GN Audio

Revenue

3,495

3,970

4,774

6,223

8,724

Revenue growth

8%

14%

20%

30%

40%

Organic growth

7%

10%

21%

26%

42%

Gross profit margin

52.7%

53.2%

51.5%

50.4%

EBITA*

597

721

905

1,192

2,002

EBITA margin*

17.1%

18.2%

19.0%

19.2%

22.9%

ROIC (EBITA*/Average invested capital)

41%

46%

59%

57%

81%

Free cash flow excl. company acquisitions and divestments

523

481

798

849

1,729

Cash conversion (free cash flow excl. company acquisitions and divestments/EBITA*)

88%

67%

88%

71%

86%

GN Store Nord

Revenue

8,651

9,585

10,607

12,574

13,449

Revenue growth

12%

11%

19%

7%

Organic growth

6%

8%

13%

15%

9%

Gross profit margin

62.4%

62.7%

62.0%

60.3%

54.3%

EBITA*

1,583

1,744

1,956

2,321

1,866

EBITA margin*

18.3%

18.2%

18.4%

18.5%

13.9%

Operating profit (loss)

1,445

1,558

1,796

2,002

1,627

Financial items, net

-52

-60

-203

-92

-6

Profit (loss) before tax

1,395

1,504

1,606

1,913

1,612

Effective tax rate

22.2%

25.4%

22.4%

23.3%

21.3%

Profit (loss) for the year

1,086

1,122

1,247

1,468

1,269

Total assets

12,835

11,737

13,017

16,683

16,682

Total equity

5,620

4,783

5,096

4,849

5,178

ROIC (EBITA*/Average invested capital)

20%

21%

24%

25%

19%

Earnings per share, basic (EPS)

7.34

8.07

9.25

11.12

9.72

Earnings per share, fully diluted (EPS diluted)

7.32

8.02

9.13

10.98

9.63

Investments in property, plant and equipment

-106

-103

-160

-232

-221

Free cash flow excl. company acquisitions and divestments

1,179

1,134

1,110

1,296

1,865

Cash conversion (free cash flow excl. company acquisitions and divestments/EBITA*)

74%

65%

57%

56%

100%

Equity ratio

43.8%

40.8%

39.1%

29.1%

31.0%

Net interest-bearing debt

3,377

3,035

3,234

5,303

4,198

Net interest-bearing debt (period-end)/EBITDA

1.9

1.6

1.5

2.0

1.8

Payout ratio

16%

14%

16%

Share buybacks**

1,272

1,372

1,061

1,626

453

Outstanding shares, end of period (thousand)

143,471

136,443

132,576

128,952

128,975

Average number of outstanding shares (thousand)

147,967

138,980

134,114

130,762

128,805

Average number of outstanding shares, fully diluted (thousand)

148,361

139,968

135,864

132,367

130,032

Treasury shares, end of period (thousand)

11,317

9,241

13,108

13,316

13,293

Share price at the end of the period

146.3

200.5

243.3

313.3

487.2

Market capitalization

20,990

27,357

32,256

40,401

62,837

* Please refer to Key Ratio Definitions on page 112 for definition of EBITA

** Including buybacks as part of the share-based incentive programs

Note: 2016 - 2018 are not adjusted for changes related to IFRS 16 and 2016 - 2017 are not adjusted for changes related to IFRS 9 and IFRS 15

Consolidated financial highlights

7 Management's report ⋅ Group performance 2020 Contents

GN Store Nord A/S

COVID-19

In 2020, GN Store Nord was affected in three ways by COVID-

19: (i) Various impact on production capacity and supply of

components from subcontractors in H1 2020, (ii) GN Audio

experienced strong demand as enterprises invested in em-

ployees working from home, and (iii) GN Hearing was im-

pacted by lockdowns and local restrictions impacting de-

mand. The impact of the pandemic obviously influenced GN

Hearing in a completely different way than GN Audio, and we

see having the two businesses under one roof as a position of

strength for the company.

To partially mitigate the negative impact on employment

from lockdowns and local restrictions, many governments

across the world implemented support schemes for busi-

nesses. Where appropriate, GN benefitted from some of

these schemes in lockdown markets. Further, the Danish gov-

ernment introduced a helpful temporary tax relief for re-

search and development costs.

Revenue

In 2020, GN Store Nord increased revenue by 7% to DKK

13,449 million compared to DKK 12,574 million in 2019.

Organic revenue growth was 9%, compared to 15% in 2019.

The foreign exchange contribution was around -1% and M&A

contribution was around -1%.

The solid performance of the company in an extraordinary

year reflects the continuous strong development in both GN

Hearing and GN Audio, driven by innovative product portfo-

lios and strong commercial execution.

EBITA

GN realized EBITA of DKK 1,866 million in 2020 (including

gain from legal settlements and litigation of DKK 114 million)

which was 20% lower than the DKK 2,321 million realized in

2019. GN’s earnings decrease reflects the significant negative

impact on revenue from COVID-19 in GN Hearing, but partly

offset by the strong performance in GN Audio. During the

year, GN focused on prudent cost control but also continued

investments into R&D and future growth opportunities. The

EBITA margin was 13.9% (including gain from legal

settlements and litigation of DKK 114 million), compared to

18.5% in 2019. Excluding the gain from legal settlements and

litigation, EBITA was DKK 1,752 million, reflecting an EBITA

margin of 13.0%.

EBITA in Other was DKK -177 million compared to DKK -155

million in 2019.

Group performance 2020

2020 manifested the benefits of having GN Hearing and GN Audio under the

same roof. GN Audio +

42%, GN Hearing -24%, GN +9% organic revenue growth

and EBITA at

DKK 1,866 million

Revenue (DKKm) and organic growth

GN Store Nord

EBITA (DKKm) and EBITA margin

GN Store Nord

*) Including gain from legal settlements and litigation of

DKK 114 million

8 Management's report ⋅ Group performance 2020 Contents

GN Store Nord A/S

Net profit

Amortization and impairment of acquired intangible assets

was DKK -235 million in 2020, compared to DKK -298 million

in 2019. The development was mainly driven by an

impairment loss in the Beltone retail in relation to the

ongoing optimization of the portfolio in 2019.

Financial items were DKK -6 million, compared to DKK -92

million in 2019. The development in financial items was

mainly driven by a positive non-cash contribution from

foreign exchange revaluation of certain balance sheet items,

as well as a fair value adjustment related to an existing

ownership interest.

The effective tax rate was 21.3%, while the net profit was

DKK 1,269 million, compared to DKK 1,468 million in 2019,

translating into a decrease of 14%, reflecting the negative

impact from COVID-19 in GN Hearing offset by prudent cost

management and strong performance in GN Audio.

Other performance indicators

GN continued throughout 2020 to have strong focus on cash

flow generation and has taken prudent cost measures. Free

cash flow excl. M&A increased 44% to DKK 1,865 million,

equal to a cash conversion of 100% for the Group compared

to 56% in 2019.

Earnings per share (EPS) was DKK 9.72, compared to DKK

11.12 in 2019.

The return on invested capital (ROIC) was 19% in 2020,

compared to 25% in 2019.

By the end of 2020, equity in GN Store Nord amounted to

DKK 5,178 million, compared to DKK 4,849 million in 2019.

The increase was primarily driven by the net profit generated

during the year on top of the execution of the share buyback

program finalized on March 9, 2020, as well as the ordinary

dividend payment and changes in foreign exchange rates.

Free cash flow (DKKm) and cash conversion

GN Store Nord

Earnings per share (EPS)

GN Store Nord

*) Including gain from legal settlements and litigation of

DKK 114 million

*) Including gain from legal settlements and litigation

of DKK 114 million

Financial overview 2020

GN Hearing

GN Audio

Group total*

DKK million

2020

2019

Growth

2020

2019

Growth

2020

2019

Growth

Revenue

4,725

6,351

-26%

8,724

6,223

40%

13,449

12,574

7%

Organic growth

-24%

7%

42%

26%

9%

15%

Gross profit

2,905

4,380

-34%

4,393

3,202

37%

7,298

7,582

-4%

Gross profit margin

61.5%

69.0%

-7.5%p

50.4%

51.5%

-1.1%p

54.3%

60.3%

-6.0%p

EBITA

41

1,284

-97%

2,002**

1,192

68%

1,866**

2,321

-20%

EBITA margin

0.9%

20.2%

-19.3%p

22.9%**

19.2%

+3.7%p

13.9%**

18.5%

-4.6%p

Earnings per share (EPS)

9.72 **

11.12

-13%

Free cash flow excl. M&A

127

672

-545

1,729**

849

+880

1,865**

1,296

+569

* Including “Other”

** Including gain from legal settlements and litigation of DKK 114 million

9 Management's report ⋅ Group performance 2020 Contents

GN Store Nord A/S

Capital structure

As previously communicated, GN has a long-term capital

structure target of a net interest-bearing debt between one-

and two-times EBITDA. By the end of 2020, the net interest-

bearing debt amounted to DKK 4,198 million (compared to

DKK 5,303 million in 2019), corresponding to 1.8 times

EBITDA. The decrease in net interest-bearing debt was driven

by prudent cash flow management and a strong cash

conversion in GN Audio.

The balance sheet remained very sound with ample sources

of liquidity and GN had cash and cash equivalent of DKK

1,657 million at the end of 2020.

In the last couple of years, GN proactively diversified the

funding profile. The different sources of financing now availa-

ble to GN include the convertible bond market (via the listed

convertible bond), traditional bonds (via the Euro Medium-

Term Note program), the Euro Commercial Paper Program,

bilateral loan from EIB, uncommitted bank facilities including

overdraft lines as well as immediate access to undrawn re-

volving credit facilities of DKK 2 billion and USD 40 million.

Dividend and share buyback program

In 2020, GN distributed in total DKK 356 million back to

shareholders through share buybacks and dividends. In March

2020, GN paid out DKK 206 million in dividend (DKK 1.45 per

share) in respect of the fiscal year 2019 as approved at the

Annual General Meeting in 2020.

In order to preserve a strong balance sheet in uncertain times,

GN postponed share buybacks (program intended to be

initiated following the approvals by the Annual General

Meeting on March 11, 2020), until better predictability and

visibility into the consequences of the COVID-19 was achieved

(see company announcement no. 24 of April 3, 2020).

In light of the uncertain market environment caused by

COVID-19 in the spring and to sustain a strong balance sheet,

the Board of Directors decided to cancel the planned capital

decrease of 4,171,390 shares, as otherwise approved at the

Annual General Meeting in March 2020, to retain flexibility for

general corporate purposes.

As part of the current capital structure policy, and when

better visibility of the ongoing pandemic materializes, it is

GN’s ambition to reinitiate share buybacks in order to

continue to focus on creating shareholder value, subject to

the necessary authorization by the Annual General Meeting to

acquire treasury shares.

The Board of Directors will propose to pay out DKK 1.45 per

share in dividend for the fiscal year 2020 (equivalent to a total

dividend of DKK 206 million), in line with last year.

Foreign exchange exposure

GN has hedged a substantial part of the expected net cash-

flow in foreign currencies to secure the EBITA contribution of

the material trading currencies for the next 12 months across

both GN Hearing and GN Audio.

Claim against Plantronics Inc.

In 2012, GN Audio filed suit against Plantronics for attempted

monopolization of the distributors’ market in the United

States. On October 18, 2017, a jury in the Federal District

Court of Delaware ruled in favor of Plantronics as the jury did

not find that Plantronics’ behavior in the market had been un-

lawful. GN appealed the ruling and won a re-trial in the US

Court of Appeals for the Third Circuit on July 10, 2019. On

July 13, 2020 GN Audio and Plantronics settled the legal case,

and the financial impact from the settlement agreement was

booked in Q3 2020.

Changes in financial leadership

On September 30, GN announced that Marcus Desimoni will

step down from his dual position as CFO of GN Store Nord

and of GN Hearing as of December 31, 2020. Peter la Cour

Gormsen, CFO of GN Audio, was appointed CFO of GN Store

Nord. Peter la Cour Gormsen will also remain CFO of GN

Audio.

10 Management's report ⋅ GN Hearing performance 2020 Contents

GN Store Nord A/S

Organic growth

-24%

EBITA

+41

(DKKm)

Free cash flow

excl. M&A

+127

(DKKm)

12%

of revenue

re-invested in R&D

ReSound ONE

An entirely new class of

hearing aids that offers a

truly individualized

hearing experience and

the best sound quality for

every user

Highlights 2020

• Organic revenue growth of -24% in 2020 as a result of

COVID-19

• Positive EBITA of DKK 41 million, equivalent to an EBITA

margin of 0.9% reflecting the lower revenue level more

than offsetting OPEX reduction

• Free cash flow excl. M&A was DKK 127 million in 2020 in a

challenging year

As for the hearing aid industry overall, COVID-19 and the re-

sulting lockdowns in 2020 had a significant negative impact

on GN Hearing. From the low-point in April, GN Hearing saw

recovery in revenue. The impact from COVID-19 varied

greatly across regions and countries.

In August 2020, GN Hearing announced the launch of

ReSound ONE, an entirely new class of hearing aids that

offers a truly individualized hearing experience and the best

sound quality for every user. GN Hearing has despite COVID-

19 executed on the global roll-out during H2 2020 and the

reception and feedback has been overwhelmingly positive.

Revenue

GN Hearing delivered -24% organic revenue growth in 2020

as a result of the severe impact from COVID-19. The foreign

exchange development contributed negatively with around

GN Hearing performance 2020

Encouraging reception of ReSound ONE, launched in August 2020. Severe impact

from COVID

-19 led to -24% organic revenue growth in 2020, while prudent cost

management

secured positive EBITA and free cash flow

Revenue (DKKm) and organic growth

GN Hearing

11 Management's report ⋅ GN Hearing performance 2020 Contents

GN Store Nord A/S

ONE of a

kind

"I'm back in the world now"

Ray Weaver first noticed a hearing loss 10

-15 years ago: “I

started to take my hearing loss seriously, when my wife and

my kids

started saying: ’Dad, you cannot hear us’. They are

the most important people in my life, so I want to hear

them.”

Ray Weaver is an award

-winning songwriter and musician.

He was born in the US and currently resides in Denmark.

Having played in bands since

he was 15 years old and been

exposed to loud music throughout his life, Ray believes this

has had a negative impact on his hearing.

Ray’s wife, Lotte, became concerned when Ray started en-

gaging less in conversations: “I noticed Ray’s hearing loss

when he

started withdrawing. He spoke less when we had

guests over.“

Since being fitted with ReSound ONE, the hearing aids have

provided Ray with an increased sense of awareness of his

surroundings and has given him the confidence to engage

fully in social situa

tions with family and friends.

“

I hear things that I hadn’t realized I couldn’t hear before.

When I was outside for the first time, I heard leaves rustling

across the driveway. I kept saying ‘what’s that sound?’ I’ve

experienced an overall

increased sense of confidence as I

no longer have to ask people to repeat questions and parts

of conversations. Wearing hearing aids has given me a

huge boost to say

– I'm back in the world now.”

Or in Lotte’s words: “

Now he is back to normal – and we

eve

n have to fight to get a word in.”

12 Management's report ⋅ GN Hearing performance 2020 Contents

GN Store Nord A/S

-1%, while the impact from M&A was around -1%. Revenue

growth was -26%. The revenue in 2020 reached DKK 4,725

million, compared to DKK 6,351 million in 2019.

The impact from COVID-19 varied greatly across regions and

countries. North America experienced a slower market

recovery during 2020 than Europe and Rest of World, with

the commercial market improving faster than the Veterans

Affairs channel and with significant differences across states.

In Europe, GN Hearing saw strong emerging recovery during

2020 in especially Germany and the South European markets.

The UK saw a slower recovery and remained heavily impacted

by local restrictions during 2020. In Rest of World, GN

Hearing saw strong emerging recovery in most areas

particularly in China, Japan, and South Korea.

Earnings and other financial highlights

GN Hearing’s gross profit decreased by -34% to DKK 2,905

million in 2020 compared to DKK 4,380 million in 2019,

mainly driven by the significant revenue decrease. The gross

margin was 61.5% compared to 69.0% in 2019 primarily

driven by the fixed part of production cost, one-time costs

and mix effects.

Operating expenses were DKK 2,864 million compared to

DKK 3,096 million in 2019, corresponding to a decrease of

7%. The decrease in operating expenses is following prudent

cost management during the year, but also impacted by one-

time costs related to the consequences of COVID-19.

EBITA decreased to DKK 41 million in 2020 from DKK 1,284

million in 2019. The EBITA margin was 0.9%. The positive

EBITA was achieved by prudent cost management on top of

one-time costs and continued investments into R&D and IT.

The return on invested capital (ROIC) was 1% in 2020

compared to 19% in 2019.

Free cash flow excl. M&A was positive of DKK 127 million in

2020, compared to DKK 672 million in 2019 despite the

severe impact from COVID-19.

Business highlights

COVID-19

GN Hearing was severely impacted by the COVID-19 outbreak

in several ways, beginning with production and supply chain

issues. In January 2020, GN Hearing suspended operations at

its Xiamen, China, production site due to COVID-19, but with

the site fully operational again during February 2020.

In the beginning of the year, GN Hearing was off to a good

start in line with expectation. As the COVID-19 pandemic

spread globally in early spring, the global hearing aid markets

saw a gradual shut-down as markets across the world were

facing lockdowns and various local restrictions. From the low-

point in April 2020, the market and GN Hearing experienced

an emerging recovery over the summer with markets getting

close to normality. Due to increasing infections rates across

the world again in the autumn / early winter, the markets

halted in its recovery. The impact from COVID-19 varied

throughout the year greatly across regions and countries,

with North America experiencing a slower recovery during

2020 than Europe and Rest of Would, but with significant dif-

ferences across states and channels.

ReSound Enzo Q and ReSound LiNX Quattro

In February 2020, GN Hearing launched multiple new

ReSound hearing solutions, ReSound Enzo Q as well as an

extension to the ReSound LiNX Quattro family to include four

new hearing aids (three new BTE hearing aids and a mini RIE

model). These were based on the powerful chip platform of

ReSound LiNX Quattro, which offers impressive sound

quality, connectivity, and customer care for people with all

types of hearing loss.

EBITA (DKKm) and EBITA margin

GN Hearing

Free cash flow (DKKm) and cash conversion

GN Hearing

13 Management's report ⋅ GN Hearing performance 2020 Contents

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Right

b

eside

you

The COVID

-19 pandemic hit those with

untreated

hearing loss especially hard by further isolating

them from friends and family and putting limits

on their ability to hear and

understand critical

news and instruction about how to stay safe.

Beltone is about being

Right Beside You and with

around 1,500 locations across the US, Beltone

recognized an acute need to help in practical

ways.

Many clinics offered “curbside assistance

” allow-

ing customers to either stay at home or drive up

to the clinic to have a Beltone hearing care pro-

fessional come to their car or front door to col-

lect their hearing aids for service, cleaning or ad-

justment

- without any direct contact or the cus-

tomer

stepping out of their home or car.

Beltone Remote Care

™ Live was launched to al-

low Beltone clinics to remotely assists patients.

From afar, audiologists can provide their patients

with the personal attention and care they re-

quire, including adjustments and fitting, via a live

video call.

To further ease some

of the strain during the

pandemic, the Beltone Foundation donated 550

hearing instruments to individuals otherwise una-

ble to get hearing help due to the financial down-

turn. Also, Beltone offered free batteries to any-

one who requested them, regardless of m

anufac-

turer. In total, the Foundation donated more

than 7,500 batteries in 2020.

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ReSound Assist™ Live

In April 2020, GN Hearing’s renowned connectivity leadership

was expanded to offer ReSound Assist Live, which is an inno-

vative new part of the popular ReSound Assist customer care

solution. The solution delivers a heightened level of customer

experience and business support for hearing care profession-

als, thus providing a more individualized experience. In the

context of COVID-19, the accelerated launch of Resound As-

sist Live enables a new, groundbreaking way to access end-to-

end hearing care, including the ability to conduct hearing

tests in the home of the users utilizing the hearing aids as en-

abler. This is reducing the need for in-office visits at a time

when older, more vulnerable populations are advised to stay

at home. ReSound Assist Live was well received by users and

will in a post-pandemic world continue to offer an attractive

and more individualized choice for users.

ReSound ONE

In August 2020, GN Hearing announced the launch of

ReSound ONE, a revolutionary new class of hearing aids that

solves one of the hearing industry’s most enduring obstacles

to improving speech intelligibility in noise. In clinical trials,

90% of users identified ReSound ONE with Microphone &

Receiver in Ear (M&RIE) as providing superior sound quality to

a traditional hearing aid with microphones positioned behind

the ear. Through a combination of a radical new receiver

design and GN’s all-new and most powerful sound-processing

chipset ever, GN Hearing was able to deliver the world’s first

All Access Directionality as well as the M&RIE solution which

incorporates an additional microphone inside the ear canal

while preserving the comfort of an open-fit form factor.

Unlike regular RIE and BTE hearing aids, by collecting sound

right inside the user’s own ears, ReSound ONE preserves all

the audio cues needed for the brain to correctly localize and

tune in to specific voices or sounds, thus allowing for a much

more individualized hearing experience.

ReSound ONE was available in clinics end of August 2020. On

September 1, 2020, GN Hearing hosted a global launch event,

with over 10,000 hearing care professionals enrolled onto the

largest ever gathering on hearing aid technology in an inter-

active, virtual learning environment. User reception and feed-

back for ReSound ONE has been overwhelmingly positive.

Veterans Affairs

The U.S. Veterans Affairs (VA) channel, which represents

roughly 20% of the US market, was significantly impacted by

COVID-19 and the total volume in the channel was at index

66 in 2020 compared to 2019, with great variances in terms

of recovery across states. By the end of 2020, ReSound ONE

became available in the channel. Under normal circumstances

VA is a channel that easily adopts new technology, but due to

the COVID-19 physical meetings have not been possible

which – combined with the fact that Resound ONE is

completely new and groundbreaking technology – have

resulted in a slower uptake than under normal circumstances.

It is still GN Hearing's clear ambition to drive market share

gains in the channel based on the superior technology of

ReSound ONE.

Beltone network

During 2020, GN Hearing continued to execute on several

strategic initiatives to continue the improvement of the North

American Beltone network. Beltone is a strong and

recognized brand in the US hearing aid market with around

1,500 point-of-sales in North America, and it is GN Hearing’s

ambition to further strengthen the Beltone business in order

to position the network well for the future.

During 2020, as for the hearing aid market overall, Beltone

was negatively impacted by COVID-19, but did find creative

ways of continuing to serve customers through the difficult

period. In June 2020, Beltone announced the launch of an

online store, making Beltone the only major hearing care

retailer to offer an online, trusted source of original, direct-

from-manufacturer solution.

Beltone continued to optimize its “ownership in transition”

portfolio of retail stores. By the end of 2020, Beltone had

reduced the total number of owned retail stores in transition

to around 100, which is in line with the overall strategic

objective.

Revenue distribution

15 Management's report ⋅ GN Hearing performance 2020 Contents

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Coping &

helping

GN Hearing stepping

up to help

customers

As

the COVID-19 forced many hearing clinics to

close down and deprived people from critical hear-

ing care, GN Hearing launched initiatives to help

customers and

hearing care professionals:

•

GN Hearing accelerated the development of Re-

Sound Assist Live. This new technology greatly ex-

panded at-home care for people with hearing loss,

allowing hearing care professionals to send, test, fit,

and fine-tune hearing aids remotely. This was vital

especially to vulnerable populations that were ad-

vised to stay at home, in times when they were most

dependent on their hearing to keep informed and

connected with their loved ones. The solution will

continue to be an attractive opti

on for many, also af-

ter the pandemic

•

As face masks became a new normal, people with

hearing loss were confronted with new challenges:

Lipreading accounts for 30% of anybody’s speech

recognition but is even more critical if you have hear-

ing loss. GN Hearing developed a new Face Mask

Program setting for the hearing aid, making it easier

for people with hearing aids to understand people

wearing face masks

•

Under the banner of ReSound Gives Sound, GN

Hearing in the US donated USD 1 million worth of

ReSound ONE hearing aids free of charge to people

with hearing loss who have experienced financial dif-

ficulty related to COVID-

19. Hearing care profession-

als in this program devote their time for fitting and

care to help people in their communities

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Smart Hearing Alliance

The Smart Hearing Alliance, a co-development and co-

commercialization partnership between GN Hearing and

Cochlear, first announced in October 2015, was despite a year

filled with global challenges further deepened and expanded.

During 2020, GN Hearing was proud to strengthen this alli-

ance by announcing that starting November 2020, the range

of Smart Hearing Alliance devices offering direct bimodal

streaming will include ReSound ONE hearing aid and Coch-

lear™ Kanso

®

2 Sound Processor. About 70% of all implant re-

cipients wear a hearing aid on their contralateral ear, also

known as a bimodal listening experience.

The vision for collaboration continues to include a focus on

fast-moving connectivity and wireless technology to allow for

closer integration between Cochlear and GN Hearing

technologies.

FalCom

During 2020, GN made further progress in commercializing its

FalCom product offering - intelligent communication

solutions for defense and security forces - resulting in

increasing revenue generation compared to 2019. GN is

currently preparing for several relevant tenders for the

FalCom solution.

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Flexible

working is

here to stay

In 2020, “WFH” became a widely known acronym as

employees around the world were forced to Work

-From-

Home due to widespread

COVID-19 lockdowns.

Throughout the

past several years, GN Audio has built a

position as global leader in Unified Communications

&

Collaborations

headsets, speakers, and most recently

conferencing cameras.

During 2020, GN Audio’s market

leading position was further reinforced with significant

market share gains.

Hopefully, COVID

-19 vaccination

s will during 2021 defeat

the

global pandemic. However

, companies, organizations,

and employees

will likely not return to pre-2020 work

patterns. As GN Audio has promoted for years: “work is

not a place

, it’s an activity”. Flexible working has proven

too

advantageous. Generally, productivity for office work-

ers did not suffer during the pandemic, work

-life balance

improved for many, and the climate benefitted from re-

duced business travel and commutes. Mon

ey was saved.

Whereas face2face meetings and business travel will cer-

tainly return, it will

likely not rebound to pre-pandemic

levels.

GN Audio will continue to support an increasing

number of companies and employees with productivity

enhancing communica

tion and collaboration tools that

support work from anywhere.

On March 30, 2020, GN Audio launched the second gen-

eration of the Evolve range, Jabra Evolve2, its best

-

selling

and market leading Unified Communications headset. By

blocking out more noise, p

roviding better voice clarity,

bringing distributed teams together, giving people the

power to work from anywhere, and monitoring data to

enable intelligent decision

-

making, the Evolve2 is the new

standard to elevate productivity to new heights

.

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Organic growth

42%

EBITA margin

22.9%

No 1

in Unified

Communications

Cash conversion

86%

Strong expansion

of world-leading product portfolio

Highlights 2020

• Exceptional 42% organic revenue growth in 2020, driven

by strong demand for enterprise products accelerated by

COVID-19. Strong momentum across regions, channels,

and products

• EBITA increased 68% to DKK 2,002 million equivalent to

an EBITA margin of 22.9%, compared to 19.2% and DKK

1,192 million in 2019. Excluding the gain for legal

settlements and litigation, EBITA was DKK 1,888 million,

equivalent to an EBITA margin of 21.6%

• Free cash flow excl. M&A increased to DKK 1,729 million

(DKK 849 million in 2019) equal to a cash conversion of

86%, compared to 71% in 2019

GN Audio has in 2020 taken significant market share and

delivered exceptional growth in both revenue and EBITA,

driven by its leading product portfolio and continued strong

execution across the organization. As enterprises invested in

employees working from home due to the ongoing pandemic,

demand for GN Audio’s enterprise products increased

further. Despite a challenged supply chain in the beginning of

2020 following COVID-19, GN Audio demonstrated a strong

ability to significantly increase production capacity to meet

the strong demand, drive exceptional growth, and gain

significant market share.

The revenue growth of 40% translated into an increase in

EBITA of 68%, reflecting continuous leverage in the business

GN Audio performance 2020

World leading product portfolio and relentless execution in 2020 led to

e

xceptional organic revenue growth of 42%

Revenue (DKKm) and organic growth

GN Audio

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Noise

away

Accept No Compromise

In September 2020, GN Audio introduced the Jabra

Elite 85t wireless earbud along with an upgrade of the

Jabra Elite 75t true wireless earbuds

series.

The Jabra Elite 85t is engineered to defy the

boundaries of how much noise can be

removed in a set

of true wireless earbuds. It features Jabra’s most

advanced and powerful Active Noise Cancellation

(

Jabra Advanced ANC™) technology, without

compromising on the size or the signature design that

looks and feels great to wear all day.

With the Jabra Elite 85t, there will be no compromise in

the discreet design or comfort, no compromise in the

calls or music experience and no compromise in the

effectiveness of the ANC.

While Jabra Elite 85t delivers an abundance of features

packed in minia

ture, the upgrade of the Jabra Elite 75t

full range was a world premier in disguise: for the first

time ever an attractive and normally expensive feature

such as ANC for a Bluetooth headphone or earbud

could be activated for existing users through a software

update

– at no extra cost. Tech reviewers and

customers cheered!

20 Management's report ⋅ GN Audio performance 2020 Contents

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and gain from legal settlements and litigation, off-set by

investments in future growth opportunities, increased freight,

and production costs due to COVID-19 and tariffs.

Revenue

GN Audio delivered 42% organic revenue growth in 2020. The

foreign exchange rate development contributed negatively

with around -2%. Revenue growth was 40%. The revenue in

2020 reached DKK 8,724 million, compared to DKK 6,223

million in 2019.

GN Audio’s Enterprise business – the world’s leading supplier

in this segment – continued in 2020 to deliver strong double-

digit organic growth across Europe, North America and Rest

of World accelerated by the pandemic.

The Consumer business was in H1 2020 negatively impacted

by COVID-19, as consumers for a large part were not able to

purchase products in certain channels and markets, due to

retailers being closed. In H2 2020, the Consumer business

returned to strong double-digit growth driven by the strong

product portfolio combined with the reopening of offline

retailers following the lockdowns in Q2 2020.

The continued strong performance reflects the strength of

GN Audio’s innovative world-leading product portfolio as well

as strong execution in its supply chain and commercial

excellence initiatives across all three regions and across the

enterprise and consumer categories. Operating in a market

with attractive conditions accelerated by the pandemic, GN

Audio has continued with new product introductions and

strong execution to strengthen its leading position across the

attractive enterprise market.

Earnings and other financial highlights

In 2020, gross profit increased by 37% to DKK 4,393 million

compared to DKK 3,202 million in 2019. The gross margin

was 50.4% in 2020, which was below the level of 51.5%

achieved in 2019, reflecting increased freight and production

costs due to COVID-19 and tariffs.

Operating expenses were DKK 2,391 million compared to

DKK 2,010 million in 2019, corresponding to an increase of

19%. The increase in reported operating expenses was

primarily related to investments in future growth

opportunities offset by a one-time gain of DKK 114 million

from legal settlement and litigation. Operating expenses in

percent of revenue decreased from 32% in 2019 to 27% in

2020 reflecting leverage in the business.

GN Audio’s EBITA of DKK 2,002 million in 2020 represents an

increase of 68% (including gain from legal settlements and

litigation of DKK 114 million), compared to DKK 1,192 million

in 2019. Excluding the gain for legal settlement and litigation,

EBITA increased 58% corresponding to an EBITA margin of

21.6%, compared to 19.2% in 2019. The strong development

reflects continuous leverage and was achieved on top of

investments in future growth opportunities, increased freight,

and production costs due to COVID-19 and tariffs.

The return on invested capital (ROIC) was 81% in 2020,

compared to 57% in 2019 driven by continued strong growth.

Free cash flow excl. M&A increased 104% to DKK 1,729

million in 2020, compared to DKK 849 million in 2019

reflecting a significant growth in earnings and a positive

development in working capital. The free cash flow translated

into a cash conversion of 86% compared to 71% in 2019.

EBITA (DKKm) and EBITA margin

GN Audio

Free cash flow (DKKm) and cash conversion

GN Audio

*) Including gain from legal settlements and litigation of

DKK 114 million

*) Including gain from legal settlements and litigation of

DKK 114 million

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In public

service

Universities and s

chools are struggling to find ways to

educate, healthcare providers are having to find new

ways of providing services, and government administra-

tive workers are collaborating remotely all or part of

the time. Never has the

need for strong virtual commu-

nications tools been greater, or more critical, for our so-

cieties.

In 2020, the public sector accelerated adoption of

technology in order to continue activities while

adhering to COVID

-19 restrictions. Jabra PanaCast

is an

eas

y plug-and-play camera, it works with all leading

video and audio

-conferencing solutions, and offers full

180° field of view

, unlike traditional video conferencing

cameras. In combination with

Jabra Speak this enables safe hybrid and remote

activities wi

th clear sound and full view of the room.

Thousands of public sector institutions particularly

within education, healthcare and administration have

used the Jabra Speak and Jabra PanaCast to provide

students with a virtual front

-row experience and to sta

y

connected with colleagues and citizens.

22 Management's report ⋅ GN Audio performance 2020 Contents

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Business highlights

COVID-19

GN Audio saw various impacts from the COVID-19 outbreak.

At the end of January 2020, GN Audio’s sub-contractors ex-

tended holidays following the Chinese New Year in line with

recommendations by local authorities. As a result, GN Audio

experienced difficulties serving the immediate increased de-

mand beyond own inventories. During Q1 2020, the produc-

tion capacity improved and in Q2 2020 the production was

back at full capacity.

GN Audio experienced continued strong demand for

enterprise products as enterprises of all sizes and across

various industries invested in employees working from home

due to COVID-19. Adversely, GN Audio saw increased freight

and production costs following the tight freight market and

significant ramp-up of production capacity.

In the face of a year characterized by uncertainty and global

challenges, GN Audio continued to invest in order to sustain

attractive growth rates in the years to come.

Jabra MySound

On January 6, GN Audio announced Jabra MySound, an inno-

vative new technology by GN Audio and sister company GN

Hearing, available from Q2 2020. Jabra MySound was created

to optimize and personalize sound experiences based on indi-

vidual hearing profiles. Jabra MySound enables users to tailor

an audio play book based on their unique hearing profile, thus

delivering a truly individualized audio experience.

Jabra Evolve2 range

GN Audio launched its new groundbreaking Jabra Evolve2

range in March 2020, the next generation of the Jabra Evolve

range, its best-selling and market leading UC headset to en-

hance productivity in the office or at home. The range

consists of the Jabra Evolve2 85, Jabra Evolve2 65, and Jabra

Evolve2 40 and is engineered to transform concentration,

collaboration, and flexibility in the workplace. By blocking out

more noise, providing better voice clarity, bringing distributed

teams together, giving people the power to work from any-

where, and monitoring data to enable intelligent decision-

making, the Jabra Evolve2 is the new standard to elevate of-

fice and work-at-home productivity to new heights. The head-

sets are certified for Microsoft Teams and work with all lead-

ing UC platforms.

Jabra Elite product family

On January 6, GN Audio launched the Jabra Elite Active 75t

earbuds – the active lifestyle edition of the Jabra Elite 75t

earbuds. Like the original, the Active version brings the same

great calls and music that is now expected from Jabra and is

optimized for work-out and fitness use. Built with a durable

coating providing optimized grip, the earbuds are also dust

and sweat resistant, while simultaneously extending battery

life by 89% (up to 28 hours).

In September 2020, GN Audio announced the launch of its

newest true wireless earbuds, Jabra Elite 85t, which

incorporates Jabra’s most advanced and powerful Active

Noise Cancellation (Jabra Advanced ANC™) technology

without compromising on the size or the signature design.

The 12mm speakers allow the Jabra Elite 85t to produce a

big sound and powerful bass, while still enhancing comfort

and relieving ear pressure with its semi-open design. Jabra

has also adapted the ear gels to an oval shape providing a

better sealing in the ear, giving users a more comfortable

earbud while maintaining a very secure fit.

With the launch of Jabra Elite 85t and the ANC technology in

the true wireless segment, GN Audio has also, for the first

time ever, enabled a software upgrade introducing ANC in

the existing Jabra Elite 75t series.

Jabra PanaCast

The Jabra PanaCast continued to receive encouraging

feedback for its best-in-class audiovisual systems supporting

plug-and-play video conferencing. Jabra PanaCast was during

the year repositioned due to COVID-19, from the traditional

huddle rooms, which employees refrained from, to a COVID-

19 compliant solution, supported by the intelligent 180-

degree panoramic view. Jabra PanaCast experienced a

significant increase in demand from the education channel,

with schools and institutions investing to equip class rooms

with video and audio solutions. Irrespective of the need to

reposition the product, Jabra PanaCast more than achieved

its original revenue targets during the year and proved GN

Audio’s ability and agility to quickly adapt to new business

opportunities.

Revenue distribution

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COVID-19 risks

Due to the ongoing COVID-19 pandemic – which impacts GN

in many ways – it must be stressed that the basic

assumptions behind the guidance remain significantly more

uncertain than normal The COVID-19 situation has and will

not only strongly impact GN’s operational performance in

2021, but it will also impact predictability and visibility across

GN’s markets, channels and supply chain. The financial

guidance is contingent on a gradual reopening of society.

GN Hearing

Market projections

GN Hearing estimates the annual market growth to return to

the historical level of around 4 - 6% in volumes with annual

ASP decline of around 1 - 2% in a normalized market. GN

Hearing’s mid-term targets of growing faster than the mar-

ket and delivering EBITA-margin of more than 20% are fully

intact.

Financial guidance 2021

The fundamental assumptions behind the financial guidance

for GN Hearing are that the global hearing aid market in H1

2021 will remain heavily impacted by COVID-19 and the

consequential volatile regional and local restrictions,

resulting in markets being below the H1 2019 level. As

hearing care professionals and end-users in our main markets

will have access to the vaccine throughout H1 2021, the

current expectation is that in H2 2021 the market will reset

and normalize. GN Hearing will continuously aim to outgrow

the market and invest in maintaining its innovation leadership

and improving the IT infrastructure.

For full year 2021, GN Hearing expects an organic revenue

growth of more than 25% and an EBITA margin of more than

16%. It is expected that the EBITA margin in a more

normalized market in H2 2021 is recovering to our mid-term

targets of more than 20%.

GN Audio

Market projections

GN Audio expects that the favorable global enterprise mar-

ket trend will continue in 2021, creating a solid foundation for

continued strong performance. For the coming years, GN Au-

dio expects its markets to grow at around 10% in value when

assuming a stable macro environment. GN Audio’s mid-term

targets of growing faster than the market and delivering

EBITA-margin of more than 20% are fully intact.

Financial guidance 2021

The fundamental assumption behind the financial guidance

for GN Audio is that the demand for collaboration solutions

from enterprises and organizations will continue in 2021 and

beyond. It is expected that the GN Audio organic revenue

growth will be significantly higher in H1 2021 than in H2

2021, mainly due to difference in comparison base. GN Audio

will continuously aim to outgrow the market and invest in

future growth opportunities.

For full year 2021, GN Audio expects organic revenue growth

to be more than 20% and an EBITA margin of more than

21%.

Other activities and EPS

For full year 2021, EBITA in “Other” is expected to be around

DKK -185 million.

GN Store Nord expects a growth in EPS of more than 50% for

full year 2021.

Financial guidance 2021

Based on GN’s attractive fundamental market prospects, focused strategic

execution, and a strong track

-record for developing industry-leading, user-

friendly, and increasingly individualized hearing,

audio and video products and

solutions, the

Group is well positioned for 2021 and beyond

Forward

-looking statements

The forward

-looking statements in this interim report reflect the management's current expectations of certain future events and financial

results. Statements regarding the future are, naturally, subject to risks and uncertainties, which may result in considerable

deviations from the

outlook set forth. Furthermore, some

of these expectations are based on assumptions regarding future events, which may prove incorrect.

Factors that may cause actual results to deviate materially from expectations include

– but are not limited to – general economic

developments and developme

nts in the financial markets, technological developments, changes and amendments to legislation and

regulations governing GN’s markets, changes in the demand for GN's products, competition, fluctuations in sub

-contractor supplies and

developments in ongoin

g litigation (including but not limited to class action and patent infringement litigation in the United States).

For more information, see the "Management's report" and "Risk management” elsewhere in this Annual Report. This Annual Report

should not

be c

onsidered an offer to sell securities in GN.

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Hear More,

Do More,

Be More

GN listens to customers,

challenges limitations, and

transforms what it takes to

keep everyone connected

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Innovation leadership and commercial excellence

In today’s increasingly complex world, GN contributes to

multiple eco-systems where participants grow ever more

dependent on each other. To stay competitive and relevant

to partners and customers, GN continues to focus on

innovation leadership and commercial excellence across both

of our business divisions, e.g. demonstrated by:

• GN’s hearing business standing out from peers by refrain-

ing from vertical integration, by integrating with multiple

eco-systems and by partnering with other technology in-

novators to deliver the best solutions for users; and

• GN’s audio and collaboration business driving an agnostic

software approach to be able to integrate with an ever in-

creasing number of eco-systems as a way to remain part-

ner of choice for our channel partners in terms of Unified

Communications and Collaboration (UC&C) systems.

Protecting and improving the infrastructure needed to seam-

lessly integrate and operate in the different eco-systems is an

increasingly central part of doing business for GN.

Market dynamics in the hearing business

GN’s hearing business estimates market growth in line with

the historical 4 - 6% growth in volumes with ASP decline of

around 1 - 2% annually in the mid-term post COVID-19. The

global hearing aid market was estimated to slightly more

than 13 million units in 2020 as a result of COVID-19. The

hearing market is driven by shifting demographics with a

growing elderly and more affluent population. Additionally,

intensifying noise pollution drives the increased prevalence of

hearing loss and recently the increased use of face masks and

the need for social distancing has increased awareness of

how crucial it is for people to be able to hear and understand

one another. The strongest hearing aid user benefits are

achieved through a successful eco-system delivering a combi-

nation of high-quality hardware and solutions and best-in-

class service and support by hearing care professionals.

Market dynamics in the audio and collaboration business

In GN’s audio and collaboration business external assess-

ments of the global enterprise market (contact centers, of-

fices, and collaboration) estimates growth of around 10% an-

nually in the mid-term. The global enterprise market is esti-

mated to USD ~2.8 billion in 2020.

The audio and collaboration enterprise market is driven by

the continued transition from desk phones to Unified

Communications. Companies transition from wired audio-

conferencing systems and legacy video conferencing systems

to portable plug & play solutions. Increasing flexibility

requirements by office-workers, demands for productivity,

focus on cloud-based solutions, and general technology

improvements have for several years spurred growth in UC

adoption. This was further accentuated by the COVID-19

pandemic. A significant part of our future growth is expected

to come from the increased penetration of professional

headsets. Additionally, UC technology has the potential to

reduce travel cost and carbon footprint by the companies

that adopt the technology.

Serving attractive markets

Focusing on innovation leadership and commercial excellence, GN operates

across attractive markets with high barriers to entry

, further accentuated by the

COVID

-19 pandemic

GN's strategy 2020 and beyond at a glance

GN’s strategy for 2020 and

beyond was launched on

February 4, 2020 and can be

further reviewed in the

Annual Report 2019.

The strategy is unchanged by

the COVID-19 pandemic and

has throughout 2020 proven

robust for a rapidly changing

and uncertain world. The

fundamental markets are

intact.

26 Management's report ⋅ Lean and agile business model Contents

GN Store Nord A/S

Lean and agile business model

GN’s business model positions the Group strongly to seize multiple business op-

portunities driven by global megatrends

whilst delivering resilient cash flows and

attractive shareholder returns

Attractive megatrends

A growing and aging world popula-

tion as well as personal communica-

tion trends offer opportunities for in-

telligent audio solutions in industries

with currently low penetration rates.

Innovation leadership

GN’s sound technologies and experi-

ence are directed at consistently de-

veloping unmatched user benefits.

Our strict innovation focus has en-

sured multiple industry firsts.

Strong partnerships

Strong track record of strategic part-

nerships with leading channels, cus-

tomers, and adjacent industry lead-

ers.

Synergistic M&A

Merger and acquisition activities to

support channel access, commercial

excellence, and technology leader-

ship as well as to streamline activi-

ties.

Execution excellence

Flawless end-to-end execution from

customer insights via research and

development, quality manufacturing,

efficient logistics, marketing, chan-

nel, and sales.

Agile and asset light

A lean business model, with no

owned retail, ensures a strong posi-

tion in relation to future distribution

trends and an asset light business

model.

Sustainable business

Throughout GN’s long and rich his-

tory, we have strongly anchored re-

sponsible business practices. Our sus-

tainability framework allows us to

address environmental, social and

governance topics proactively to en-

sure real and lasting positive impact.

Customer experience

Utilizing synergies derived from GN’s

audio and hearing technologies and

expertise, GN is able to significantly

improve and personalize customers’

hearing and listening experiences in

audio and hearing products.

Retain and attract talent

Driving an organization with highly

skilled and engaged people, ensuring

a level playing field with equal oppor-

tunity for all, ensuring people and

talent development at all levels, and

ensuring leadership the GN Way

where we actively listen, challenge,

and transform.

27 Management's report ⋅ Global reach, local presence Contents

GN Store Nord A/S

Global reach, local presence

GN develops and manufactures innovative and intelligent audio and video

communications

solutions that are marketed and sold in around 100 countries

across the world

Research & Development

Manufacturing

Sales and distribution

GN has R&D centers

in Denmark, the

United States, the

Netherlands, and

China.

The Group commands a unique blend

of leading expertise of the human

ear, sound and speech, wireless

technologies, software, and

miniaturization.

In 2020, GN invested around DKK

1.3bn in research and development.

GN has its global

manufacturing sites

for hearing aids in

Denmark, China,

and Malaysia.

Regional manufacturing centers are

located in the United States and

Great Britain.

GN’s audio and video products are

mainly produced by carefully se-

lected manufacturers in China and

Southeast Asia, and most compo-

nents are sourced from suppliers in

Asia. GN Audio works with a small

number of tier-one manufacturers

supported by more than 100 sub-

suppliers.

GN’s hearing aids are

sold in around 100

countries across the

world. GN has its own

organization in 30

countries and operates via partners

and distributors in another 70

countries.

GN’s audio and video products are sold

via distributors and retailers in around

80+ countries across the world.

Partners are responsible for logistics,

local customization, and final

packaging to optimize lead-time to the

final customer, delivering from four

regional centers in Mexico, Poland,

China, and Hong Kong.

Countries with direct sales

Countries with GN distributors

GN Hearing

GN Audio

GN Hearing & GN Audio

GN offices

28 Management's report ⋅ Business areas and brands Contents

GN Store Nord A/S

Unique engineering – all under one roof

GN enables people to Hear More, Do More and Be More,

driven by innovation leadership and commercial & eco-sys-

tem excellence. GN drives growth by delivering uniquely and

increasingly individualized customer experiences in products

and solutions.

Utilizing the synergies derived from GN’s audio and hearing

technologies and expertise, the Group significantly improve

and personalize customers’ experiences. Enabling a whole

new level of individualization, GN delivers industry-leading in-

novation that addresses real life challenges for people with

hearing loss, for businesses seeking productivity gains and for

audio consumers looking for individualized experiences.

Jabra

Jabra provides the most technically ad-

vanced headset, speakerphone, and audio-

visual collaboration solutions based on unique sound and vis-

ual capabilities and engineered for purpose. The Jabra brand

is the undisputed world leader in Unified Communications

with products that help businesses achieve productivity im-

provement and work smarter. Jabra offers audio and video

communication and collaboration products and solutions en-

gineered specifically for professional office use and for call-

centers. Jabra’s consumer-line of award-winning products set

the standard in the true-wireless category. Jabra’s range of

products are available in around 80 countries.

BlueParrott

BlueParrott provides industry-leading com-

munication headsets to professional drivers

and enterprise workers, who require superior call quality in

high-noise environments. BlueParrott products are crafted to

deliver the highest levels of noise cancellation, comfort, and

durability. BlueParrott is available across North America and

select markets in Europe and Asia-Pacific.

Resound

ReSound improves the quality of life for

people with hearing loss based on innovative hearing

solutions that combine original thinking and design with solid

GN technology, deep audiological insight and understanding

of hearing aid users, allowing them to connect and

communicate better than ever before. ReSound is available in

around 100 countries.

Beltone

Beltone’s technically optimal hearing solu-

tions focus on the individual’s needs based on care, innova-

tive GN technology and superior service. With 1,500 locations

Beltone is a well-renowned hearing brand in the USA and also

offered in many other countries.

Interton

The Interton brand delivers essential

solutions designed to provide people with

hearing impairment with a value based, affordable hearing

aid that is easy to use. Interton hearing aids use proven GN

core technology to provide a straightforward, functional, and

easy-to-use hearing solution.

Audigy

Audigy is the hearing industry’s preeminent,

data-driven management company representing North

America’s most-respected, independently owned audiology

and ENT/otolaryngology practices. Audigy helps member

practices optimize efficiency, maximize profitability, and im-

prove patient outcomes, providing comprehensive support

services in business intelligence, operations, print and digital

marketing, professional development, technology infrastruc-

ture, and human resources.

FalCom

FalCom provides advanced hearing protec-

tion solutions enabling special operations, military, law en-

forcement and security personnel to communicate in the

most extreme environments – all while providing world class

hearing protection.

Business areas and brands

GN builds on its core engineering expertise and technologies to address medical,

professional and consumer segments with solutions that improve quality of life,

facilitate communication and collaboration, and enhance business and personal

productivity

29 Management's report ⋅ Awards and accolades Contents

GN Store Nord A/S

Awards and accolades

Awards and accolades from independent industry organizations, media, and

reviewers

demonstrate GN’s innovation leadership, product excellence, and

customer service. In 2020, new ReSound, Beltone and Jabra products received

multiple awards

30 Management's report ⋅ Sustainability - ESG Contents

GN Store Nord A/S

GN’s commitment to the

UN Sustainable Development Goals

Ensure

healthy lives

and promote

well-being for

all

GN products make life sound

better, which helps our custom-

ers lead a healthier and happier

life. In our operations we drive a

culture of health and safety and

avoid negative impact on health

by complying with chemical and

hazardous substance regula-

tions.

Achieve gen-

der equality

and empower

all women and

girls

By driving a culture of diversity

and inclusion in our recruitment,

employee development and in-

ternal networks, we strive to

empower underrepresented

groups in leadership positions

and across GN.

Promote sus-

tainable eco-

nomic growth

and decent

work for all

Driven by our commitment to

UN Global Compact, we set high

internal standards and audit

suppliers to ensure human and

labor rights are protected at all

times.

Promote sus-

tainable indus-

trialization

and foster in-

novation

The dynamic industries in which

we operate drive us to develop

products and services on the

leading edge of innovation that

meet society’s current and fu-

ture needs.

Ensure sus-

tainable con-

sumption and

production

patterns

We do business the right way.

Through our policies and due dil-

igence processes in, for example,

conflict minerals, responsible

sourcing, and business ethics, we

set high standards across our

value chain.

Take urgent

action to com-

bat climate

change and its

impacts

We help our customers make cli-

mate-friendly choices through

our remote collaboration solu-

tions. Through our climate goals,

we strive to reduce our own car-

bon footprint too.

GN’s starting point for sustainability

GN’s hearing, audio and collaboration solutions let people

Hear More: at work, at home or during leisure activities. Peo-

ple are enabled to Do More: improving productivity or com-

municating. This allow people to Be More: improving health,

becoming more productive, regaining a desired role in society

or at work, or understanding colleagues. In short, GN’s prod-

ucts and solutions enable people to live better lives.

Doing business responsibly has been core to GN throughout

our 150-year history. 2020 marked our 10

th

year as a signa-

tory to the UN Global Compact, from which our sustainability

framework has taken great inspiration. Leading ESG rating

agency MSCI acknowledges our strong foundation, rating GN

with an AA in 2020 for our performance across all relevant

sustainability/ESG areas, placing us in the upper quartile of

companies in our industry.

GN is committed to continuous improvement in all sustaina-

bility areas that are material to GN, by setting high standards

in product safety and quality, human rights, diversity and in-

clusion, occupational health and safety, people development,

business ethics and environmental and social compliance. We

use our existing business processes to drive sustainability as

an integrated part of how we run our company.

We made progress in many areas in 2020. To name a few: the

packaging of new large-volume product lines is now truly sus-

tainable; we intensified investigation of sustainable materials

for future products; we worked in many parts of the world to

support hearing loss for those most in need; and with re-

chargeable batteries as the new standard in our hearing aids

we aim to save millions of batteries.

To further improve, we have in 2020 defined three key areas

where we by setting new goals can make true impact over the

next years: climate change, sustainable products and packag-

ing, and health. By 2025, we:

1. aim to be climate neutral in our own company activities,

while also reducing our indirect emissions

2. will use at least 50% sustainable material in new products,

having truly sustainable packaging across GN, launching

take-back schemes for all relevant products and regions,

and repairing or refurbishing more products per year

3. want to help more than 10 million people with hearing

loss, continue to raise awareness and break down stigmas

around hearing loss, and work with our foundations as well

as an NGO partner on supporting unmet hearing needs

across the world

Our 2020 Sustainability - ESG report (available for download

here: www.gn.com/sustainabilityESG2020) provides a full

overview of our progress across all areas, forms part of this

Annual Report 2020 for GN Store Nord A/S, and constitutes

GN’s corporate responsibility report according to Section 99a,

99b, and 107d in the Danish Financial Statements Act.

Sustainability - ESG

GN’s sustainability strategy focuses on making real and lasting impact in areas

where the company can make a noteworthy difference

. 2020 marked progress in

many areas and new goals were set for 2025

31 Management's report ⋅ Risk management Contents

GN Store Nord A/S

In 2020, the COVID-19 pandemic was the overshadowing risk

that impacted the world and business and highlighted, more

than anything, the need for an agile and solid risk manage-

ment approach in a world where changes can happen swiftly

and with force.

In GN, the risk management process continuously identifies

new business risks. These are assessed by key employees and

management teams across the entire value chain, and this

allows us to react swiftly as it was the case at the outbreak of

COVID-19.

Subsequently the most significant risks are evaluated in order

to determine what actions should be taken to reduce the risk

or potentially turn it into opportunities.

At least once a year, the risks considered the most material

are reported to and discussed with the Audit Committee and

subsequently the Board of Directors.

The process is linked to and informs other key planning

processes, such as strategy planning, budgeting, and ongoing

business reviews, in order to ensure that identified key risks as

well as opportunities are proactively managed by relevant

risk owners.

The overall aim of this integrated and proactive approach to

risk management is to enable GN to reap the rewards of

more coordinated, informed, and intelligent risk-taking.

The main types of risk associated with GN’s business and the

main initiatives taken to manage them are outlined in the

following pages.

Main risks associated with GN’s businesses

*)

Research and development

Operations

Marketing and sales

Regulatory risk

Intellectual property rights

Information security

Human resources

Financial risk

* Risks derived from the COVID-19 pandemic span all main risk areas, notably human resources, global supply chains and sales. Below, the COVID-19 pandemic risks are specifically

addressed under section C Marketing and sales.

Risk management

Operating in business environments characterized by increasingly fast-paced

innovation and change

- not least in a highly unpredictable COVID-19

environment

– our proactive and systematic approach to risk management is a

valuable tool in our continuous eff

orts to stay ahead of new developments and

win in tomorrow’s marketplace

B

C

D

E

F

G

H

A

32 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteristics

Mitigating actions

A

Research and

development

With the rapid development of exciting new

technologies, such as voice computing,

artificial intelligence

, augmented and virtual

r

eality, 5G networks and more, the potential

for disruptive innovation and transformation

within our playing field is greater than ever

.

While this entails previously unthinkable

opportunities for development of new GN

products and solutions, it also entails a key

competitive risk in case we fail to turn the

application of new technologies into better

customer

experiences and tangible benefits

for the users of our offerings.

The accelerating pace of technology

development makes it paramount for GN to

be able to shorten time

-to-market even

further in the years ahead.

With our continuous and relentless focus on

innovation excellence we invest significantly

in research and innovation and have

continued to improve

our product innovation

and development process

es during 2020.

T

hese improvements enable faster time-to-

market as well as

making us more efficient,

agil

e, and adaptable during the development

process, without compromising

on high-

quality standards.

During the past years, we have also increas-

ingly focused on exploring and leveraging the

increasing and unique technology synergies

between GN

Hearing and GN Audio, to the

benefit of the customers of both businesses.

B

Operations

GN Hearing and GN Audio both rely on global

supply chains for the timely delivery of critical

materials and components, which must meet

high

-quality standards.

At the outbreak of COVID

-19 in Q1, GN

Hearing suspended operations at its Xiamen,

China,

manufacturing site and GN Audio’s

subcontractors extended holidays following

the Chinese New Year in line with

recommendations

by local authorities. As for

most technology companies in general, GN

has a high dependency on Chinese suppliers.

When key suppliers

are unable to provide

agreed deliverables this negatively affects

our ability to accommodate demand for GN

products.

COVID

-19 or other specific events could lead

to shunning of Chinese products, or

protectionist sentiment, which could escalate

into new t

ariffs or other forms of trade

barriers affecting the supply and cost of GN

products or components.

Where possible and feasible, GN therefore

targets to pursue a dual sourcing strategy to

ensure that GN is able to source the same

type of component from at least two

different suppliers.

For some unique suppliers, other measures

are taken to reduce the risk, such as higher

inventory buffers, du

al sets of production

equipment or other specific measures.

Further, GN closely monitors the risk of

increasing barriers to trade and takes this into

account in our ongoing production and

supply chain planning in order to proactively

mitigate any potenti

al impact. GN engages

with

global manufacturing partners with

production

capacity in different geographies.

33 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteristics

Mitigating actions

C

Marketing and

sales

GN Hearing

GN Hearing generates a significant part of its

revenue from partnerships with a number of

leading channels

that occasionally put their

business up for tender. This means that GN

Hearing is exposed to the risk of losing

business as these are re

-tendered.

We mitigate the channel risk by working

closely

with our partners to continuously

strengthen partnerships and integrate our

products and services deeper into our

partners’ eco

-systems and customer

journeys. Accordingly, we will stay focused on

meeting th

e needs and demands of partners

and eco

-systems and provide these with

superior added benefits. Further, GN

Hearing’s strategic priority of further

expanding innovation leadership to provide

more natural and individualized hearing

solutions

mitigates the risk of being de-

selected during tenders.

GN Audio

GN Audio entered 2020 with a strong track

-

record of growth in attractive enterprise mar-

kets. The already high demand rose sharply

as enterprises and organizations increased in-

vestments in collaboration

solutions

allowing

employees to work effectively from

home.

The underlying business is very strong and

GN Audio took significant market share and

further consolidated its position as the

world’s leading supplier of peripherals for en-

terprise collaboration.

While attractive growth rates are also ex-

pected for

the years to come, a global eco-

nomic slowdown due to the pandemic could

potentially constrain the demand for con-

sumer headsets and professional audio and

video collaboration peripherals.

The attractive growth rates also entail a risk

that new competitio

n enters the market and

challenges GN Audio

’s leading position.

GN Audio continually works to expand its

world

-leading position by developing new, in-

novative, relevant, and unique solutions

based on deep insights into new trends and

developments in user

preferences, purchas-

ing patterns, technology and other key fac-

tors shaping user needs and demands. The

enterprise business operates in a consoli-

dated industry with high barriers to entry and

complex eco

-systems.

GN Audio is well positioned to withstand th

e

effects of a potential economic slowdown.

Our enterprise product portfolio is fundamen-

tally designed to support more flexible and

hybrid working patterns. The portfolio further

helps companies realize efficiency gains and

productivity enhancements, redu

ce travel

cost and climate footprint, all of which are at-

tractive value propositions also in an eco

-

nomic downturn. Furthermore, our consumer

headsets and true wireless earbuds address a

strongly growing market.

GN Audio’s scalable contract

manufacturing

and distribution model allows us to adjust

volumes swiftly on an ongoing basis to miti

-

gate fluctuating demand.

34 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteristics

Mitigating actions

C

Marketing and

sales (continued)

COVID-19

GN

was affected in three ways by COVID-19:

(i) Various impact on production capacity and

supply of component from subcontractors in

H1 2020, (ii) GN Audio experienced strong de-

mand as enterprises continued to invest in

employees working from home, and (iii) GN

He

aring was impacted by lockdowns and lo-

cal restrictions impacting demand severely.

For GN Hearing the

COVID-19 pandemic re-

sulted in

a severe impact on revenue as the

global hearing aid markets in H1 2020 saw a

gradual shut

-down as markets across the

world

were facing lockdowns and various lo-

cal restrictions, including advising the more

vulnerable populations to stay home. Addi-

tional waves of the virus prior to widespread

vaccinations could pose similar challenges.

For GN Audio the pandemic resulted in

ex-

ceptional demand

as enterprises and organi-

zations increased investments in collabora-

tion

solutions allowing employees to work ef-

fectively from home

.

GN’s business model with limited forward in-

tegration and

operating within both the hear-

ing aid and audio &

video

space mitigates this

risk.

2020 manifested the benefits of having

both divisions under the same roof, which

combined with speed and agility lead to a

company that is now stronger than ever, with

a sol

id financial foundation.

For both business divisions organizational

streamlining and increased focus on online

channels and digitalization of the customer

journey had already been instigated. The pan-

demic accelerated this development, which

places both di

visions in strong positions on

the back of the epidemic.

D

Regulatory risk

US over-the-counter regulation

In the US market for hearing aids, a new over

-

the

-counter (OTC) category is expected to be

introduced. A new FDA regulation was ex-

pected in 2020 but was postponed due to the

global pandemic. Timing of a new regulation

remains uncertain.

The precise scope

and timing of its implemen-

tation is still not known, and it consequently

also remains uncertain what overall effect

this might have on the hearing aid industry.

New players may enter the market in this cat-

egory, and we may see some downward pres-

sure on

prices.

A new regulated OTC hearing aid category in

the US could present a new opportunity to

address millions of Americans that suffer

from some degree of untreated hearing loss.

GN could leverage its unique combination of

hearing aid and

consumer earbud expertise,

turning an OTC market into an additive op

-

portunity rather than a threat.

Additionally, GN’s focused business model as

a dedicated wholesale manufacturer with lim-

ited forward integration

– in combination

with strong strategic pa

rtnerships – makes

GN less exposed to any risks arising from the

introduction of an over

-the-counter category

than manufacturers that are vertically inte

-

grated, as GN will be more agile and resilient.

35 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteristics

Mitigating actions

D

Regulatory risk

(continued)

Medical device regulation

Regulatory requirements concerning quality

management systems and product safety of

medical devices, including hearing aids and

certain accessories, are increasing.

The next main piece of legislation raising the

bar is the EU Medical Device Regulation,

w

hich imposes stricter requirements regard-

ing clinical data and safety risk management.

As a consequence of

the global pandemic,

the EU Parliament voted in favor

of postpon-

ing MDR

by 12 months. In May 2021, the

transition period for the regulation expires,

after which quality systems of all

hearing aid

R&D and manufacturing sites must comply.

In 2020, GN Hearing added further resources

to upgrade its quality management system,

processes, and medical device files for prod-

ucts in order to ensure compliance with the

Medical Device Regulation. The ongoing work

to ensure compliance will continue into 2021.

Given that the new regulation significantly in-

creases the requirements that G

N and other

medical device manufacturers must live up

to, it also increases the barriers to entry in the

industry, as the cost and resource investment

needed to ensure compliance

increases.

E

Intellectual

property rights

As GN operates globally in highly innovative

industries and with increased focus on

cus-

tomer

needs and individualized user experi-

ences

, connectivity, wireless solutions, and

software, there is a risk that our freedom to

operate is constrained by third

-party patents

preventing commercialization of certain

products or solutions or forcing GN to pay

royalty.

GN continues to strengthen its patent portfo-

lio and monitors third

-party patent activities.

From time to time GN initiates invalidation

actions against

patents considered to be

wrongfully issued. The objective is to protect

our freedom to operate within current and fu-

ture innovation spaces and to defend our-

selves in case of patent infringement claims

being brought against GN.

F

Information

security

GN’s business depends to a large and

increasing degree on reliable and secure IT

systems. Failure to adequately protect the IT

infrastructure and key systems against the

risk of security incidents could potentially

impact critical bus

iness processes such as

manufacturing or sales or lead to unintended

disclosure of business

-critical confidential

data or sensitive personal data. Such

incidents may negatively affect GN’s

competitive position, damage its reputation

and/or result in fines.

GN works to continuously minimize these

risks through a wide range of measures, such

as technical security controls, process con-

trols and internal employee awareness cam-

paigns.

During past years, GN has significantly

strengthened its specific defenses in order to

ensure that we stay

vigilant

of the constantly

evolving threat landscape.

36 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteritics

Mitigating actions

G

Human

resources

The competition for talent in our industry has

intensified during the past few years. Should

we no longer be able to retain, attract and

grow the right talent, we might not be able:

1) to continue delivering innovative and

relevant product

s, 2) to successfully execute

on our strategy and 3) to build a sustainable

organization for the future.

In addition, our ability to deliver on our ambi-

tious strategic objectives depends on our abil-

ity to ensure that the entire global organiza-

tion is ful

ly aligned behind our strategy and

that this translates into flawless strategy exe-

cution.

GN’s HR strategy provides the foundation for

successfully building strong leadership and

talent across the organization to meet our

objectives.

During 2020, we further strengthened our

talent acquisition team to increase in

-house

search capability and co

mplement rigorous

talent review and succession planning. Re-

cent years’ increased focus on talent man-

agement resulted in several internal recruit-

ments for Executive Management and Global

Management Team positions.

GN’s strategic leadership development pro-

g

ram was postponed in 2020 due to COVID-

19 but will restart in 2021. Leadership devel-

opment will be further strengthened with

programs for new leaders and for virtual

leadership. A job catalogue with clear career

paths for employees was introduced and a re-

ward framework that enables GN to attract

and retain the right talent at the right cost

will be deployed in 2021. GN will actively take

steps to address mental wellbeing for em-

ployees to mitigate negative effects from re-

mote working over prolonged time.

F

inally, a new employee engagement survey

tool was introduced across the GN Group in

2020. Going forward, GN will seek valuable

feedback from all our employees twice a year

ensuring that we actively can take appropri-

ate actions to continuously maintain a hi

ghly

engaged organization.

37 Management's report ⋅ Risk management Contents

GN Store Nord A/S

Risk

Characteristics

Mitigating actions

H

Financial risk

Due to the nature of the operations, invest-

ments, and financing activities, GN is exposed

to a number of financial risks. GN has central-

ized the handling of these financial risks in

Group Treasury except for commercial risks,

which are managed by the Group

’s operating

businesses (divisions).

The financial risks are managed in accordance

with the overall financial risk management

guidelines set out in GN’s Group Treasury

Policy which is reviewed on an ongoing basis.

GN’s net interest

-bearing debt decreased dur-

ing 2020 to DKK

4,198 million and

NIBD/EBITDA ended at

1.8x. EBITDA de-

creased significantly due to the impact of

COVID

-19 in GN Hearing, but to a certain de-

gree off

-set by a strong performance in GN

Audio and diligent cash preservation

measures acros

s the company, including the

suspension of share buyback

s.

GN’s loans are long

-term with maturities ex-

tended until 2024 with mostly fixed interest

rates

Annual EBITA impact from a 5% increase

in currency before hedging (DKK million)

Currency

GN

Hearing

GN

Audio

GN Store

Nord

USD

65

-61

4

GBP

3

36

39

JPY

9

14

23

AUD

0

19

20

GN has hedged a substantial part of the ex-

pected net

cash-flow in foreign currencies to

secure the EBITA contribution of the material

trading currencies for the next 12 months

across both GN Hearing and GN Audio. GN is

also monitoring the combined impact of mi-

nor trading currencies and hedges those on a

case

-by-case basis.

To mitigate potential liquidity or refinancing

risks GN has access to a Revolving Credit Fa-

cility of DKK 2,000 millio

n, which can be up-

sized to DKK 4,000 million at the discretion of

the lenders. In addition, GN has entered into a

USD 40

million committed revolving credit

facility, both completely undrawn as of 31

December 2020.

GN has diversified its borrowing instruments

through the establishment of a short

-term,

uncommitted Euro Commercial Paper pro-

gram (“ECP”) of up to EUR 250 million, which

was utilized at EUR 45 million on December

31, 2020.

Additionally, under the uncommitted Euro

Medium Term Note program (“EMTN”) which

has been updated on November 30, 2020

(with a maximum program amount of EUR 1

billion) GN has outstanding senior

unsecured

bond of EUR 220 million under the program

in December 2020.

Please refer to note 4.2 in the Financial state-

ments for further information about financial

risks.

38 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

Corporate governance refers to the way a company is

managed and controlled through ownership, management

structure, incentive schemes, etc. GN strives to build trusted

relationships with customers, shareholders, suppliers,

employees, and the community. We also aim for a high

degree of transparency and active ownership, including

sharing information and engaging in a regular dialogue with

all our stakeholders.

On its website GN provides a statutory report on corporate

governance, including an explanation of how GN complies

with each recommendation (www.gn.com/CorporateGovern-

ance2020). This overview, as well as the risk management and

internal control systems related to financial reporting de-

scribed in the risk management section in this report, form

the statutory report on corporate governance that is required

under section 107b of the Danish Financial Statements Act.

Board of Directors

Composition and responsibilities of the Board of Directors

GN’s Board of Directors currently comprises seven members

elected by the shareholders at the Annual General Meeting.

Further, three members are elected by the employees based

in Denmark.

Members of the Board of Directors elected by the sharehold-

ers at the Annual General Meeting are elected for an annual

term until GN’s next Annual General Meeting. GN’s 2021 An-

nual General Meeting is held on March 17 at 10am.

Employee representatives are elected in accordance with the

Danish Companies Act for terms of four years. The next elec-

tion for GN Store Nord will be in the first quarter of 2022.

The Board of Directors is responsible for safeguarding the in-

terests of the shareholders while at the same time consider-

ing all other stakeholders. At least once a year, the Board of

Directors assesses the most important tasks based on the

overall strategic direction of the company, including the fi-

nancial and managerial supervision of the company. As part

of the supervision, the Board of Directors evaluates the per-

formance of the Executive Management on a continuous ba-

sis.

In 2020, the Board of Directors held 13 meetings (face-to-

face and by way of conference calls/virtual meetings).

Competencies of the Board of Directors

GN’s Board of Directors strives to recruit board members with

a diverse range of mutually complementary competencies.

When the Board of Directors proposes new board members, a

Corporate governance

GN maintains a strong focus on corporate governance through policies,

processes, and control systems as well as training and follow

-up activities

GN’s framework for corporate governance

GN’s management structure is built to support its two main businesses focusing on the hearing aid and headset segments.

The CFO of the group’s parent company, GN Store Nord, the CEO of GN Hearing and the CEO of GN Audio constitute GN’s

Executive Management. The Board members of GN Store Nord are elected at GN’s Annual General Meeting.

Shareholders

Board of Directors

Executive Management

GN Hearing

GN Audio

39 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

CV, as well as a thorough description of the candidate’s quali-

fications, will be available to the shareholders.

GN is a global company and to successfully develop and

maintain this position in the marketplace, GN is dependent

upon global expertise and experience. The Board of Directors

is a diverse group in terms of global experience, functional

competencies, and industry background, which ensures that it

can fulfill its obligations. Board members possess expertise

within med-tech, innovation, product development,

digitalization, online marketing, and commercialization, as

well as thorough understanding of financial and human

resource matters and in-depth knowledge of GN’s business.

The composition of the Board of Directors is a mix of mem-

bers with executive positions and professional board mem-

bers of both genders and diverse nationalities. This composi-

tion is deemed to provide a good balance between

knowledge, competencies, experience, and availability for a

substantial workload.

Evaluation of the performance of the Executive Manage-

ment Team and the Board of Directors

The Board of Directors assesses the work and results of the

Executive Management on an ongoing basis as an integrated

and natural part of their regular meetings. In the beginning of

every year, the Board establishes performance plans with spe-

cific KPIs for each member of the Executive Management.

The Board assesses the performance of the Executive Man-

agement and its execution of the agreed KPIs on an ongoing

basis during the year and formally at the end of the year. The

Board also evaluates on an ongoing basis the structure and

composition of the Executive Management in light of compe-

tencies and execution of the company’s strategy. At the year-

end assessment of Executive Management, the Chairman of

the Board is having individual performance evaluation meet-

ings with each member of the Executive Management. In ad-

dition, the work of the Executive Management is also as-

sessed as an integrated part of the Board’s own annual self-

evaluation, ensuring that the Executive Management’s work is

evaluated in accordance with pre-defined criteria.

The Board of Directors has – since 2009 - conducted an an-

nual self-evaluation of its work through which the Board can

track its own performance, strengths and development areas

over time and consequently the Board has been able to con-

tinuously improve its work and procedures. Progress has been

measured from one year to the other. The overall purpose of

the Board’s self-evaluation process continues to be to secure

a high level of professionalism, solid corporate governance

and contribution to the continued success of the company.

Furthermore, it ensures that the Board continues to have the

right composition and expertise at the Board.

The annual self-evaluation process covers the contributions

of each individual Board member as well as the achievements

of the Board as a whole and of the Board committees. The

self-evaluation process secures a structured and systematic

approach for the assessment of the Board’s work and is led by

the Chairman of the Board. The process also includes an as-

sessment of other management positions that each Board

and Executive member holds and assesses potential over-

boarding issues. The company subscribes to the concept of

“non- overboarding” and, therefore, carefully considers the

workload and other requirements such other management

positions may impose on each individual Board or Executive

member.

The self-evaluation survey is anonymous and is based on a

comprehensive questionnaire that among other covers the

following evaluation criteria in accordance with the Good Cor-

porate Governance recommendations and is managed by the

office of the General Counsel:

• The Board’s contribution and results,

• The Board’s cooperation with the Executive Management

Team,

• The Chairman’s leadership of the Board,

• The composition of the Board (including competencies, di-

versity, and the number of members),

• The work in the Board committees and the committees’

structure, and

• The organization and quality of the Board materials

Each year, the questions in the survey questionnaire are being

reviewed by the Chairman of the Board to ensure, that they

are all applicable and relevant, taking into consideration any

topics of importance for the Board’s work during that year. In

2020, the Board Survey was conducted in December and in-

cluded added sections on both the Board’s and the Executive

Management Team’s handling of the COVID-19 pandemic,

both in terms of global impact on the business short term and

long term and impact on the global workforce.

Each question in the self-evaluation questionnaire is answered

by each Board members and each member of the Executive

Management Team and is rated with a score from 1 to 5. The

questionnaire also offers the participants the option to pro-

vide additional commentary input, all on an anonymous basis.

The Chairman also has individual meetings with each Board

member and member of the Executive Management Team to

follow up on the results of the survey. The results are pre-

sented in a Board meeting by the Chairman combined with a

Board discussion of the results

The Chairman of the Board is furthermore responsible for

providing an update to the Annual General Meeting on the

general results of the self-evaluation.

Over time it is the Board’s intention to obtain periodic exter-

nal assistance to the Board evaluation process. The Board had

planned to do so in 2020. However, due to a new composition

of the Board with three new external members joining in

March 2020, and the extraordinary circumstances resulting

40 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

from the COVID-19 pandemic, which caused all Board meet-

ings - except for one - to be held fully or partially as virtual

meetings, the Board decided to postpone the involvement of

external assistance until a later point in time.

The general conclusions of the 2020 self-evaluation survey

were that the work in the Board and the collaboration be-

tween the Board and the Executive Management are con-

ducted in a professional and efficient way; and that the Board

and the Executive Management are aligned with respect to

how they collaborate, how the Board and Board Committee

meetings are conducted; and the decision-making processes.

With respect to the competencies represented on the Board,

the survey showed that the Board possesses the skills needed.

The survey also concluded that the Board and Executive Man-

agement’s efforts during recent years in relation to securing

in-house succession planning have paid off and that it should

continue to be a focus area for the Board and Executive Man-

agement going forward.

The general conclusions and information on the Board’s self-

evaluation process are also published on the company’s cor-

porate website, gn.com.

Diversity and talent management

Board of Directors

The Board of Directors firmly believes that diversity strength-

ens any governing body and acknowledges the importance of

diversity in general, including diversity of gender, nationality,

and competencies.

At the 2020 Annual General Meeting, the Board of Directors

was expanded from five to seven shareholder-elected mem-

bers. Of the current seven members, four are women. Already

in 2018, the Board reached its diversity target of 50% of its

members being women.

Senior management

GN’s current diversity focus is to advance stronger interna-

tional representation and gender diversity in our senior man-

agement, the Global Management Teams (GMT) in GN Audio

and GN Hearing. By the end of 2020, GN Hearing’s GMT com-

prised 18% female leaders and 36% non-Danes. GN Audio’s

GMT comprised 14 % female leaders and 64% non-Danes.

When GN’s diversity policy was established in 2014, women

filled 14% of the company’s senior management positions. As

a result of dedicated efforts women by the end of 2020 filled

21% of senior management positions across the GN Group.

GN will continue to strengthen efforts to build a pipeline of

future female candidates for senior positions. We have a con-

stant focus to ensure that we attract female candidates for

both internal job rotations and for new positions. By the end

of 2020, 43% of the newly appointed members of senior man-

agement were women.

Furthermore, to achieve our goals, we ensure that diversity –

encompassing gender, nationality, competencies, etc. – is an

integral part of GN’s yearly talent review and succession plan-

ning process, of talent development practices, recruitment

procedures and leadership development programs.

Finally, the wording and visual identity in recruitment activi-

ties on social media and other channels are continuously de-

signed to best attract female candidates and encourage di-

versity. When external recruiters or headhunters are used, GN

requires that viable female candidates are presented for any

position.

Remuneration

GN pursues a policy of offering the Board of Directors and Ex-

ecutive Management remuneration that is competitive with

industry peers and other global companies to retain and at-

tract competent professional leaders of the businesses and

members of the Board of Directors.

Remuneration of Executive Management is composed by a

fixed base salary plus a cash bonus which, for each member of

Executive Management, will normally be targeted at 50% but

can vary between 25 and 75% of the fixed annual base salary.

The cash bonus pay-out is capped at 100% of the annual base

salary of the relevant member of Executive Management. In

addition, Executive Management is offered to be part of GN’s

Long-Term Incentive Program which is a share option-based

program linked to the development in GN’s share price as well

as two financial performance metrics (revenue growth and

EBITDA improvement) measured against a peer group of in-

novative companies similar to GN. Each grant to a member of

Executive Management will be made within a range of 50% to

100% of the annual base salary calculated in accordance with

the Black Scholes method at the time of grant. The gross re-

turn on the share options for each annual grant can generally

not exceed a value equal to four times the annual base salary

of the relevant member of Executive Management at the

time of the grant.

The company does not make pension contributions for mem-

bers of Executive Management, and Executive Management

has change-of-control agreements in line with Danish market

practice. GN may terminate members of Executive Manage-

ment by giving 12 months’ notice, whereas a member of Ex-

ecutive Management may resign by giving six months’ notice.

Members of the Board of Directors receive a fixed remunera-

tion, comprising a base fee (with a multiple of two times to

the Deputy Chairman and three times to the Chairman) and

fixed travel allowances. In addition, GN pays statutory contri-

butions to social security and similar taxes and charges within

the EU/EEA that GN is obligated to pay according to applica-

ble law in relation to a member of the Board of Directors’ po-

sition with GN. Board members also receive a separate fee for

serving on the Board committees, with a multiple of two

times the committee base fee to the committee chair.

41 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

In line with the recommendations on corporate governance,

members of the Board of Directors are not awarded share op-

tions, nor do they participate in other incentive programs.

Board members, Executive Management, and senior manage-

ment are encouraged to buy and own shares in GN Store

Nord.

GN’s full Remuneration Report for 2020 is available here:

www.gn.com/Remuneration2020.

Board committees

Chairmanship

The Chairman and the Deputy Chairman form the Chairman-

ship of the Board. The Chairmanship prepares and organizes

the work of the Board of Directors with a view to ensure that

the Board performs its tasks and fulfills its duties and respon-

sibilities in an efficient and responsible manner. The Chair-

manship also performs preparatory tasks for and advise the

Board in relation to, inter alia, business strategy, implementa-

tion of strategy, business development, budget, and projects,

and performs in-depth business reviews of selected areas.

Audit Committee

According to its charter, the Audit Committee, among other,

assists the Board of Directors in relation to internal/external

accounting and financial control systems, the integrity of the

company’s financial reports and engagements with external

auditors. The Audit Committee also carries out ongoing as-

sessments of the company’s financial and business risks.

In 2020, the committee continued to deploy GN’s internal

controls framework which, among other, builds on increased

education and financial reporting process tracking. The com-

mittee reviewed the whistleblower reporting system, main ac-

counting principles, tax strategy and compliance and risk

management processes covering key risks (including identi-

fied supplier risks), etc.

Additionally, the Audit Committee assists the Board of Direc-

tors in relation to monitoring the control framework and pro-

cesses to protect the company’s IT infrastructure, cyber secu-

rity, and key systems against the risk of security incidents that

could potentially impact critical business processes.

In 2020, the Audit Committee held 6 meetings.

Remuneration Committee

According to its charter, the Remuneration Committee assists

the Board of Directors in matters and decisions concerning re-

muneration of Executive Management and senior employees

and in ensuring that the general remuneration policies strike

an appropriate balance between the interests of GN's share-

holders and rewarding and motivating the executives and em-

ployees in order to secure the long-term benefits of their en-

ergy and loyalty. Resolutions on remuneration recommended

by the Remuneration Committee and adopted by the Board

of Directors are in line with the Remuneration Policy as ap-

proved by the Board and by the Annual General Meeting on

11 March 2020.

The 2020 Remuneration Policy for Executive Management is

based on the remuneration guidelines and takes into account

the corporate governance recommendations and the require-

ments of the Danish Companies Act. In 2020, the Remunera-

tion Committee supervised and reviewed the remuneration

policy, salary, bonus, long-term incentive process and results,

and assisted with the preparation of the Remuneration Re-

port, which can be reviewed here: www.gn.com/Remunera-

tion2020. The Remuneration Committee also considered

grants under GN’s long term incentive program, talent devel-

opment and succession planning process and results.

In 2020, the Remuneration Committee held 7 meetings.

Strategy Committee

As an innovation-driven company, it is vital for GN to maintain

and further enhance the technological core capabilities of the

company of today, and even more importantly of tomorrow.

Investments in a number of exploratory research projects aim

at discovering potential future business opportunities leverag-

ing core knowledge and competencies of GN, but outside GN

Hearing’s and GN Audio’s immediate area of operation.

In 2020, the Strategy Committee oversaw a series of existing

projects as well as new projects to explore technological inno-

vations within the broader technology space.

In 2020, the Strategy Committee held 9 meetings.

Nomination Committee

According to its charter, the Nomination Committee advises

and makes recommendations to the Board of Directors in re-

lation to the skills that the Board of Directors and Executive

Management must have to best perform their tasks.

In 2020, primary activities included a review of the general

competencies necessary to be represented on the Board.

Based on this analysis and a review of the competency pro-

files of the individual Board members, the committee con-

cluded that the necessary competencies are represented in

the Board. The structure, size and diversity of the Board was

also reviewed and found to meet all governance require-

ments.

The committee also reviewed the latest developments in

good corporate governance and performed succession plan-

ning for the Board.

In 2020, the Nomination Committee held 2 meetings.

42 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

Internal audit function

In accordance with its charter, the Audit Committee annually

considers the need for an internal audit function. Based on

the recommendations of the Audit Committee, the Board of

Directors determines whether the internal control systems

are adequate.

In 2020, the Group Finance function of GN continued their fo-

cus on internal control of financial reporting covering the con-

trols specifically designed to address the risks of misstate-

ments in the financial statements. The compliance and inter-

nal control agenda continued to focus on the strengthening

of the internal processes, including risk assessment, control

activities and a defined controlling concept for GN. The pur-

pose is to strengthen the overall control environment, iden-

tify weaknesses and mitigate financial risks globally as well as

locally.

GN continuously adjusts and implements financial processes

and control activities in our business aimed at further mitigat-

ing the risk of incorrect financial reporting. These activities

help ensure that errors and deviations are prevented, discov-

ered, and rectified.

GN focuses on having a current and functioning internal con-

trol process that provides the users of our Consolidated Fi-

nancial Statements with a “reasonable assurance” that these

are accurate and can be relied upon for informed decision-

making. The Board of Directors’ assessment, which is based

on the company’s size and the organization of the finance de-

partment, is that there is no need to establish an internal au-

dit function at this time.

Compliance

Policy management and compliance training

GN’s commitment to business ethics and compliance with in-

ternational regulations and internal policies is anchored in our

Ethics Guide, anti-corruption policies, our Supplier Codes of

Conduct and other policies and guidelines. These outline the

fundamental requirements for how GN operates and describe

the responsibilities and ethical standards expected of all em-

ployees and relevant business partners.

To ensure and document that employees are always familiar

with our Ethics Guide and other key policies, relevant employ-

ees have to electronically sign off on their compliance within

specific areas and on a regular basis take GN’s e-learning

courses within key topics, such as anti-corruption and compe-

tition compliance. Each year this is supplemented with tai-

lored compliance training for selected business units or

groups of employees.

Anti-corruption compliance reviews

As a regular part of our global anti-corruption compliance

program, we each year conduct a number of compliance re-

views of selected GN subsidiaries or business units around the

world. The main objective is to identify and assess relevant

risk areas and to make sure that adequate controls are in

place to ensure compliance with applicable legislation and GN

policies. The selection of subsidiaries or business units for

compliance reviews is based on an annual country risk assess-

ment consisting of defined risk indicators.

Third-party due diligence

Our aspiration is that all our business partners acknowledge

our values and share our commitment to conducting business

in an ethical manner. In 2020, GN took further steps to en-

hance the process for assessing and managing corruption

risks associated with third-party business partners in selected

high-risk countries. The evaluation of third parties involves

self-assessment questionnaires and due diligence screenings

focusing on the potential reputational and legal risks associ-

ated with the business relationship.

Whistleblower system

GN’s whistleblower hotline, the GN Alertline, is available in 27

countries and 24 languages and is independently managed by

a third party. The hotline can be used by employees as well as

external parties to report a concern or perceived misconduct.

Access to reporting and additional details about the hotline

can be found here: www.gn.com/Alertline

The system is an important tool for ensuring that alleged ille-

gal or unethical conduct is reported and immediately ad-

dressed. All complaints are treated with the needed confiden-

tiality, and GN is committed to dealing with any employee

who takes action and/or participates in an investigation in a

fair and respectful manner. This is emphasized in the GN non-

retaliation policy signed by Executive Management.

In 2020, 14 concerns were reported through the GN whistle-

blower system. The allegations were primarily related to inap-

propriate behavior, harassment/bullying, conflicts of interest,

and COVID-19 precaution violations. All relevant cases have

been investigated and appropriate remediating as well as dis-

ciplinary actions were taken where relevant.

More details on GN’s compliance efforts and policies can be

found via www.gn.com/Documents.

Shareholders

GN aims for transparency and active ownership towards

shareholders through an open and active dialogue by ongoing

communication with our shareholders at the Annual General

Meeting and through investor presentations, news updates,

conference calls, the company website, webcasts, interim re-

ports, the annual report, company announcements and media

outreach activities.

GN services national, as well as international investors, and

ensures a continuous dialogue with shareholders, whether ex-

isting or potential, as well as equity analysts. On the

43 Management's report ⋅ Corporate governance Contents

GN Store Nord A/S

company’s website, www.gn.com/Investor, detailed material

on the interests of the shareholders can be found. GN’s

shares are 100% free float, and shareholders have the ulti-

mate authority over the company and exercise their right to

make decisions at the Annual General Meeting where they

also approve the Annual Report and elect Board members

and the independent auditor. For more information, please

see the shareholder section on pages 44 – 45.

Notices for the Annual General Meeting

GN sends notices to convene Annual General Meetings by

email. Letters are sent to shareholders who have requested

this instead of emails. Thus, we encourage all registered

shareholders to sign up at the investor portal with their email

addresses and check the box labeled “subscribe/unsubscribe”

in the field “Notice for the Annual General Meeting”. Share-

holders will then receive the notice by email in the future.

44 Management's report ⋅ Shareholder information Contents

GN Store Nord A/S

The GN share

The price of the GN share was DKK 487.2 on December 31,

2020, which is equivalent to an increase of 56% compared to

the end of 2019. In comparison, the C25 index increased by

34%, while the Stoxx Europe 600 index decreased by 4%. The

total market value of GN’s shares, excluding treasury shares,

was DKK 63 billion at the end of 2020.

GN is, among other indices, included in the C25 index and

Large Cap index on Nasdaq Copenhagen, as well as the Stoxx

Europe 600 index, the Stoxx Europe Sustainability index and

the MSCI Europe mid cap index.

Ownership

The GN share is 100% free float, and the company has no

dominant shareholders. GN has approximately 30,000

registered shareholders and foreign ownership is estimated to

be around 70%.

The 10 largest registered shareholders held in total about

35% of the GN share capital at the end of 2020 (including

GN’s holding of treasury shares). Two shareholders have

informed GN that they hold 5% or more of the share capital:

• APG Asset Management N.V. (Holland)

• Société Générale S.A. (France)

GN Store Nord Fondet currently owns 238,200 GN shares. A

recent regulatory change has made it possible for GN Store

Nord Fondet to diversify and restructure its asset portfolio

more efficiently and increase the fund available for donations.

With the aim of fulfilling its ambition to continue to do valua-

ble charitable donations, GN Store Nord Fondet is therefore

investigating the possibility of restructuring and diversifying

its asset portfolio, including a sale of the majority of its hold-

ing of GN shares.

Share capital and voting rights

GN’s share capital of DKK 569,072,400 consists of

142,268,100 shares, each carrying four votes. GN has one

share class with no restrictions on ownership or voting rights.

Treasury shares

On December 31, 2020, GN held 13,293,255 treasury shares

corresponding to 9.3% of the share capital, and the value of

the treasury shares was DKK 6.5 billion. As part of the EUR

330 million convertible bond offering concluded in May 2019,

around 5,200,000 shares are kept in Treasury to hedge future

obligations of the convertible bond.

At the Annual General Meeting to be held on March 17, 2021,

the Board of Directors will propose to reduce the company’s

share capital by canceling 4,092,118 shares equivalent to all

treasury shares held today in excess of the shares needed to

Shareholder information

Through an open and active dialogue, GN strives to provide all stakeholders with

timely and relevant information to ensure a fair pricing of the GN share

Shareholder return distribution

(DKK million)

Development in total outstanding shares

(Million)

1,364

1,443

1,168

1,392

356

0

200

400

600

800

1,000

1,200

1,400

1,600

2016 2017 2018 2019 2020

Dividends Share buyback

155

146

142 142

135

140

145

150

155

160

2016 2017 2018 2019 2020

Total outstanding shares

45 Management's report ⋅ Shareholder information Contents

GN Store Nord A/S

hedge future obligations of the convertible bond and

4,000,000 shares – which are held for hedging of long-term

incentive programs.

Until the Annual General Meeting on March 17, 2021, the

Board of Directors is authorized to acquire shares in GN. The

company's holding of treasury shares may at no time exceed

15% of the share capital of the company.

Dividend policy and share buyback programs

GN’s overall financial target is to deliver a competitive

shareholder return through a combination of dividend

payments and share price appreciation. GN aims to pay out a

dividend corresponding to 15 - 25% of the annual net profit

and to distribute additional excess cash to shareholders

through share buyback programs.

Dividend payments and share buybacks are subject to, among

other factors, cash requirements to support the ongoing

operations, strategic opportunities, and the company’s capital

structure. As previously communicated, it is currently GN’s

target to maintain a capital structure consisting of equity and

debt with the net interest-bearing debt amounting to

between one to two times EBITDA.

In order to preserve a strong balance sheet in uncertain times,

GN postponed share buybacks (program intended to be

initiated following the approvals by the Annual General

Meeting on March 11, 2020), until better predictability and

visibility into the consequences of the COVID-19 was achieved

(see company announcement no. 24 of April 3, 2020).

At the Annual General Meeting on March 17, 2021, the Board

of Directors will propose to pay out a total dividend of DKK

206 million (equivalent to DKK 1.45 per share and 16% of the

2020 net profit) in respect of the 2020 financial year,

compared to DKK 206 million in 2019 (equivalent to DKK

1.45 per share and 14% of the 2019 net profit).

Incentive programs

By the end of 2020, the total number of outstanding warrants

in GN Hearing was 4,238 (0.7%) of the share capital in GN

Hearing). The total number of outstanding warrants in GN

Audio was 3,838 (1.1%) of the share capital in GN Audio). The

total number of outstanding options in GN Store Nord was

1,439,890 (1.0%) of the share capital in GN Store Nord).

Investor relations policy

As part of GN’s investor relations activities an active dialogue

is pursued with existing and potential shareholders as well as

with financial analysts. GN ensures that relevant and timely

information is provided to the financial community to ensure

that the GN share is fairly priced. This is accomplished

through information continually announced to the market as

company announcements and press releases, combined with

investor meetings, conferences and presentations of the

company’s interim and annual results.

Following the release of interim and annual results, GN con-

ducts roadshows where the Executive Management and the

investor relations team inform investors and financial analysts

about the recent developments in the company. GN is

covered by sell-side analysts, who continually release analyst

research reports on GN and the industry dynamics. A full list

of the analysts covering GN can be found on the website

www.gn.com/Investor.

GN has a four-week silent period prior to publication of a

financial report. During these silent periods, any

communication with stakeholders is restricted.

GN’s website www.gn.com contains historic and current

information about GN, including company announcements

and press releases, current and historic share price data,

investor presentations and annual and interim reports.

The investor relations team can be contacted at:

Investor@gn.com

Share price development vs peers*

Financial calendar for 2021

Event

Date

Annual General Meeting March 17, 2021

Interim Report Q1 2021 May 6, 2021

Interim Report Q2 2021 August 19, 2021

Interim Report Q3 2021 October 29, 2021

* Index : 30-12-2019 = 100

Read company announcements on www.gn.com

156

134

96

60

80

100

120

140

160

180

30-12-2019 30-12-2020

GN C25 CAP Stoxx 600

46 Management's report ⋅ Board of Directors Contents

GN Store Nord A/S

Board of Directors

Per Wold-Olsen

(Chairman)

MBA. Formerly president

Merck & Co., Inc., Interconti-

nental Division, USA. Chair-

man since 2008.

Jukka Pekka Pertola

(Deputy Chairman)

M.Sc. Electrical Engineering

.

Professional board member.

Former CEO of Siemens A/S,

Denmark.

Hélène Barnekow

M.Sc. (International

Business). CEO,

Microsoft

Sweden.

Board & Committee

positions

Chairman of the Boards of

GN Audio A/S and GN

Hearing A/S. Chairman of the

Board

s of Medicines for

Malaria Venture and

Oncopeptides AB

. M

ember of

the Board of Gilead Sciences

Inc.

Deputy Chairman of the

Boards of GN Audio A/S and

GN Hearing A/S. Chairman of

the Board of Asetek A/S,

Monsenso A/S, Siemens

Gamesa R

enewable Energy

A/S, Tryg A/S, Tryg Forsikring

A/S. Deputy Chairman of the

Boards of COWI Holding A/S,

GomSpace Group AB and

GomSpace A/S.

Member of the Boards of GN

Audio A/

S and GN Hearing

A/S. Member of the Board of

Creades AB

.

Special competencies

Extensive global leadership

expertise and knowledge of

the healthcare industry.

Brings a unique set of capa-

bilities and values to the

Board of GN Store Nord

within marketing and product

development as well as com-

mercialization of innovation.

Also possesses in

-depth

knowledge of the U.S. market

as well as emerging markets.

Broad international back-

ground with more than 20

years of management experi-

ence in the I

CT, energy, in-

dustry, infrastructure and

healthcare sectors, solid ex-

perience with various busi-

ness models stretching from

B2C to complex project busi-

ness, IT outsourcing solu-

tions, technology services

and professional services.

Unique

capabilities within

general commercial

management and marketing,

including go

-to-market,

branding, communications,

product management and

channel management from

the mobile communications

and IT sector.

Board member since

2008

20

2013

Term

20

20/2021

20

20/2021

20

20/2021

Considered independent

No

Yes

Nationality

Norw

ay

Finland

Swed

en

Year of birth

1947

19

60

1964

No. of GN shares

224,884 (unchanged)

2,000 (+2,000)

10,000 (unchanged)

Total remuneration 2020

(DKKt)

2,

033

992

6

41

Chairmanship

32/32

30/30

1

Audit Committee

0/1

2

Nomination Committee

2/2

1/1

1

1/1

2

Remuneration Committee

7/7

5/5

1

1/2

2

Strategy Committee

9/9

7/7

1

GN

Store Nord A/S Board

13/13

10/10

1

12/13

GN Hearing A/S Board

8/8

5/5

1

7/8

GN Audio A/S Board

11/11

8/8

1

9/11

C

DC

C

DC

C

DC

47 Management's report ⋅ Board of Directors Contents

GN Store Nord A/S

Montserrat Maresch Pascual

MBA

(Business Administra-

tion). C

o-founder and Senior

Advisor, Naar + Maresch AB,

Sweden

Wolfgang Reim

Ph.D. in physics. Professional

board member and self

-em-

ployed consultant within the

medical industry.

CEO,

Amann Girrbach AG

.

Ronica Wang

MBA, B.A. Sc. (Engineering),

Co

-founder & Global

Managing Partner, The

InnoGrowth Group Ltd.

Former CEO of Avon Japan

(listed on JASDAQ) and

leadership positions with J&J,

Hutchison

-Priceline, Procter

& Gamble

Anette Weber

L

ic.oec HSG, Finance & Ac-

counting

. Group CFO of

Bucherer AG, Switzerland

Board & Committee

positions

Member of the Boards of GN

Audio A/S

, GN Hearing A/S,

and

the GN Store Nord

Foundation

. Senior Advisor

to the Board

s of

Cia Española

de Aislamientos, S.A (Isolana)

and Pronokal Health Group

S.L., both in Spain.

Member of the Boards of GN

Audio A/S and GN Hearing

A/S. Chairman of the Board

of Ondal Medical GmbH.

Member of the Boards of

Elekta AB, AudEERING

GmbH and LAP Laser GmbH.

Member of the Boards of GN

Audio A/S and GN Hearing

A/S. Member of the

Boards

of Pandora A/S and Ho-

telbeds Group.

Member of the Boards of GN

Audio A/S and GN Hearing

A/S.

Member of the Supervi-

sory Board of New Work S.E.

(formerly Xing S.E), Ham-

burg, Germany.

Special competencies

International executive back-

ground and experience

. In-

depth competences within

retail, branding, business de-

velopment and implementa-

tion of business and market-

ing strategies

and models,

digital transformation, opera-

tions performance, and opti-

mization of cu

stomer experi-

ence.

Global leadership experience

from the healthcare industry

and special knowledge in the

areas of business process

reengineering, innovation

management, global sourc-

ing, and supply chain man-

agement. Contributes to the

Board with extensive

M&A

understanding.

In

-depth experience in global

brand marketing, digital

strategy/ecommerce/omni

-

channel, business

transformation, and sales/

channel management across

consumer health, healthcare,

technology, FMCG,

affordable luxury, travel

industries. Extensiv

e

knowledge of

Asia/China/Japan.

Extensive global leadership

expertise and knowledge

from various leadership

positions in the global

healthcare and IT industry.

In

-depth knowledge of

finance, digitalization

,

development, general

and

c

hange management,

platform economies

, and

M&A.

Board member since

2020

2008

2015

20

Term

20

20/2021

20

20/2021

20

20/2021

20

20/2021

Considered independent

Yes

No

Yes

Nationality

Spa

in and Sweden

German

y

Hong Kong

Germany

Year of birth

1964

1956

1962

19

71

No. of GN shares

700 (+700)

51,000 (unchanged)

9,050 (+4,200)

600 (+600)

Total remuneration 2020

(DKKt)

6

09

1,

058

6

60

6

09

Chairmanship

Audit Committee

6/6

4/6

5/5

3

Nomination Committee

1/1

4

Remuneration Committee

5/5

5

Strategy Committee

7/7

5

9/9

GN Store Nord A/S Board

9/10

5

13/13

11/13

10/10

3

GN Hearing A/S Board

4/5

5

8/8

7/8

5/5

3

GN Audio A/S Board

7/8

5

10/11

8/8

3

C

48 Management's report ⋅ Board of Directors Contents

GN Store Nord A/S

Employee elected members

Leo Larsen

M.Sc. (Electrical Engineering)

and a diploma in business

administration and

international trade. Senior

Director, Audio Research, GN

Audio.

Morten Andersen

B.Sc. (Mechanical

Engineering). V

ice President,

Component Manufacturing in

Operations, GN

Hearing.

Marcus Stuhr Perathoner

Manager, Customer

Experience & Escalations

,

GN Audio

.

Board & Committee

positions

Member of the Board of the

GN Store Nord Foundation

Special competencies

N/A

Board member since

2007

2011

20

18

Term

2018/2022

Considered independent

N/A

Nationality

Denmark

Year of birth

19

59

1963

19

77

No. of GN shares

1,137 (unchanged)

854

( +400)

0

(unchanged)

Total remuneration 2020

(DKKt)

2

76

2

76

2

76

Please visit

www.gn.com for more elaborate descriptions of the board members’ competencies

and management duties.

#/# signifies the number of Board and

Committee meetings in which each member has partici-

pated followed by the total number of Board and

Committee meetings.

1

)

Jukka Pertola joined the Board and was appointed Deputy Chairman as of March 11, 2020

, and

then became member of the committees for Remuneration, Nomination, and Strategy

2)

Hélène Barnekow was a member of the committees for Audit and Remuneration only up u

ntil

March 11, 2020

, and then became a member of the Nomination Committee

3)

Anette Weber joined the Board and the Audit Committee as of March 11, 2020

4)

Wolfgang Reim was a member of the Nomination Committee only up until March 11, 2020

5)

Montserrat Maresch Pascual joined the Board and the committees for Remuneration and

Strategy

as of March 11, 2020

Chairman

Deputy chairman

Board member

C

DC

49 Management's report ⋅ Executive Management Contents

GN Store Nord A/S

Executive Management

René Svendsen-Tune

CEO, GN Store Nord

and

GN Audio

Gitte Pugholm Aabo

CEO, GN Hearing

Peter La Cour Gormsen

C

FO, GN Store Nord

and

GN Audio

(

CFO of GN Store Nord as of

January 1, 2021)

Marcus Desimoni

CFO, GN Store Nord

and

GN Hearing

(

CFO up and until December

31, 2020

)

Member of the Executive

Management since

2015

2019

2021

2016

Year of birth

1955

1967

1974

1968

No. of GN shares

90

,670 (+17,670)

6

,823 (+6,338)

9,9

18 (NA)

10

,500 (+2,500)

No. of GN

options

134,464

(+58,937)

104,634

(+60,241)

23,458 (

NA)

89,670

(+39,303)

No. of GN

warrants

1,398

-

98 (NA)

413

(-412)

Board positions

Chairman of the

Boards of

Stokke AS

and the GN Store

Nord

Foundation, Deputy

Chairman of the

Board of

NKT A/S, member of t

he

Board

of Nilfisk Holding A/S.

Member of the Committee of

Directors of Danmarks Na

-

tionalbank (the Danish

National Bank)

, member of

the

Board of HIMPP A/S

(

Hearing Instrument

Manufacturers Patent

Partnership

).

50 Management's report ⋅ Additional financial information 2020 (unaudited) Contents

GN Store Nord A/S

Additional financial

information 20

20 (unaudited)

Additional

financial information

Q4 financial highlights

51

Quarterly financial highlights

53

Quarterly reporting by segment

54

Q4 segment disclosures

55

51 Management's report ⋅Q4 financial highlights Contents

GN Store Nord A/S

GN Hearing

Revenue

GN Hearing’s revenue in Q4 2020 was DKK 1,378 million

compared to DKK 1,722 million in Q4 2019, translating into a

revenue growth of -20%. Organic revenue growth was -16%,

while the foreign exchange development contributed with

around -3% and M&A contribution was around -1%.

In Q4 2020, as for the hearing aid industry overall, COVID-19

continued to impact GN Hearing negatively, and due to the

increasing infection rates across the world, the markets

halted in its recovery, but with the impact varying greatly

across channels, regions, and countries. The ReSound ONE

reception and feedback has been overwhelmingly positive.

In North America, the overall hearing aid market experienced

a slowdown in its recent recovery trend primarily as a

reflection of the continued increase in infection rates from

COVID-19 with significant differences across states.

In Europe, GN Hearing experienced a strong performance in

especially Germany and Spain but the region was in general

negatively impacted by the increase in COVID-19 infection

rates.

In Rest of World, countries like Japan and Korea delivered

revenue in line with 2019 despite continued impact from

COVID-19 across the region.

Earnings and other financial highlights

GN Hearing’s gross profit decreased -27% to DKK 873 million

in Q4 2020. The gross margin reached 63.4%, compared to

69.1% in Q4 2019. The decrease in gross margin is mainly due

to the revenue decline, the fixed part of production costs, and

mix effects.

EBITA in Q4 2020 was DKK 153 million, compared to DKK

420 million in Q4 2019. The EBITA margin in Q4 2020 was

11.1%, compared to 24.4% in Q4 2019, primarily driven by

the revenue decline. OPEX continued to be prudently

managed during Q4 2020, which resulted in a 6% decrease

compared to Q4 2019.

The return on invested capital (ROIC) was 1% in Q4 2020,

compared to 19% in Q4 2019.

In Q4 2020, free cash flow excl. M&A reached DKK 263

million, compared to DKK 130 million in Q4 2019. Cash

conversion was 172% in Q4 2020 due to the continued

prudent cost measures.

GN Audio

Revenue

Revenue in Q4 2020 reached DKK 2,706 million compared to

1,962 million in Q4 2019, corresponding to an organic

revenue growth of 43%. The foreign exchange development

contributed with around -5%. Revenue growth was 38%.

In Q4 2020, GN Audio’s Enterprise business continued to

deliver high double-digit organic revenue growth and market

share gains across regions and channels. The continued

strong growth reflects the accelerating market trends

following COVID-19, GN Audio’s innovative world leading

product portfolio as well as strong execution on its

commercial excellence initiatives.

Q4 financial highlights

Financial

overview Q4 2020

GN Hearing

GN Audio

Group total*

DKK million

Q4 2020

Q4 2019

Growth

Q4 2020

Q4 2019

Growth

Q4 2020

Q4 2019

Growth

Revenue

1,378

1,722

-20%

2,706

1,962

38%

4,084

3,684

11%

Organic growth

-16%

4%

43%

24%

15%

13%

Gross profit

873

1,190

-27%

1,318

975

35%

2,191

2,165

1%

Gross profit margin

63.4%

69.1%

-5.7%p

48.7%

49.7%

-1.0%p

53.6%

58.8%

-5.2%p

EBITA

153

420

-64%

642

441

46%

746

821

-9%

EBITA margin

11.1%

24.4%

-13.3%p

23.7%

22.5%

+1.2%p

18.3%

22.3%

-4.0%p

Earnings per share (EPS)

4.09

4.30

-5%

Free cash flow excl. M&A

263

130

+133

625

210

+415

896

274

+622

* Including "Other"

52 Management's report ⋅Q4 financial highlights Contents

GN Store Nord A/S

GN Audio’s Consumer delivered strong organic revenue

growth, driven among other by new launches in the Jabra

Elite family.

Earnings and other financial highlights

In Q4 2020, GN Audio’s gross profit increased by 35% to DKK

1,318 million corresponding to a gross margin of 48.7%,

which was slightly lower than in Q4 2019, reflecting

increased freight and production costs due to COVID-19.

In Q4 2020, GN Audio’s EBITA was DKK 642 million

equivalent to an EBITA margin of 23.7%, reflecting leverage

in the business as well as continued investments into growth

opportunities.

GN Audio’s free cash flow excl. M&A was DKK 625 million in

Q4 2020, which is 198% higher than in Q4 2019. The cash

conversion in Q4 2020 was 97%, compared to 48% in Q4

2019, reflecting the strong growth in earnings as well as a

positive development in working capital.

53 Management's report ⋅ Quarterly financial highlights Contents

GN Store Nord A/S

Q4

Full year

2020

2019

2020

2019

DKK million

(unaud.)

(aud.)

GN Hearing

Revenue

1,378

1,722

4,725

6,351

Revenue growth

-20%

5%

-26%

9%

Organic growth

-16%

4%

-24%

7%

Gross profit margin

63.4%

69.1%

61.5%

69.0%

EBITA*

153

420

41

1,284

EBITA margin*

11.1%

24.4%

0.9%

20.2%

ROIC (EBITA*/Average invested capital)

1%

19%

1%

19%

Free cash flow excl. M&A

263

130

127

672

Cash conversion (Free cash flow excl. M&A/EBITA*)

172%

31%

310%

52%

GN Audio

Revenue

2,706

1,962

8,724

6,223

Revenue growth

38%

27%

40%

30%

Organic growth

43%

24%

42%

26%

Gross profit margin

48.7%

49.7%

50.4%

51.5%

EBITA*

642

441

2,002

1,192

EBITA margin*

23.7%

22.5%

22.9%

19.2%

ROIC (EBITA*/Average invested capital)

81%

57%

81%

57%

Free cash flow excl. M&A

625

210

1,729

849

Cash conversion (Free cash flow excl. M&A/EBITA*)

97%

48%

86%

71%

GN Store Nord

Revenue

4,084

3,684

13,449

12,574

Revenue growth

11%

16%

7%

19%

Organic growth

15%

13%

9%

15%

Gross profit margin

53.6%

58.8%

54.3%

60.3%

EBITA*

746

821

1,866

2,321

EBITA margin*

18.3%

22.3%

13.9%

18.5%

Profit (loss) before tax

657

722

1,612

1,913

Effective tax rate

19.8%

23.0%

21.3%

23.3%

ROIC (EBITA*/Average invested capital)

19%

25%

19%

25%

Earnings per share, basic (EPS)

4.09

4.30

9.72

11.12

Earnings per share, fully diluted (EPS diluted)

4.04

4.26

9.63

10.98

Free cash flow excl. M&A

896

274

1,865

1,296

Cash conversion (Free cash flow excl. M&A/EBITA*)

120%

33%

100%

56%

Equity ratio

31.0%

29.1%

31.0%

29.1%

Net interest-bearing debt

4,198

5,303

4,198

5,303

Net interest-bearing debt (period-end)/EBITDA

1.8

2.0

1.8

2.0

Payout ratio

-

16%

14%

Share buybacks**

-

273

453

1,626

Outstanding shares, end of period (thousand)

128,975

128,952

128,975

128,952

Average number of outstanding shares (thousand)

128,894

129,338

128,805

130,762

Average number of outstanding shares, fully diluted (thousand)

130,401

130,566

130,032

132,367

Treasury shares, end of period (thousand)

13,293

13,316

13,293

13,316

Share price at the end of the period

487.2

313.3

487.2

313.3

Market capitalization

62,837

40,401

62,837

40,401

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

** Incl. buybacks as part of share-based incentive programs

Quarterly financial highlights

54 Management's report ⋅ Quarterly reporting by segment Contents

GN Store Nord A/S

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Full year

2019

Full Year

2020

DKK million

(unaud.)

(aud.)

Income statement

Revenue

GN Hearing

1,507

1,585

1,537

1,722

1,314

715

1,318

1,378

6,351

4,725

GN Audio

1,333

1,466

1,462

1,962

1,653

1,944

2,421

2,706

6,223

8,724

Total

2,840

3,051

2,999

3,684

2,967

2,659

3,739

4,084

12,574

13,449

Organic growth

GN Hearing

8%

4%

-14%

-54%

-11%

-16%

7%

-24%

GN Audio

36%

26%

20%

24%

22%

32%

72%

43%

26%

42%

Total

19%

16%

13%

3%

-13%

29%

15%

9%

Gross profit

GN Hearing

1,047

1,090

1,053

1,190

841

332

859

873

4,380

2,905

GN Audio

707

745

775

975

827

1,009

1,239

1,318

3,202

4,393

Total

1,754

1,835

1,828

2,165

1,668

1,341

2,098

2,191

7,582

7,298

Gross profit margin

GN Hearing

69.5%

68.8%

68.5%

69.1%

64.0%

46.4%

65.2%

63.4%

69.0%

61.5%

GN Audio

53.0%

50.8%

53.0%

49.7%

50.0%

51.9%

51.2%

48.7%

51.5%

50.4%

Total

61.8%

60.1%

61.0%

58.8%

56.2%

50.4%

56.1%

53.6%

60.3%

54.3%

Development costs

GN Hearing

-134

-130

-132

-131

-149

-124

-120

-118

-527

-511

GN Audio

-91

-92

-96

-112

-110

-118

-181

-145

-391

-554

Other *

-16

-19

-14

-22

-20

-19

-23

-63

-84

Total

-241

-242

-257

-281

-262

-320

-286

-981

-1,149

Selling and distribution costs and administrative

expenses etc.

GN Hearing

-631

-661

-638

-639

-637

-544

-570

-602

-2,569

-2,353

GN Audio

-423

-385

-389

-422

-429

-483

-394

-531

-1,619

-1,837

Other *

-20

-25

-21

-26

-21

-27

-19

-26

-92

-93

Total

-1,074

-1,071

-1,048

-1,087

-1,054

-983

-1,159

-4,280

-4,283

EBITA

GN Hearing

282

299

283

420

55

-336

169

153

1,284

41

GN Audio

193

268

290

441

288

408

664

642

1,192

2,002

Other *

-36

-44

-35

-40

-43

-47

-38

-49

-155

-177

Total

439

523

538

821

300

25

795

746

2,321

1,866

EBITA margin

GN Hearing

18.7%

18.9%

18.4%

24.4%

4.2%

-47.0%

12.8%

11.1%

20.2%

0.9%

GN Audio

14.5%

18.3%

19.8%

22.5%

17.4%

21.0%

27.4%

23.7%

19.2%

22.9%

Total

15.5%

17.1%

17.9%

22.3%

10.1%

0.9%

21.3%

18.3%

18.5%

13.9%

Depreciation and software amortization

GN Hearing

-46

-47

-48

-47

-45

-54

-35

-189

-181

GN Audio

-23

-24

-26

-30

-28

-29

-31

-34

-103

-122

Other *

-17

-20

-23

-28

-29

-32

-30

-24

-88

-115

Total

-86

-91

-97

-106

-104

-106

-115

-93

-380

-418

EBITDA

GN Hearing

328

346

331

468

102

-291

223

188

1,473

222

GN Audio

216

292

316

471

316

437

695

676

1,295

2,124

Other *

-19

-24

-12

-14

-15

-8

-25

-67

-62

Total

525

614

635

927

404

131

910

839

2,701

2,284

EBITA

439

523

538

821

300

25

795

746

2,321

1,866

Amortization and impairment of acquired intangi-

ble assets

-42

-57

-151

-48

-50

-52

-82

-51

-298

-235

Gain (loss) on divestment of operations etc.

-

1

-3

-19

1

-1

-3

-21

-4

Operating profit (loss)

397

467

384

754

251

-28

712

692

2,002

1,627

Share of profit (loss) in associates

-2

-5

5

-1

-6

-2

-

3

-9

Financial items, net

-53

-64

62

-37

-111

49

91

-35

-92

-6

Profit (loss) before tax

342

398

451

722

139

15

801

657

1,913

1,612

Tax on profit (loss)

-80

-93

-106

-166

-33

-2

-178

-130

-445

-343

Profit (loss)

262

305

345

556

106

13

623

527

1,468

1,269

Balance sheet

Development projects

GN Hearing

948

967

987

1,029

1,058

1,069

1,080

1,084

1,029

1,084

GN Audio

319

324

333

361

377

399

369

426

361

426

Other *

-25

-24

-22

-21

-19

-18

-16

-15

-21

-15

Total

1,242

1,267

1,298

1,369

1,416

1,450

1,433

1,495

1,369

1,495

Inventories

GN Hearing

509

541

562

535

580

603

610

650

535

650

GN Audio

493

539

611

771

585

711

805

1,072

771

1,072

Total

1,002

1,080

1,173

1,306

1,165

1,314

1,415

1,722

1,306

1,722

Trade receivables

GN Hearing

1,294

1,254

1,235

1,282

1,095

835

1,025

972

1,282

972

GN Audio

1,014

1,174

1,056

1,527

1,477

1,593

1,860

1,704

1,527

1,704

Total

2,308

2,428

2,291

2,809

2,572

2,428

2,885

2,676

2,809

2,676

Net working capital

GN Hearing

940

886

804

861

927

649

581

552

861

552

GN Audio

592

578

433

488

765

512

764

357

488

357

Other *

-110

-160

-74

-142

-121

-139

-93

-74

-93

Total

1,422

1,354

1,077

1,275

1,550

1,040

1,206

816

1,275

816

Free cash flow excl. M&A

GN Hearing

-37

290

289

130

-66

-117

47

263

672

127

GN Audio

78

232

329

210

-67

579

592

625

849

1,729

Other *

-54

-50

-55

-66

-27

55

-27

8

-225

9

Total

-13

472

563

274

-160

517

612

896

1,296

1,865

Acquisitions and divestments of companies

-653

-37

-12

-

-29

-10

-107

-

-702

-146

Free cash flow

-666

435

551

274

-189

507

505

896

594

1,719

* "Other" comprises Group Functions, GN Ejendomme and eliminations.

Quarterly reporting by segment

55 Management's report ⋅ Q4 segment disclosures Contents

GN Store Nord A/S

Income statement

GN Hearing

GN Audio

Other*

Consolidated total

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

(DKK million)

(unaud.)

Revenue

1,378

1,722

2,706

1,962

-

4,084

3,684

Production costs

-505

-532

-1,388

-987

-

-1,893

-1,519

Gross profit

873

1,190

1,318

975

-

2,191

2,165

Development costs

-118

-131

-145

-112

-23

-14

-286

-257

Selling and distribution costs

-455

-506

-467

-357

-

-922

-863

Management and administrative expenses

-155

-132

-55

-60

-26

-236

-218

Other operating income and costs, net

8

-1

-9

-5

-

-1

-6

EBITA

153

420

642

441

-49

-40

746

821

Amortization and impairment of acquired intangible assets

-33

-28

-18

-20

-

-51

-48

Gain (loss) on divestment of operations etc.

-3

-13

-

-6

-

-3

-19

Operating profit (loss)

117

379

624

415

-49

-40

692

754

Share of profit (loss) in associates

3

7

-

-3

-2

-

5

Financial items

-17

-30

-9

9

-9

-16

-35

-37

Profit (loss) before tax

103

356

615

424

-61

-58

657

722

Tax on profit (loss)

-56

-21

-138

-90

64

-55

-130

-166

Profit (loss) for the period

47

335

477

334

3

-113

527

556

Cash flow statement

GN Hearing

GN Audio

Other*

Consolidated total

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

(DKK million)

(unaud.)

Operating activities before changes in working capital

303

542

731

498

-18

-10

1,016

1,030

Cash flow from changes in working capital

-11

-15

355

-157

-43

-61

301

-233

Cash flow from operating activities excluding financial

items and tax

292

527

1,086

341

-61

-71

1,317

797

Cash flow from investing activities:

Development projects

-96

-111

-95

-70

-

-191

-181

Other

-78

-66

-28

-46

-49

-68

-155

-180

Cash flow from operating and investing activities before

financial items and tax

118

350

963

225

-110

-139

971

436

Tax and financial items

145

-220

-338

-15

118

73

-75

-162

Cash flow from operating and investing activities (free

cash flow)

263

130

625

210

8

-66

896

274

Cash flow from M&A activities

-

Free cash flow excl. M&A

263

130

625

210

8

-66

896

274

Additional information

GN Hearing

GN Audio

Other*

Consolidated total

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

Q4 2020

Q4 2019

(DKK million)

(unaud.)

Revenue distributed geographically

Denmark

39

17

86

41

-

125

58

Europe

381

447

1,506

874

-

1,887

1,321

North America

640

847

730

745

-

1,370

1,592

Rest of World

318

411

384

302

-

702

713

Revenue

1,378

1,722

2,706

1,962

-

4,084

3,684

Incurred development costs

-129

-172

-201

-140

-25

-16

-355

-328

Capitalized development costs

96

111

95

70

-

191

181

Amortization, impairment and depreciation of development

projects**

-85

-70

-39

-42

2

-122

-110

Expensed development costs

-118

-131

-145

-112

-23

-14

-286

-257

EBITDA

188

468

676

471

-25

-12

839

927

Depreciation and software amortization

-35

-48

-34

-30

-24

-28

-93

-106

EBITA

153

420

642

441

-49

-40

746

821

EBITA margin

11.1%

24.4%

23.7%

22.5%

N/A

18.3%

22.3%

Number of employees, end of period

~4,400

~4,425

~1,875

~1,650

~250

~200

~6,525

~6,275

* "Other" comprises Group Shared Services, GN Ejendomme and eliminations

** Does not include amortization of acquired intangible assets, cf. definition of EBITA

Q4 segment disclosures

56 Management's report ⋅ Financial statements 2020 Contents

GN Store Nord A/S

Section 1 Basis of preparation

Overview of the financial accounting policies in general

and an introduction to Management's key accounting

estimates and judgments.

1.1 General accounting policies 61

1.2 Significant accounting estimates and

judgments 63

1.3 Non-IFRS measures 63

Section 2 Results of the year

Insights into the results for the year, including operating

segments, employee costs and taxes.

2.1 Segment disclosures 64

2.2 Revenue and geographical information 69

2.3 Staff Costs 71

2.4 Government grants 72

2.5 Tax 72

2.6 Income statement classified by function 74

Section 3 Operating assets and liabilities

Insights into the assets that form the basis for the

activities in GN Store Nord, and the related liabilities.

Most of these are included in invested capital and some

in net working capital.

3.1 Intangible assets 75

3.2 Property, plant and equipment 78

3.3 Leases 79

3.4 Depreciation, amortization and impairment 81

3.5 Other non-current assets 82

3.6 Inventories 84

3.7 Trade receivables 85

3.8 Provisions 86

Section 4 Capital structure and

financing items

Insight into GN Store Nord's capital structure and

financial items as well as financial risks.

4.1 Outstanding shares and treasury shares 87

4.2 Financial risks 88

4.3 Financial instruments 92

4.4 Liabilities from financing activities 96

4.5 Financial income and expenses 97

Section 5 Other disclosures

Statutory notes and other disclosures.

5.1 Acquisition and divestment of companies

and operations 98

5.2 Remuneration of the Board of Directors and

Executive Management 101

5.3 Share-based incentive plans 103

5.4 Pension obligations 106

5.5 Contingent liabilities 107

5.6 Investments in associates 108

5.7 Other non-cash adjustments 108

5.8 Fees to statutory auditors 109

5.9 Related parties 109

5.10 Events after the reporting period 109

Financial statements 2020

Content

Consolidated financial statements

Consolidated income statement and statement of

comprehensive income

57

Consolidated balance sheet at December 31

58

Consolidated statement of cash flow

s 59

Consolidated statement of equity

60

Notes to the consolidated financial statements

57 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Consolidated income statement

DKK million

Note

2020

2019

Revenue

2.2

13,449

12,574

Production costs

2.3, 2.4, 3.4, 3.6

-6,151

-4,992

Gross profit

7,298

7,582

Development costs

2.3, 2.4, 3.4

-1,149

-981

Selling and distribution costs

2.3, 2.4, 3.4

-3,349

-3,359

Management and administrative expenses

2.3, 2.4, 3.4, 5.8

-1,037

-918

Other operating income and costs, net

103

-3

EBITA*

1,866

2,321

Amortization and impairment of acquired intangible assets

2.6, 3.4

-235

-298

Gain (loss) on divestment of operations etc.

5.1

-4

-21

Operating profit (loss)

1,627

2,002

Share of profit (loss) in associates

5.6

-9

3

Financial income

2.4, 4.5

294

355

Financial expenses

4.5

-300

-447

Profit (loss) before tax

1,612

1,913

Tax on profit (loss)

2.5

-343

-445

Profit (loss) for the year

1,269

1,468

Attributable to:

Non-controlling interests

17

14

Shareholders in GN Store Nord A/S

1,252

1,454

Earnings per share (EPS)

4.1

9.72

11.12

Earnings per share fully diluted (EPS diluted)

4.1

9.63

10.98

* Please refer to Key Ratio Definitions on page 112 for definition of EBITA

Consolidated statement of comprehensive income

DKK million

Note

2020

2019

Profit (loss) for the year

1,269

1,468

Other comprehensive income

Items that will not be reclassified to the income statement

Actuarial gains (losses)

-1

17

Tax relating to actuarial gains (losses)

2.5

-

-5

Items that may be reclassified subsequently to the income statement

Adjustment of cash flow hedges

4.3

-13

21

Foreign exchange adjustments, etc.

-601

161

Tax relating to other comprehensive income

2.5

14

-11

Other comprehensive income for the year

-601

183

Total comprehensive income for the year

668

1,651

Attributable to:

Non-controlling interests

17

14

Shareholders in GN Store Nord A/S

651

1,637

58 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Consolidated balance sheet at December 31

DKK million

Note

2020

2019

Assets

Intangible assets

3.1, 3.4

7,007

7,422

Property, plant and equipment

3.2, 3.3, 3.4

1,057

1,076

Investments in associates

5.6

523

257

Deferred tax assets

2.5

392

423

Other non-current assets

3.5, 4.3

1,187

1,315

Total non-current assets

10,166

10,493

Inventories

3.6

1,722

1,306

Trade receivables

3.7, 4.3

2,676

2,809

Tax receivables

63

58

Other receivables

398

289

Cash and cash equivalents

4.3

1,657

1,728

Total current assets

6,516

6,190

Total assets

16,682

16,683

Equity and Liabilities

Share capital

569

Other reserves

-5,161

-4,345

Proposed dividends for the year

206

Retained earnings

9,564

8,419

Total equity

5,178

4,849

Bank loans and issued bonds

4.2, 4.3, 4.4

5,069

5,345

Lease liabilities, non-current

3.4, 4.3, 4.4

324

357

Pension obligations

5.4

36

26

Provisions, non-current

3.8

203

92

Deferred tax liabilities

2.5

362

552

Other non-current liabilities

4.3, 4.4

482

507

Total non-current liabilities

6,476

6,879

Bank loans

4.2, 4.3, 4.4

341

1,197

Lease liabilities, current

3.4, 4.3, 4.4

121

132

Trade payables

4.3

1,238

1,058

Tax payables

253

66

Provisions

3.8

333

431

Other current liabilities

2,742

2,071

Total current liabilities

5,028

4,955

Total equity and liabilities

16,682

16,683

59 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Consolidated statement of cash flows

DKK million

Note

2020

2019

Operating activities

Operating profit (loss)

1,627

2,002

Depreciation, amortization and impairment

3.4

1,167

1,074

Other non-cash adjustments

5.7

346

92

Cash flow from operating activities before changes in working capital

3,140

3,168

Change in inventories

-471

-336

Change in receivables

-189

-456

Change in trade payables and other payables

1,028

480

Total changes in working capital

368

-312

Cash flow from operating activities before financial items and tax

3,508

2,856

Interest received

86

136

Interest etc. paid

-99

-302

Tax paid, net

-289

-483

Cash flow from operating activities

3,206

2,207

Investing activities

Development projects

3.1

-638

-544

Investments in intangible assets, excluding development projects

-234

-171

Investments in property, plant and equipment

3.2

-221

-232

Investments in other non-current assets

-297

-304

Disposal of intangible assets and property, plant and equipment

2

-

Disposal (repayment) of other non-current assets

47

340

Acquisition of companies/operations

5.1

-147

-704

Divestment of companies/operations

5.1

1

2

Cash flow from investing activities

-1,487

-1,613

Cash flow from operating and investing activities (free cash flow)

1,719

594

Financing activities

Increase of short-term loans

4.4

-

1,168

Decrease of long-term loans

4.4

-458

-1,002

Decrease of short-term loans

4.4

-855

-

Net proceeds from issue of bonds (bond-with-warrant units)

4.4

-

2,272

Net proceeds from issue of warrants (bond-with-warrant units)

4.4

-

204

Repurchase of bonds issued in 2017

-

-1,632

Repurchase of warrants issued in 2017

-

-604

Net proceeds from issue of Eurobonds

-

1,630

Paid dividends

-187

-178

Share-based payment (exercised)

194

271

Purchase of treasury shares

4.1

-453

-1,626

Other adjustments

-12

-9

Cash flow from financing activities

-1,771

494

Net cash flow

-52

1,088

Cash and cash equivalents, beginning of period

1,728

636

Adjustment foreign currency, cash and cash equivalents

-19

4

Cash and cash equivalents, end of period

1,657

1,728

60 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Consolidated statement of changes in equity

Other reserves

DKK million

Share

capital

Foreign

exchange

adjust-

ments

Hedging

reserve

Treasury

shares

Proposed

dividends

for the

year

Retained

earnings

Equity,

share-

holders in

GN Store

Nord A/S

Non-con-

trolling

interests

Total

equity

Balance at January 1, 2019

583

-1,065

-27

-2,585

197

7,993

5,096

-

5,096

Profit (loss) for the period

-

1,454

14

1,468

Actuarial gains (losses)

-

17

-

17

Tax relating to actuarial gains (losses)

-

-5

-

-5

Adjustment of cash flow hedges

-

21

-

21

-

21

Foreign exchange adjustments, etc.

-

161

-

161

-

161

Tax relating to other comprehensive

income

-

-6

-5

-

-11

-

-11

Other comprehensive income for the

year

-

155

16

-

12

183

-

183

Total comprehensive income for the year

-

155

16

-

1,466

1,637

14

1,651

Reduction of share capital

-14

-

536

-

-522

-

Fair value of warrants issued with bonds

-

204

-

204

Repurchase of warrants issued with

bonds in 2017

-

-604

-

-604

Share-based payment (granted)

-

39

-

39

Share-based payment (exercised)

-

251

-

20

271

-

271

Tax related to share-based incentive

plans

-

49

-

49

Purchase of treasury shares

-

-1,626

-

-1,626

-

-1,626

Reclassification of non-controlling inter-

ests by recognizing a put option liability

-

-39

-14

-53

Proposed dividends for the year*

-

206

-206

-

Paid dividends

-

-178

-

-178

-

-178

Dividends, treasury shares

-

-19

19

-

Balance at December 31, 2019

569

-910

-11

-3,424

206

8,419

4,849

-

4,849

Profit (loss) for the period

-

1,252

17

1,269

Actuarial gains (losses)

-

-1

-

-1

Tax relating to actuarial gains (losses)

-

Adjustment of cash flow hedges

-

-13

-

-13

-

-13

Foreign exchange adjustments, etc.

-

-601

-

-601

-

-601

Tax relating to other comprehensive

income

-

11

3

-

14

-

14

Other comprehensive income for the

year

-

-590

-10

-

-1

-601

-

-601

Total comprehensive income for the year

-

-590

-10

-

1,251

651

17

668

Share-based payment (granted)

-

77

-

77

Share-based payment (exercised)

-

237

-

-43

194

-

194

Tax related to share-based incentive

plans

-

60

-

60

Purchase of treasury shares

-

-453

-

-453

-

-453

Reclassification of non-controlling inter-

ests by recognizing a put option liability

-

-13

-11

-24

Proposed dividends for the year*

-

206

-206

-

Paid dividends

-

-187

-

-187

-6

-193

Dividends, treasury shares

-

-19

19

-

Balance at December 31, 2020

569

-1,500

-21

-3,640

206

9,564

5,178

-

5,178

* Equivalent to DKK 1.45 per share (2019: DKK 1.45 per share)

61 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

In the annual report the notes are grouped in sections. Each note includes the accounting policies and significant accounting estimates applica-

ble to the relevant notes. The description of the accounting policies in the notes is part of the complete description of GN Store Nord’s ac-

counting policies. The notes are grouped in these five sections:

Section 1 Basis of preparation

Section 2 Results of the year

Section 3 Operating assets and liabilities

Section 4 Capital structure and financing items

Section 5 Other disclosures

New or revised EU endorsed accounting standards and interpretations are described as well as how these changes are expected to impact the

financial performance and reporting of the GN Store Nord Group.

1.1 General accounting policies

The annual report of GN Store Nord has been prepared in accordance

with International Financial Reporting Standards (IFRS) as adopted by

the EU and the Danish disclosure requirements for annual reports of

listed companies.

The annual report has been prepared in accordance with the histori-

cal cost convention, as modified by the revaluation of certain financial

instruments (including derivative financial instruments) at fair value.

New standards, interpretations and amendments adopted by GN

Store Nord

As of January 1, 2020, GN Store Nord adopted all relevant new or re-

vised International Financial Reporting Standards and IFRIC Interpre-

tations with effective date January 1, 2020 or earlier. The new or re-

vised standards and interpretations did not affect recognition and

measurement materially nor did they result in any material changes

to disclosures in the notes. Apart from this, the annual report is pre-

sented in accordance with the accounting policies applied in previous

years’ annual reports.

Accounting standards not yet adopted

A number of new standards, amendments to standards and interpre-

tations are effective for annual periods beginning after January 1,

2020 and have not been applied in preparing this annual report. None

of these new standards, amendments to standards and interpreta-

tions are expected to have significant impact on the financial state-

ments of GN Store Nord.

GN Store Nord will adopt new standards and interpretations as of the

effective dates.

Consolidated Financial Statements

The consolidated financial statements relate to the financial state-

ments of the parent company, GN Store Nord, and its subsidiaries as

at December 31, 2020. Control is achieved when the Group is ex-

posed or has rights to variable returns from its involvement with the

investee and has the ability to affect those returns through its power

over the investee.

Generally, there is a presumption that a majority of voting rights re-

sults in control. To support this presumption and when GN Store

Nord has less than a majority of the voting or similar rights of an in-

vestee, GN Store Nord considers all relevant facts and circumstances

in assessing whether it has power over an investee.

Group companies are listed on page 110. Enterprises that are not

subsidiaries, but where GN Store Nord holds between 20% and 50%

of the voting rights and over which it exercises significant influence,

but where it does not have power to govern the financial and operat-

ing policies, are considered associates. When assessing whether GN

Store Nord exercises control or significant influence, potential voting

rights that are substantive and options on acquisition of additional

ownership interests are taken into account.

The consolidated financial statements are prepared as a consolida-

tion of the financial statements of the parent company and those of

the individual subsidiaries, all of which are presented in accordance

with the Group’s accounting policies. Intra-group income and ex-

penses, shareholdings, intra-group balances and dividends, and real-

ized and unrealized gains and losses on intra-group transactions are

eliminated. On consolidation, the carrying amount of shares held by

the parent company in subsidiaries is set off against the subsidiaries’

equity.

Section 1

Basis of preparation

62 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Foreign Currency Translation

Functional Currency and Presentation Currency

Financial statement items for each of the reporting enterprises in the

Group are measured using the currency used in the primary financial

environment in which the reporting enterprise operates. Transactions

denominated in other currencies than the functional currency are

considered transactions denominated in foreign currencies. The con-

solidated financial statements are presented in Danish kroner (DKK),

which is the functional currency and presentation currency of the par-

ent company.

Translation of Transactions and Balances

On initial recognition, transactions denominated in foreign currencies

are translated to the functional currency at the exchange rates at the

transaction date. Foreign exchange differences arising between the

exchange rates at the transaction date and at the date of payment

are recognized in the income statement as financial income or finan-

cial expenses. Receivables, payables and other monetary items de-

nominated in foreign currencies are translated at the exchange rates

at the balance sheet date. The difference between the exchange

rates at the balance sheet date and at the date at which the receiva-

ble or payable arose or was recognized in the latest annual report is

recognized in the income statement as financial income or financial

expenses.

Translation of Subsidiaries

On recognition in the consolidated financial statements of foreign en-

tities with another functional currency than GN Store Nord’s presen-

tation currency, the income statements are translated at the ex-

change rates at the transaction date, and the balance sheet items are

translated at the exchange rates at the balance sheet date. An aver-

age exchange rate for the month is used as the exchange rate at the

transaction date to the extent that this does not significantly distort

the presentation of the underlying transactions. Foreign exchange

differences arising on translation of the opening balance of equity of

such enterprises at the exchange rates at the balance sheet date and

on translation of the income statements from the exchange rates at

the transaction date to the exchange rates at the balance sheet date

are recognized in other comprehensive income.

Foreign exchange adjustment of balances with foreign entities that

are considered part of the investment in the entity is recognized in

other comprehensive income in the consolidated financial statements

under a separate translation reserve.

Cash Flow Statement

The cash flow statement is presented using the indirect method

based on the operating profit (loss). The cash flow statement shows

the cash flow from operating, investing and financing activities for

the year and the year’s changes in cash and cash equivalents as well

as the cash and cash equivalents at the beginning and end of the

year. The cash flow effect of acquisitions and disposals of enterprises

is shown separately in cash flows from investing activities. Cash flow

from acquired enterprises is recognized in the cash flow statement

from the acquisition date. Cash flow from disposed of enterprises is

recognized up until the disposal date.

Cash flow from operating activities comprises cash flow from the

year’s operations adjusted for non-cash operating items and changes

in working capital. Working capital comprises current assets exclud-

ing items stated as cash and cash equivalents and excluding tax re-

ceivable, as well as current liabilities excluding bank loans, tax paya-

ble and provisions.

Cash flow from investing activities comprises payments in connection

with acquisitions and disposals of enterprises and activities, acquisi-

tions and disposals of intangible assets, property, plant and equip-

ment and other non-current assets and acquisitions and disposals of

securities that are not included in cash and cash equivalents.

Cash flow from financing activities comprises changes in the size or

composition of the share capital and related costs as well as the rais-

ing of loans, repayment of interest-bearing debt, payment of the prin-

cipal portion of lease liabilities, acquisition and disposal of treasury

shares and payment of dividends to shareholders.

Cash and cash equivalents comprise cash and short-term marketable

securities with a term of three months or less and are subject to an in-

significant risk of changes in value.

63 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

1.2 Significant accounting estimates

and judgments

The recognition of certain items of income and expenses and the de-

termination of the carrying amount of certain assets and liabilities im-

plies making accounting estimates and judgments. Significant ac-

counting estimates and judgments comprise revenue recognition,

computation of amortization, depreciation and impairment, useful

lives and remaining useful lives of non-current assets. Furthermore,

recognition of pension obligations and similar non-current obliga-

tions, provisions, contingent liabilities as well as measurement of

investment in associates requires significant accounting estimates

and judgments.

The estimates used are based on assumptions, which by Management

are deemed reliable, but by nature are associated with uncertainty.

The assumptions may be incomplete or incorrect, and unexpected

events or circumstances may arise. Accordingly, the Company is sub-

ject to risks and uncertainties that may lead to a situation where ac-

tual results differ from estimates.

A description of significant accounting estimates and judgments is in-

cluded in the relevant notes:

Estimate/Judgment

Section

Revenue recognition

2.1 Segment disclosures

Measurement of deferred tax

2.5 Tax

Recognition and measurement of goodwill and development projects

3.1 Intangible assets

Loans to dispensers and ownership interests

3.5 Other non-current assets

Measurement of inventories

3.6 Inventories

Measurement of trade receivables

3.7 Trade receivables

Measurement of provisions

3.8 Provisions

Disclosure of contingent liabilities

5.5 Contingent liabilities

1.3 Non-IFRS measures

This Annual Report includes financial measures which are not defined

by IFRS. These measures are included because they are used by GN

Store Nord’s Management to analyze and manage the business and

to provide stakeholders with useful information on the group’s finan-

cial position, performance and development. Please refer to Key Ra-

tio Definitions on page 112 for a definition of the measures.

64 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.1 Segment disclosures

Income statement 2020

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

External revenue

4,725

8,724

-

13,449

Internal revenue

-

456

-456

-

Revenue

4,725

8,724

456

-456

13,449

Production costs

-1,820

-4,331

-

-6,151

Gross profit

2,905

4,393

456

-456

7,298

Development costs

-511

-554

-90

6

-1,149

Selling and distribution costs

-1,772

-1,577

-

-3,349

Management and administrative expenses

-596

-348

-549

456

-1,037

Other operating income and costs, net

15

88

-

103

EBITA*

41

2,002

-183

6

1,866

Amortization and impairment of acquired intangible assets

-158

-77

-

-235

Gain (loss) on divestment of operations etc.

-5

1

-

-4

Operating profit (loss)

-122

1,926

-183

6

1,627

Share of profit (loss) in associates

-6

-

-3

-

-9

Financial items

8

13

-27

-

-6

Profit (loss) before tax

-120

1,939

-213

6

1,612

Tax on profit (loss)

-2

-443

103

-1

-343

Profit (loss) for the year

-122

1,496

-110

5

1,269

Impairment losses and reversals regarding intangible assets

and property, plant and equipment recognized in the income

statement

-46

-90

-

-136

Eliminations in the income statement primarily concern internal revenue, intersegment rent and management fee

Other segment disclosures 2020

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Incurred development costs

-558

-614

-90

-

-1,262

Capitalized development costs

345

293

-

638

Amortization, impairment and depreciation of

development projects***

-298

-233

-

6

-525

Expensed development costs

-511

-554

-90

6

-1,149

EBITDA**

222

2,124

-68

6

2,284

Depreciation and software amortization

-181

-122

-115

-

-418

EBITA*

41

2,002

-183

6

1,866

* Please refer to Key Ratio Definitions on page 112 for definition of EBITA

** Excluding gain (loss) on divestments of operations etc. but including amortization of development projects

*** Does not include amortization and impairment of acquired intangible assets, cf. definition of EBITA

Section 2

Results of the

year

65 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.1 Segment disclosures (Continued)

Income statement 2019

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

External revenue

6,351

6,223

-

12,574

Internal revenue

-

420

-420

-

Revenue

6,351

6,223

420

-420

12,574

Production costs

-1,971

-3,021

-

-4,992

Gross profit

4,380

3,202

420

-420

7,582

Development costs

-527

-391

-72

9

-981

Selling and distribution costs

-2,033

-1,326

-

-3,359

Management and administrative expenses

-540

-286

-512

420

-918

Other operating income and costs, net

4

-7

-

-3

EBITA*

1,284

1,192

-164

9

2,321

Amortization and impairment of acquired intangible assets

-232

-66

-

-298

Gain (loss) on divestment of operations etc.

-15

-6

-

-21

Operating profit (loss)

1,037

1,120

-164

9

2,002

Share of profit (loss) in associates

5

-

-2

-

3

Financial items

2

-8

-86

-

-92

Profit (loss) before tax

1,044

1,112

-252

9

1,913

Tax on profit (loss)

-174

-251

-18

-2

-445

Profit (loss) for the year

870

861

-270

7

1,468

Impairment losses and reversals regarding intangible assets

and property, plant and equipment recognized in the income

statement

-100

-3

-

-106

Eliminations in the income statement primarily concern internal revenue, intersegment rent and management fee

Other segment disclosures 2019

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Incurred development costs

-613

-433

-72

-

-1,118

Capitalized development costs

345

199

-

544

Amortization, impairment and depreciation of

development projects***

-259

-157

-

9

-407

Expensed development costs

-527

-391

-72

9

-981

EBITDA**

1,473

1,295

-76

9

2,701

Depreciation and software amortization

-189

-103

-88

-

-380

EBITA*

1,284

1,192

-164

9

2,321

* Please refer to Key Ratio Definitions on page 112 for definition of EBITA

** Excluding gain (loss) on divestments of operations etc. but including amortization of development projects

*** Does not include amortization and impairment of acquired intangible assets, cf. definition of EBITA

66 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.1 Segment disclosures (Continued)

Balance sheet 2020

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Assets

Goodwill

3,257

1,108

-

4,365

Development projects

1,084

426

-

-15

1,495

Other intangible assets

402

377

369

-1

1,147

Property, plant and equipment

513

306

238

-

1,057

Investments in associates

499

-

24

-

523

Deferred tax assets

351

143

-

-102

392

Loans to dispensers and ownership interests

759

-

759

Other financial assets

428

-

428

Total non-current assets

7,293

2,360

631

-118

10,166

Inventories

650

1,072

-

1,722

Trade receivables

972

1,704

-

2,676

Receivables from group companies*

-

1,334

593

-1,927

-

Tax receivables

27

171

-

-135

63

Other receivables

221

99

149

-71

398

Cash and cash equivalents

246

181

1,230

-

1,657

Total current assets

2,116

4,561

1,972

-2,133

6,516

Total assets

9,409

6,921

2,603

-2,251

16,682

Equity and Liabilities

Equity

4,904

3,599

-3,313

-12

5,178

Bank loans and issued bonds

-

5,069

-

5,069

Lease liabilities, non-current

211

78

35

-

324

Pension obligations

30

6

-

36

Provisions, non-current

115

88

-

203

Deferred tax liabilities

266

148

32

-84

362

Other non-current liabilities

331

151

-

482

Total non-current liabilities

953

471

5,136

-84

6,476

Bank loans

1

6

334

-

341

Lease liabilities, current

79

31

11

-

121

Trade payables

265

913

60

-

1,238

Amounts owed to group companies*

1,927

-

-1,927

-

Tax payables

78

139

193

-157

253

Provisions, current

176

157

-

333

Other current liabilities

1,026

1,605

182

-71

2,742

Total current liabilities

3,552

2,851

780

-2,155

5,028

Total equity and liabilities

9,409

6,921

2,603

-2,251

16,682

*Net amount

Eliminations in the balance sheet primarily concern tax and intercompany balances

67 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.1 Segment disclosures (Continued)

Balance sheet 2019

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Assets

Goodwill

3,539

1,210

-

4,749

Development projects

1,029

361

-

-21

1,369

Other intangible assets

542

465

298

-1

1,304

Property, plant and equipment

579

255

242

-

1,076

Investments in associates

230

-

27

-

257

Deferred tax assets

318

162

-

-57

423

Loans to dispensers and ownership interests

924

-

924

Other financial assets

391

-

391

Total non-current assets

7,552

2,453

567

-79

10,493

Inventories

535

771

-

1,306

Trade receivables

1,282

1,527

-

2,809

Receivables from group companies*

-

766

277

-1,043

-

Tax receivables

67

20

71

-100

58

Other receivables

170

57

62

-

289

Cash and cash equivalents

209

109

1,410

-

1,728

Total current assets

2,263

3,250

1,820

-1,143

6,190

Total assets

9,815

5,703

2,387

-1,222

16,683

Equity and Liabilities

Equity

6,261

3,190

-4,585

-17

4,849

Bank loans and issued bonds

-

5,345

-

5,345

Lease liabilities, non-current

249

67

41

-

357

Pension obligations

21

5

-

26

Provisions, non-current

78

14

-

92

Deferred tax liabilities

239

185

245

-117

552

Other non-current liabilities

380

127

-

507

Total non-current liabilities

967

398

5,631

-117

6,879

Bank loans

-

1

1,196

-

1,197

Lease liabilities, current

91

32

9

-

132

Trade payables

254

750

54

-

1,058

Amounts owed to group companies*

1,043

-

-1,043

-

Tax payables

44

67

-

-45

66

Provisions, current

283

148

-

431

Other current liabilities

872

1,117

82

-

2,071

Total current liabilities

2,587

2,115

1,341

-1,088

4,955

Total equity and liabilities

9,815

5,703

2,387

-1,222

16,683

*Net amount

Eliminations in the balance sheet primarily concern tax and intercompany balances

68 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.1 Segment disclosures (Continued)

Cash flow statement 2020

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Cash flow from operating activities before

changes in working capital

695

2,499

-54

-

3,140

Cash flow from changes in working capital

187

157

24

-

368

Cash flow from operating activities before

financial items and tax

882

2,656

-30

-

3,508

Cash flow from investing activities:

Development projects

-345

-293

-

-638

Other investing activities

-439

-234

-176

-

-849

Cash flow from operating and investing

activities before financial items and tax

98

2,129

-206

-

2,021

Tax and financial items

-10

-507

215

-

-302

Cash flow from operating and investing

activities (free cash flow)

88

1,622

9

-

1,719

Cash flow from M&A activities

-39

-107

-

-146

Free cash flow excl. M&A

127

1,729

9

-

1,865

Cash flow statement 2019

DKK million

GN Hearing

GN Audio

Other GN

Eliminations

Consolidated

total

Cash flow from operating activities

before changes in working capital

1,749

1,492

-73

-

3,168

Cash flow from changes in working capital

-146

-168

2

-

-312

Cash flow from operating activities

before financial items and tax

1,603

1,324

-71

-

2,856

Cash flow from investing activities:

Development projects

-345

-199

-

-544

Other investing activities

-146

-762

-161

-

-1,069

Cash flow from operating and investing

activities before financial items and tax

1,112

363

-232

-

1,243

Tax and financial items

-496

-160

7

-

-649

Cash flow from operating and investing

activities (free cash flow)

616

203

-225

-

594

Cash flow from M&A activities

-56

-646

-

-702

Free cash flow excl. M&A

672

849

-225

-

1,296

Accounting policies

Segment Information

GN Store Nord’s Management has identified GN Hearing and GN Audio as the reportable segments in the Group. GN Hearing is operating

within the hearing instrument industry, primarily producing and selling hearing instruments and products related hereto. GN Audio is a leading

supplier in the market for audio and collaboration solutions including headsets, video cameras and speakerphones for professional use and

selected consumer products.

Segment information is based on the Group’s accounting policies. In the Group, segment performance is evaluated on the basis of EBITA as

defined under key ratio definitions. Segment revenue and expense and segment assets and liabilities comprise items directly attributable to a

segment and items that can be allocated to a segment on a reasonable basis.

Other GN primarily reflects cost from Group Functions, including new business opportunities and research projects under the supervision of

the GN Store Nord Strategy Committee, which are outside the reportable segments in the Group. Furthermore, unallocated balance sheet

items are included

69 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.2 Revenue and geographical information

GN Hearing

GN Audio

Consolidated total

DKK million

2020

2019

2020

2019

2020

2019

Denmark

110

126

199

160

309

286

Europe

1,266

1,469

4,329

2,671

5,595

4,140

North America

2,276

3,347

2,620

2,292

4,896

5,639

Asia and rest of world

1,073

1,409

1,576

1,100

2,649

2,509

Total revenue from customer contracts

4,725

6,351

8,724

6,223

13,449

12,574

Revenue disaggregation

Revenue is predominantly recognized at a point in time, and revenue recognized over time is not significant. Revenue is in all material respects

related to sale of goods; hearing aid instruments, DKK 4,725 million (2019: DKK 6,351 million) and audio and collaboration solutions, DKK

8,724 million (2019: DKK 6,223 million). Revenue is attributed to countries on the basis of the customer's location. Only the US represents a

material single country and constitutes the vast majority of revenue in North America. One distributor in the Audio segment comprises more

than 10 % of the group's total revenue amounting to DKK 2,371 million (2019: DKK 1,475 million).

Geographical information on assets

Intangible assets and property,

plant and equipment

DKK million

2020

2019

Denmark

3,127

3,336

Europe

408

313

North America

4,091

4,488

Asia and rest of world

438

361

Total

8,064

8,498

Assets are attributed to countries based on the domicile location of the asset. Apart from Denmark only the US represents a material single

country and constitutes the vast majority of assets in North America.

Contract liabilities

GN Store Nord has recognized the following revenue-related contract liabilities:

DKK million

2020

2019

Deferred revenue re. pre-paid extended warranties (Other current liabilities and Other non-current liabilities)

125

134

Contract liabilities at December 31

125

134

Revenue recognized, included in contract liabilities at the beginning of the year

54

64

70 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.2 Revenue and geographical information (Continued)

Accounting policies

Revenue

Revenue from the sale of hearing aids and audio and collaboration solutions is recognized in the income statement when the customer obtains

control of the goods. When considering at what point in time the customer obtains control of the goods, a number of indicators are consid-

ered, including whether:

• GN Store Nord has a present right to payment for the goods

• The customer has legal title to the goods

• The customer has physical possession of the goods

• The customer has the significant risks and rewards of ownership of the goods

• The customer has accepted the goods

In the majority of sales, the customer obtains control of the goods either upon shipment from a distribution hub or upon delivery to the cus-

tomer.

The amount of revenue recognized varies with discounts and rebates offered to customers. Discounts and rebates are estimated based on the

expected amount to be provided to the customers and reduce revenues recognized. Revenue is only recognized to the extent that it is highly

probable that a significant reversal will not occur. Revenue from contracts in which GN Store Nord provides on-going access to research

against a fee and in which the counterparty reasonably expects that GN Store Nord will continue to perform research is recognized over the

access period.

When goods are sold with a right of return, a refund liability and a right to the returned products are recognized as a provision and a current

asset, respectively. The refund liability is deducted from revenue and the right to the returned products is offset in cost of sales. The portion of

goods sold that is expected to be returned is estimated based on historical product returns data. The estimated amounts of both returns, dis-

counts and rebates are reassessed at each reporting date.

GN Store Nord typically provides warranties for general repairs of defects that existed at the time of sale, as required by law. These assurance-

type warranties are accounted for as described in the accounting policies for warranty provisions.

As part of a sales transaction, certain future services such as extended warranties may be included. In case such service-type warranties are

sold, the transaction price is allocated to the promised goods and services based on stand-alone selling prices. Observable prices are as far as

possible used to determine the stand-alone selling prices but if such are not available a cost plus a margin approach is used.

Extended warranties are initially recognized as contract liabilities in the balance sheet and recognized in the income statement on a straight-

line basis over the term of the extended warranty period.

The typical payment terms for customers is between 30 and 60 days. GN Store Nord does not expect to have contracts with payment terms

exceeding one year. As a consequence, the transaction prices are not adjusted for the time value of money. Revenue is measured excluding

VAT, taxes and granted cash and quantity discounts in relation to the sale and expected returns of goods.

Production Costs

Production costs comprise costs, including depreciation and salaries, incurred in generating the revenue for the year. Production costs include

direct and indirect costs for raw materials and consumables, wages and salaries, inventory write-downs, maintenance and depreciation and

impairment of production plant and costs and expenses relating to the operation, administration and management of factories.

Development Costs

Development costs comprise costs, salaries, and depreciation of operating assets and equipment directly or indirectly attributable to the

Group’s development activities. Furthermore, amortization and write-down of capitalized development projects are included.

Selling and Distribution Costs

Selling and distribution costs comprise costs relating to the sale and distribution of products and services, including salaries, sales commis-

sions, advertising and marketing costs, depreciation and impairment, expected losses on trade receivables etc.

71 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Management and Administrative Expenses

Management and administrative expenses comprise expenses incurred for management and administration. Administrative expenses include

office expenses, depreciation and impairment, etc.

Other Operating Income and Costs, net

Other operating income and costs comprise items secondary to the principal activities of the enterprises

Significant accounting estimates and judgments

Revenue recognition

Certain contracts with customers include a right of return and volume rebates that give rise to variable consideration. In estimating the varia-

ble consideration GN Store Nord is required to use either the expected value method or the most likely amount method based on which

method better predicts the amount of consideration to which it will be entitled. Significant accounting estimates and judgments involve deter-

mining the portion of expected returns of goods as well as the amount of discounts and rebates. The portion of goods sold that is expected to

be returned is estimated based on historical product returns data.

In sales, where the customer obtains control of the goods upon delivery to the customer, the significant judgments made in determining when

the customer obtains control of promised goods involve determining when a customer has physical possession of the goods and when the

customer has accepted the goods due to uncertainty in transportation time

2.3 Staff Costs

DKK million

2020

2019

Wages, salaries and remuneration

3,203

3,071

Pensions, defined benefit plans

6

8

Pensions, defined contribution plans

130

129

Other social security costs

320

318

Share-based incentives

77

40

Total

3,736

3,566

Included in:

Production costs and change in payroll costs included in inventories

557

553

Development costs

705

590

Selling and distribution costs

1,929

1,890

Management and administrative expenses

543

531

Financial expenses

2

Total

3,736

3,566

Average number of employees

6,325

6,250

Number of employees, year-end

6,525

6,275

For information regarding remuneration of the Board of Directors and Executive Management, please refer to note 5.2 Remuneration of the Board of Directors and Executive Management

72 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.4 Government grants

As a consequence of COVID-19 several government grants have been received by GN Store Nord during 2020. Most of the grants relate to

compensation for fixed costs and compensation for salary costs in GN Hearing and are recognized as a deduction from costs in the following

line items:

DKK million

2020

Production costs

10

Development costs

34

Selling and distribution costs

26

Management and administrative expenses

23

Financial income

10

Total

103

Accounting policies

Government grants

Government grants are recognized when there is reasonable assurance that the grant will be received and that all attached conditions will be

complied with. A grant relating to an expense item, is recognized on a systematic basis over the periods that the related costs, for which it is

intended to compensate, are expensed. Government grants are presented as a deduction from the relevant functional cost line items in the

income statement. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving

immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become re-

ceivable

2.5 Tax

Tax on profit (loss)

DKK million

2020

2019

Tax on profit (loss)

Current tax for the year

-485

-432

Deferred tax for the year

143

-17

Effect of change in income tax rates

-

4

Withholding tax

-1

-

Adjustment to current tax with respect to prior years

-37

14

Adjustment to deferred tax with respect to prior years

37

-14

Total

-343

-445

Reconciliation of effective tax rate

Danish tax rate

22.0%

Effect of tax rates in foreign jurisdictions

1.0%

2.1%

Non-taxable income

-1.0%

0.0%

Non-deductible expenses

1.5%

1.3%

Utilization of previously not recognized tax assets

0.0%

-3.6%

Withholding tax

0.1%

0.0%

Effect of change in income tax rates

0.0%

-0.2%

Other, including provisions for uncertain tax positions*

-2.3%

1.7%

Effective tax rate

21.3%

23.3%

Tax relating to other comprehensive income

Actuarial gains (losses)

-

-5

Adjustment of cash flow hedges

3

-5

Foreign exchange adjustments, etc.

11

-6

Total

14

-16

*Other primarily relates to tax subsidies relating to R&D countered by provisions for uncertain tax positions.

73 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.5 Tax (Continued)

Deferred Tax

DKK million

2020

2019

Deferred tax, net

Deferred tax at January 1, net

-129

-31

Adjustment with respect to prior years

37

-14

Effect of change in income tax rates

-

4

Addition of deferred tax on acquisition of enterprises

-

-64

Deferred tax for the year recognized in profit (loss) for the year

143

-17

Deferred tax for the year recognized in other comprehensive income for the year

6

-9

Tax related to share-based incentive plans

4

1

Foreign exchange adjustments

-31

1

Deferred tax at December 31, net

30

-129

Deferred tax is recognized in the balance sheet as follows:

Deferred tax assets

392

423

Deferred tax liabilities

-362

-552

Deferred tax at December 31, net

30

-129

Deferred tax, net relates to:

Intangible assets

-527

-501

Property, plant and equipment

42

27

Other securities

-5

-2

Current assets

130

92

Current liabilities

5

4

Intercompany liabilities

-2

-4

Tax loss carryforwards

94

153

Retaxation

-

-127

Provisions

272

234

Other

21

-5

Total

30

-129

Tax value of unrecognized tax assets

Other tax assets

15

11

Unrecognized tax assets at December 31

15

11

Unrecognized tax assets are based on the Group's expectations to the future utilization of the tax assets. All tax losses carryforward have no

expiry date.

Deferred tax, net includes DKK 20 million expected to be utilized within 12 months (2019: DKK 30 million).

Repatriation of retained earnings from certain foreign subsidiaries, however not planned or expected in the foreseeable future, may trigger

withholding tax liabilities up to DKK 45 million (2019: DKK 31 million).

Accounting policies

Tax on profit (loss) for the year

The parent company is jointly taxed with all Danish subsidiaries. The current Danish corporation tax is allocated between the jointly taxed com-

panies in proportion to their taxable income. The jointly taxed companies are taxed under the on-account tax scheme.

Tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit (loss) for the year is

recognized in the income statement, and the tax expense relating to amounts recognized in other comprehensive income is recognized in

other comprehensive income.

74 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

2.5 Tax (Continued)

Current tax payable is recognized in current liabilities and deferred tax is recognized in non-current liabilities. Tax receivable is recognized in

current assets and deferred tax assets are recognized in non-current assets.

Deferred tax

Deferred tax assets, including the tax base of tax loss carryforwards, are recognized at the expected value of their utilization, either as a set-off

against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction. Deferred tax is measured

using the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities.

Deferred tax is not recognized on goodwill unless this is deductible for tax purposes. Deferred tax is measured according to the tax rules and at

the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallize as current tax.

The change in deferred tax as a result of changes in tax rates is recognized in the income statement. If a tax deduction on computation of the

taxable income in Denmark or in foreign jurisdictions is obtained as a result of share-based payment programs, the tax benefit for the deduc-

tion is recognized directly in the balance sheet. Deferred tax assets are subject to annual impairment tests and are recognized only to the ex-

tent that it is probable that the assets will be utilized

Significant accounting estimates and judgments

Deferred tax

Management has made judgments in determining the Company’s valuation of tax, deferred tax assets and deferred tax liabilities and the ex-

tent to which deferred tax assets are recognized. GN Store Nord recognizes deferred tax assets only to the extent that it is probable that taxa-

ble profit will be available against which the temporary differences and unused tax losses can be utilized

2.6 Income statement classified by function

The group presents the income statement based on a classification of costs by function. However, in order to present EBITA in the income

statement, which is the measure of profit used by Management, amortization and impairment of acquired intangible assets are separated from

the individual functions and presented as a separate line item. If amortization and impairment of acquired intangible assets are allocated to the

individual line items by function, the income statement will present as follows:

DKK million

2020

2019

Revenue

13,449

12,574

Production costs

-6,151

-4,992

Gross profit

7,298

7,582

Development costs

-1,232

-1,051

Selling and distribution costs

-3,501

-3,587

Management and administrative expenses

-1,037

-918

Other operating income and costs, net

103

-3

Gain (loss) on divestment of operations etc.

-4

-21

Operating profit (loss)

1,627

2,002

In the above income statement amortization and impairment of acquired intangible assets has been

allocated to functions as follows:

Development costs

-83

-70

Selling and distribution costs

-152

-228

Amortization and impairment of acquired intangible assets

-235

-298

75 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.1 Intangible assets

DKK million

Goodwill

In-house

development

projects

Customer

relationships

Software

Patents

and rights

Other

Total

Cost at January 1

4,749

4,120

715

907

783

774

12,048

Additions on company acquisitions

14

-

14

Additions

-

638

-

156

3

61

858

Disposals

-10

-

-56

-

-18

-84

Transfers

-

29

-

-28

-

-1

-

Foreign exchange adjustments

-388

-

-66

-13

-4

-78

-549

Cost at December 31

4,365

4,787

593

1,022

782

738

12,287

Amortization and impairment at January 1

-

-2,751

-368

-584

-410

-513

-4,626

Amortization

-

-413

-66

-90

-83

-49

-701

Disposals

-

47

-

17

64

Impairment

-

-99

-34

-

-3

-136

Transfers

-

-29

-

28

-

1

-

Foreign exchange adjustments

-

36

11

4

68

119

Amortization and impairment at December 31

-

-3,292

-385

-635

-489

-479

-5,280

Carrying amount at December 31, 2020

4,365

1,495

208

387

293

259

7,007

Cost at January 1

4,245

3,576

808

772

407

763

10,571

Additions on company acquisitions

425

-

58

-

372

2

857

Additions

-

544

-

135

8

7

694

Disposals

-16

-

-171

-3

-7

-9

-206

Transfers

-2

-

2

-

Foreign exchange adjustments

97

-

18

3

11

132

Cost at December 31

4,749

4,120

715

907

783

774

12,048

Amortization and impairment at January 1

-

-2,354

-308

-509

-337

-469

-3,977

Amortization

-

-393

-82

-73

-70

-47

-665

Disposals

-

129

3

-

8

140

Impairment

-

-4

-99

-3

-

-106

Foreign exchange adjustments

-

-8

-2

-3

-5

-18

Amortization and impairment at December 31

-

-2,751

-368

-584

-410

-513

-4,626

Carrying amount at December 31, 2019

4,749

1,369

347

323

373

261

7,422

The carrying amount of In-house development projects and software include development in progress of DKK 458 million and DKK 192 million

respectively (2019: DKK 663 million and DKK 159 million).

Goodwill

Additions during the year of DKK 14 million relate to the cash-generating units GN Hearing with DKK 14 million (2019: DKK 2 million) and GN

Audio DKK 0 million (2019: DKK 423 million the acquisition of Altia) cf. note 5.1 Acquisition and divestment of companies and operations.

Management performs an annual impairment test of the carrying amount of goodwill. The impairment test covers the Group's cash-generat-

ing units (CGU) to which the carrying amount of goodwill is allocated.

Section 3

Operating assets

and liabilities

76 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.1 Intangible assets (Continued)

Carrying amount

of goodwill

DKK million

Pre-tax discount rate

%

Weighted average

cost of capital

%

2020

2019

2020

2019

2020

2019

Cash-generating units:

GN Hearing

3,257

3,539

8

7

GN Audio

1,108

1,210

10

8

9

Total

4,365

4,749

In the impairment test, the discounted future cash flows of each CGU (the value in use) were compared with the carrying amounts. Future

cash flows are based on the budget for 2021, market forecasts for 2022 – 2025, strategy plans, etc. approved by the Board of Directors. Budg-

ets and strategy plans are based on specific assumptions for the individual CGU regarding sales, operating profit, working capital, investments

in non-current assets, etc. The calculations apply expected growth in the terminal period of 2.0% p.a. (2019: 2.5% p.a.)

The GN Hearing segment expects to return to positive organic growth in 2021. The GN Audio segment is expecting to maintain their strong

position in the growing market for audio and collaboration solutions.

The market growth in the Hearing Aid industry and the Audio market is driven by these main factors:

GN Hearing:

• Shifting demographics with a growing elderly and more affluent population

• Intensified noise pollution drives the increased prevalence of hearing loss

• Increased penetration rates as more people with a hearing loss will use hearing aids in the future, and

• Increased use of two hearing aids instead of only one, which is relatively common today

GN Audio:

• Continued transition from desk phones to Unified Communications

• Increasing flexibility requirements by office-workers, demands for productivity, focus on cloud-based solutions, and general technology

improvements

• A significant part of our future growth is expected to come from the increased penetration of professional headsets

• UC technology has the potential to reduce travel cost and carbon footprint by the companies that adopt the technology

The expected revenue growth in the GN Hearing segment and GN Audio segment is based on the current differentiated product offering with

unique technology as well as future product launches. Based on the impairment test and related assumptions, Management has not identified

any goodwill impairment at December 31, 2020. No likely change in the assumptions applied will result in an impairment.

Development projects and software

In-progress and completed development projects comprise development and design of hearing instruments and audio and collaboration solu-

tions. Most development projects are expected to be completed in the coming years, after which product sales and marketing can be com-

menced. Management performs at least one annual impairment test of the carrying amount of recognized development costs. The recovera-

ble amount is assessed based on sales forecasts. During the year, impairments of DKK 99 million related to projects were recognized. In Man-

agement's assessments, the recoverable amount exceeds the carrying amount at December 31, 2020.

Software comprises development, design and test of production and planning software and reporting systems, business intelligence etc. Imple-

mentation of these systems is expected to optimize internal procedures and processes. In 2020, Management assessed that the expected use-

ful lives were reflected in the carrying amounts at December 31, 2020.

Customer relationships

Customer relationships primarily comprise acquired customer relationships. The most significant customer relationship relates to the acquisi-

tion of US Beltone. The impairment loss of DKK 34 million relating to customer relationships was incurred in connection with a review of ex-

pectations and budgets for a number of previously acquired assets. The impairment loss has been expensed in the line ‘Amortization and im-

pairment of acquired intangible assets’. The impairment loss has been calculated using a fair value based on multiples (fair value hierarchy

level 3).

77 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.1 Intangible assets (Continued)

Patents and rights

Patents and rights primarily comprise acquired patents and rights. The most significant patents and rights relate to technologies for the devel-

opment of new hearing instruments for GN Hearing and rights to the use of certain technologies for development of headsets and video com-

munications solutions.

Other

The Group's other intangible assets comprise DKK 71 million (2019: DKK 80 million) related to trademarks, DKK 142 million (2019: DKK 181

million) related to supply agreements and DKK 46 million (2019: DKK 0 million) related to know how.

Accounting policies

Goodwill

At the acquisition date goodwill is recognized in the balance sheet at cost as described under Business combinations. Subsequently, goodwill is

measured at cost less accumulated impairment losses. Goodwill is not amortized but is tested for impairment at least once a year. The carrying

amount of goodwill is allocated to the Group’s cash-generating units at the acquisition date. Identification of cash-generating units is based on

how Management monitor the operation in the Management reporting.

As a result of the integration of acquired enterprises in the existing group, Management assesses that the smallest cash-generating units to

which the carrying amount of goodwill can be allocated are: GN Hearing and GN Audio.

Development projects, Software, Patents, Licenses and Other Intangible Assets

Intangible assets are measured at cost less accumulated amortization and impairment. Amortization is provided on a straight-line basis over

the expected useful lives of the assets. When changing the depreciation period, the effect on the depreciation is recognized prospectively as a

change in accounting estimates. Amortization and impairment is recognized in the income statement as production costs, development costs,

distribution costs and administrative expenses. The expected useful lives are as follows:

Completed development projects

1-5 years

Software

1-7 years

Customer relationships

up to 8 years

Patents, licenses, trademarks and other intellectual property rights

up to 20 years

Development projects that are clearly defined and identifiable, where the technical utilization degree, sufficient resources and a potential fu-

ture market or development opportunities in the Company is evidenced, and where GN Store Nord intends to produce, market or use the pro-

ject, are recognized as intangible assets if it is probable that costs incurred will be covered by future earnings. The cost of such development

projects includes direct wages, salaries, materials and other direct and indirect costs attributable to the development projects. Amortization

and write-down of such capitalized development projects are started at the date of completion and are included in development costs. Other

development costs are recognized in the income statement as incurred.

Gains or losses on the disposal of intangible assets are determined as the difference between the selling price less selling costs and the carry-

ing amount at the disposal date, and are recognized in the income statement as other operating income or other operating costs, respectively.

Impairment of Goodwill and in-progress development projects

Goodwill is subject to at least one annual impairment test. Similarly, in-progress development projects are tested for impairment at least annu-

ally. An impairment test is also performed whenever there is an indication that an asset may be impaired.

The carrying amount of goodwill is tested for impairment together with the other non-current assets in the cash-generating unit to which the

goodwill is allocated. Goodwill is written down to the recoverable amount if the carrying amount is higher than the computed recoverable

amount. The recoverable amount is computed as the present value of the expected future net cash flows from the enterprises or activities to

which the goodwill is allocated.

Recognition of impairment losses in the income statement

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds the recoverable amount of the asset or

the cash-generating unit. Impairment of goodwill is recognized in a separate line item in the income statement. Impairment of goodwill is not

reversed

78 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.1 Intangible assets (Continued)

Significant accounting estimates and judgments

Goodwill

Determining whether goodwill is impaired requires a comparison of the recoverable amount with the carrying amount. The recoverable

amount is determined as the net present value of the future cash flows expected to arise from the cash generating unit to which goodwill is

allocated.

Development projects

Development projects are measured at cost less accumulated amortization and impairment. An impairment test is performed of the carrying

amount of recognized development projects. The impairment test is based on assumptions regarding strategy, product life cycle, market con-

ditions, discount rates and budgets, etc., after the project has been completed and production has commenced. If market-related assumptions

etc., are changed, development projects may have to be written down. Management examines and assesses the underlying assumptions when

determining whether or not the carrying amount should be written down. In addition, Management continuously assess the useful lives of its

products to ensure that amortization of development projects reflects the useful lives

3.2 Property, plant and equipment

DKK million

Factory

and office

buildings

Leasehold

improvements

Plant and

machinery

Operating

assets and

equipment

Assets

under

construction

Total

Cost at January 1

442

172

940

412

36

2,002

Additions

3

19

17

68

114

221

Disposals

-6

-10

-34

-44

-

-94

Transfers

-18

-

-133

271

-120

-

Foreign exchange adjustments

-2

-1

-10

-16

-

-29

Cost at December 31

419

180

780

691

30

2,100

Depreciation and impairment at January 1

-213

-134

-735

-325

-

-1,407

Depreciation

-18

-13

-100

-55

-

-186

Disposals

6

9

32

44

-

91

Transfers

10

-

227

-237

-

Foreign exchange adjustments

2

1

9

14

-

26

Depreciation and impairment at December 31

-213

-137

-567

-559

-

-1,476

Carrying amount at December 31, 2020

206

43

213

132

30

624

Leased assets, c.f. note 3.3

391

-

42

-

433

Total carrying amount at December 31, 2020

597

43

213

174

30

1,057

Cost at January 1

430

162

813

389

14

1,808

Additions on company acquisitions

-

1

-

1

Additions

13

60

40

106

232

Disposals

-1

-7

-20

-23

-

-51

Transfers

-

84

-

-84

-

Foreign exchange adjustments

-

4

3

5

-

12

Cost at December 31

442

172

940

412

36

2,002

Depreciation and impairment at January 1

-197

-122

-666

-309

-

-1,294

Depreciation

-17

-15

-86

-32

-

-150

Disposals

1

6

20

-

47

Foreign exchange adjustments

-

-3

-4

-

-10

Depreciation and impairment at December 31

-213

-134

-735

-325

-

-1,407

Carrying amount at December 31, 2019

229

38

205

87

36

595

Leased assets, c.f. note 3.3

441

-

40

-

481

Total carrying amount at December 31, 2019

670

38

205

127

36

1,076

79 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.2 Property, plant and equipment (Continued)

Accounting policies

Property, plant and equipment

Land and buildings, plant and machinery and fixtures and fittings, other plant and equipment are measured at cost less accumulated deprecia-

tion and impairment losses. Cost comprises the purchase price and costs of materials, components, suppliers, direct wages and salaries and

indirect production costs until the date when the asset is available for use. Liabilities related to dismantling and removing the asset and restor-

ing the site on which the asset is located are added to the cost. Where individual components of an item of property, plant and equipment

have different useful lives, they are accounted for as separate items, which are depreciated separately.

Depreciation is provided on a straight-line basis over the expected useful lives of property, plant and equipment. The expected useful lives are

as follows:

Buildings and installations (land is not depreciated) 10-50 years

Leasehold improvements 5-20 years

Plant and machinery 1-7 years

Operating assets and equipment 2-7 years

The basis of depreciation is calculated as the residual value of the asset less impairment losses. The residual value is determined at the acquisi-

tion date and reassessed annually. If the residual value exceeds the carrying amount, depreciation is discontinued. When changing the depreci-

ation period or the residual value, the effect on the depreciation is recognized prospectively as a change in accounting estimates. Depreciation

and impairment is recognized in the income statement as production costs, development costs, distribution costs and administrative expenses.

Expenses for repairs and maintenance of property, plant and equipment are included in the income statement. Gains or losses on disposal or

scrapping of an item of property, plant and equipment are determined as the difference between the sales price reduced by costs related to

dismantling and removing the asset, selling costs and costs related to restoring the site on which the asset is located and the carrying amount.

Gains or losses are recognized in the income statement as Other operating income or Other operating costs, respectively

3.3 Leases

The following right-of-use assets are included in property, plant and equipment:

Leased assets

2020

2019

DKK million

Factory

and office

buildings

Operating

assets and

equipment

Total

Factory

and office

buildings

Operating

assets and

equipment

Total

Carrying amount at January 1

441

40

481

492

35

527

Additions

86

30

116

107

24

131

Remeasurements

8

-4

4

-22

-1

-23

Depreciation

-121

-23

-144

-135

-18

-153

Foreign exchange adjustments

-23

-1

-24

-1

-

-1

Carrying amount at December 31

391

42

433

441

40

481

Lease liabilities

DKK million

2020

2019

Contractual maturity analysis of lease liabilities:

Less than one year

129

142

Between one and three years

185

196

More than three years

157

179

Total

471

517

The maturity analysis is based on non-discounted cash flows.

80 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.3 Leases (Continued)

Amounts expensed in the income statement and total cash outflow

DKK million

2020

2019

Interest expense on lease liabilities

10

12

Expense relating to low-value assets and short-term leases

17

15

Total cash outflow for leases

168

173

GN Store Nord’s leases mainly consist of property leases of e.g. offices but also include cars and office equipment. Rental contracts are typi-

cally made for fixed periods but may have extension options. Contracts may contain both lease and non-lease components. In such cases the

consideration in the contract is allocated to the lease and non-lease components based on their relative stand-alone prices. Lease terms are

negotiated on an individual basis and contain a wide range of different terms and conditions.

Accounting policies

Leases

Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the

group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period

so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of use asset is depreci-

ated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the

following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable

• variable lease payment that are based on an index or a rate

• amounts expected to be payable by the lessee under residual value guarantees

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental

borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a

similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or

loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise e.g. IT-equipment and small items of of-

fice furniture.

Extension and termination options

Extension and termination options are included in a number of leases across the group. These terms are used to maximize operational flexibil-

ity in terms of managing contracts

81 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.3 Leases (Continued)

Significant accounting estimates and judgments

Leases

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension

option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the

lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in cir-

cumstances occurs which affects this assessment and that is within the control of the lessee

3.4 Depreciation, amortization and impairment

DKK million

2020

2019

Depreciation, amortization and impairment for the year of property, plant and equipment (incl. leased assets) and in-

tangible assets are recognized in the income statement as follows:

Production costs

-143

-110

Development costs

-525

-407

Selling and distribution costs

-115

-137

Management and administrative expenses

-149

-122

Amortization and impairment of acquired intangible assets

-235

-298

Total

-1,167

-1,074

Amortization of intangible assets is recognized in the income statement as follows:

Development costs

-413

-393

Selling and distribution costs

-3

-4

Management and administrative expenses

-87

-69

Amortization and impairment of acquired intangible assets

-198

-199

Total

-701

-665

Impairment of intangible assets is recognized in the income statement as follows:

Development costs

-99

-4

Management and administrative expenses

-

-3

Amortization and impairment of acquired intangible assets

-37

-99

Total

-136

-106

82 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.5 Other non-current assets

DKK million

2020

2019

Loans to dispensers of GN Hearing products

443

498

Pre-paid discounts

198

238

Ownership interests

118

188

RAP, SIP and DCP

280

272

Other

148

119

Total

1,187

1,315

RAP (Retirement Advantage Plan) and SIP (Savings and Investment Plan) are programs in which customers earn funds based on purchases

made. DCP (Deferred Compensation Plan) is a program in which Management in certain foreign subsidiaries may choose to defer compensa-

tion. The amounts invested by the Group on behalf of customers and Management are recognized in Other non-current assets. The Group’s

liabilities related to the programs are recognized in Other non-current liabilities at DKK 230 million (2019: DKK 238 million).

GN Hearing's assessment of credit risk associated with non-current loans to dispensers depends primarily on change in payment behavior and

current economic conditions. Before a loan is extended the creditworthiness of the individual dispenser is analyzed.

Dispenser loans are provided to dispensers of GN Hearing products in order to support their future growth. Calculating the expected credit loss

rates, GN Store Nord considers historical loss rates for each category of dispensers, and provides for credit losses against loans to customers

by comparing the development in the actual loan balance to the agreed development in the loan balance. The majority of dispenser loans is

related to dispensers in the US.

The table below illustrates how the 12-month and lifetime expected credit loss are calculated for dispenser loans and how the credit risk expo-

sure on dispenser loans are grouped by GN Store Nord’s internal credit rating:

2020

2019

Expected

credit loss

rate

Estimated gross

carrying amount

at default

Carrying

amount (net of

loss allowance)

Expected

credit loss

rate

Estimated gross

carrying amount

at default

Carrying

amount (net of

loss allowance)

GN Store Nord internal credit rating

%

DKK million

%

DKK million

Performing

12-month expected

credit loss

3%

458

443

3%

508

493

Underperforming

Lifetime expected

credit losses

100%

128

-

96%

121

5

Write-off

Assets derecog-

nized through the

income statement

100%

41

-

100%

7

-

Total dispenser loans at December 31

627

443

636

498

The 12-month and lifetime expected credit losses have developed as follows:

DKK million

Performing

(12 month ECL)

Underperform-

ing (lifetime

ECL)

Total

Opening loss allowance as at January 1, 2020

-15

-116

-131

Transferred to underperforming (lifetime ECL)

2

-58

-56

New dispenser loans, net

-2

-

-2

Write-off

-

41

Changes in model/risk parameters

-

-5

Foreign exchange adjustments and other changes

-

10

Closing loss allowance as at December 31, 2020

-15

-128

-143

Opening loss allowance as at January 1, 2019

-16

-58

-74

Transferred to underperforming (lifetime ECL)

-

-58

Changes in model/risk parameters

1

-

1

Closing loss allowance as at December 31, 2019

-15

-116

-131

All ownership interests are accounted for at fair value through profit or loss.

83 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.5 Other non-current assets (Continued)

Accounting policies

Loans to dispensers

Loans to dispensers and other receivables are measured at amortized cost less an allowance for expected credit losses. Both loans to dispens-

ers and other receivables are held for collection of contractual cash flows and those cash flows represent solely payments of principal and

interest.

Ownership Interests and savings plans

Ownership interests between 20% and 50% in unlisted enterprises in which the Group does not exercise significant influence on the financial

and operating policies are recognized under non-current assets at fair value. Gains and losses on such ownership interests will either be rec-

orded under financial items in the income statement or in other comprehensive income. This will depend on the Group’s irrevocable election at

the time of initial recognition to account for the ownership interests at fair value through profit (loss) or other comprehensive income.

Where the Group has elected to present fair value gains and losses on ownership interests in other comprehensive income, there is no subse-

quent reclassification of fair value gains and losses to the income statement following the derecognition of the investment. Changes in the fair

value of ownership interests at fair value though profit or loss are recognized in financial items in the income statement.

The savings plans RAP, SIP and DCP are measured at fair value through profit or loss.

Impairment of dispenser loans

The impairment methodology applied to calculate expected credit losses associated with dispenser loans carried at amortized cost depends on

whether there has been a significant increase in credit risk. Loss allowances on dispenser loans are measured equal to 12-month expected

credit losses, if the credit risk has not increased significantly since initial recognition. If the credit risk has increased significantly, the loss allow-

ance will be measured at an amount equal to lifetime expected credit losses.

The calculation of 12-month expected credit losses on dispenser loans are based on a weighted average of historical annual losses on custom-

ers. Payment plans are agreed with dispensers when issuing loans to these. The credit risk of loans to dispensers is considered to have in-

creased significantly since initial recognition when actual loan balances differ from the agreed development in loan balances with more than

40%. At this point the loan is considered to be in default and credit impaired.

The calculation of lifetime expected credit losses on dispenser loans is based on the difference between the development in the actual loan

balances and the agreed development in loan balances. The allowances are increased in steps if the difference between the actual loan bal-

ance and the agreed development in loan balances increases

.

Indicators that there is no reasonable expectation of recovery of a dispenser loan include bankruptcy, change of control and change in the

payment behavior or financial situation of the dispenser. In such cases a full or partial write-off of a dispenser loan will be recognized by derec-

ognizing the asset. Where recoveries are made, these are recognized in the income statement.

Impairment of Pre-paid discounts

The carrying amount of Pre-paid discounts is subject to an annual test for indications of impairment. When there is an indication that assets

may be impaired, the recoverable amount of the asset is determined.

Recognition of impairment losses in the income statement

Impairment losses are recognized in the income statement in the relevant functional line items.

Impairment of dispenser loans is reversed only to the extent of changes in the assumptions and estimates underlying the impairment calcula-

tion

84 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.5 Other non-current assets (Continued)

Significant accounting estimates and judgments

Financial support arrangements

GN Store Nord grants loans to dispensers and acquires ownership interests in dispensers. The agreements are typically comprehensive, com-

plex and cover several aspects of the relationship between the parties. Management assesses the recognition and classification of income and

expenses for each of these agreements, including whether the agreement represent a discount on future sales. Management also assesses

whether current economic conditions and changes in customers' payment behavior could indicate impairment of the outstanding balances.

Ownership Interests

When considering whether or not GN Hearing exercises significant influence in unlisted enterprises a number of judgments are made. These

judgments include considering:

• Representation on the board of directors

• Participation in policy-making processes

• Material transactions between the entity and GN

• Interchange of managerial personnel

• Provision of essential technical information

3.6 Inventories

DKK million

2020

2019

Raw materials and consumables

449

296

Work in progress

24

19

Finished goods and merchandise

1,249

991

Total

1,722

1,306

The above includes write-downs amounting to

-153

-112

Costs of goods sold included in Production Costs

-5,547

-4,472

Accounting policies

Inventories

Inventories are measured at cost in accordance with the FIFO-principle. Inventories in GN Hearing are measured at cost using the standard

cost method. Standard costs take into account normal levels of raw materials and consumables, staff costs, efficiency and capacity utilization.

Standard costs are reviewed regularly and adjusted in accordance with the FIFO-principle.

Raw materials and goods for resale are measured at cost, comprising purchase price plus delivery costs.

Work in progress and finished goods are measured at cost, comprising the cost of direct materials, wages and salaries and indirect production

overheads. Indirect production overheads comprise indirect materials, wages and salaries, maintenance and depreciation of production ma-

chinery, buildings and equipment as well as factory administration and management.

Where the net realizable value is lower than cost, inventories are written down to this lower value. The net realizable value of inventories is

calculated as the sales amount less costs of completion and costs necessary to make the sale

Significant accounting estimates and judgments

Measurement of inventories

The net realizable value of inventories is calculated based on the size of the inventory and decreases in the recoverable amount of purchased

raw materials, technical obsolescence (e.g., faulty products), physical obsolescence (e.g. damaged products) and financial obsolescence (e.g.,

reduced demand or substituting products). GN Store Nord performs write-downs of inventories based on an individual assessment of products

or product groups and expected product sales from 6 to 24 months following the balance sheet date

85 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.7 Trade receivables

DKK million

Current

1-60 days

past due

61-90

days past

due

91-120

days past

due

121-180

days past

due

More than

181 days

past due

Total

Gross carrying amount - Trade receivables

2,260

317

51

40

39

185

2,892

Loss allowance at December 31

-20

-16

-5

-6

-20

-149

-216

Trade receivables at December 31, 2020

2,240

301

46

34

19

36

2,676

Expected loss rate

1%

5%

10%

14%

51%

80%

7%

Gross carrying amount - Trade receivables

2,374

281

49

44

45

166

2,959

Loss allowance at December 31

-20

-8

-3

-4

-7

-108

-150

Trade receivables at December 31, 2019

2,354

273

46

40

38

58

2,809

Expected loss rate

1%

3%

6%

9%

16%

65%

5%

The loss allowance included in total trade receivables, based on the above ageing profile and expected loss rates, have developed as follows:

DKK million

2020

2019

Loss allowance at January 1

-150

-165

Increase in loss allowance during the year

-143

-29

Trade receivables written off as uncollectible

16

34

Reversal of unused loss allowance

49

13

Foreign exchange adjustments

12

-3

Loss allowance at December 31

-216

-150

The total loss allowance of DKK 216 million is included in trade receivables at December 31, 2020 (2019: DKK 150 million). GN Store Nord's

assessment of credit risk associated with individual receivables depends primarily on aging, change in customer payment behavior, current

economic conditions etc. as described in significant accounting estimates.

No security has been pledged to GN Store Nord for trade receivables.

Accounting policies

Measurement of trade receivables

Trade receivables are measured at amortized cost less expected lifetime credit losses. The expected loss rates are based on days past due and

whether a receivable concerns a GN Hearing or a GN Audio customer. Current expectations and estimates of expected credit losses are fur-

thermore based on change in customer behavior and current economic conditions. Expected credit losses are based on an individual assess-

ment of each receivable and at portfolio level

Significant accounting estimates and judgments

Measurement of trade receivables

If a customer’s financial condition deteriorates, further loss allowance may be required in future periods. In assessing the adequacy of expected

credit losses, Management specifically analyzes receivables, including doubtful debts, concentrations of credit risk, credit ratings, current eco-

nomic conditions and changes in customers’ payment behavior

86 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

3.8 Provisions

DKK million

Right of return

provisions

Warranty

provisions

Other

provisions

Total

Provisions at January 1

184

195

144

523

Additions

157

165

161

483

Consumed

-136

-156

-14

-306

Reversed

-48

-5

-89

-142

Reclassified to other liabilities

-

9

Foreign exchange adjustments

-14

-13

-4

-31

Provisions at December 31, 2020

143

186

207

536

Which is presented in the consolidated balance sheet as:

Non-current liabilities

-

70

133

203

Current liabilities

143

116

74

333

Provisions at December 31, 2020

143

186

207

536

Warranty provisions concern products sold. The warranty provision covers any defects in design, materials and workmanship for a period of 1-4

years from delivery and completion. Provisions for right of return concern GNs obligation to take back products sold to customers who has the

right to return the product for credit. Other provisions primarily consist of provisions for legal disputes, obligations regarding onerous con-

tracts and property leases.

Accounting

policies

Provisions

Warranty provisions are recognized as the underlying goods and services are sold based on warranty costs incurred in previous years and ex-

pectations of future costs.

Other provisions primarily comprise onerous contracts. Provisions are recognized when, as a result of events before or at the balance sheet

date, the Group has a legal or a constructive obligation and it is probable that there may be an outflow of resources embodying economic ben-

efits to settle the obligation. On measurement of provisions, the costs required to settle the liability are discounted if the effect is material to

the measurement of the liability.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the

unavoidable costs of meeting its obligations under the contract (onerous contracts). A provision for onerous contracts is recognized e.g. when

the Company has entered a binding legal agreement for the purchase of components from suppliers that exceeds the benefits from the ex-

pected future use of the components and the Company can only sell the components at a loss

Significant

accounting estimates and judgments

Provisions

Warranty provisions are recognized based on historical and future warranty costs related to the Group’s products. Future warranty costs may

differ from past practices and the level of costs. The amount recognized as a provision is Management’s best estimate of the expenses re-

quired to settle the obligation.

In accordance with GN Store Nord’s business policy, some products are supplied with a right of return. Provisions for future returns of goods

are recognized based on historical product returns data. The probability of future returns may differ from past practices.

Agreement has been made with a number of the suppliers that the suppliers purchase components for the production of hearing instruments

and headsets based on sales estimates prepared by GN Store Nord. To the extent that GN Store Nord's actual purchases from suppliers are

lower than sales estimates, GN Store Nord will be under an obligation to purchase any remaining components from the suppliers. Manage-

ment assesses sales estimates on an ongoing basis, and to the extent that component inventories at suppliers are not expected to be used, GN

Store Nord recognizes a provision for onerous purchase contracts

87 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.1 Outstanding shares and treasury shares

Thousands

Outstanding

shares

Treasury

shares

Total number

of shares

Nominal

value of

outstand-

ing shares

(DKK)

Nominal

value of

treasury

shares

(DKK)

Nominal

value of total

shares (DKK)

Treasury

shares as a

percentage of

share capital

Number/value of shares at January 1, 2020

128,952

13,316

142,268

515,808

53,264

569,072

9.4%

Purchase of ownership interest in subsidiaries

1,192

-1,192

-

4,769

-4,769

-

Shares acquired by GN Store Nord A/S

-1,169

1,169

-

-4,678

4,678

-

Shares cancelled

-

Number/value of shares at December 31, 2020

128,975

13,293

142,268

515,899

53,173

569,072

9.3%

All shares are fully issued and paid up. The nominal value of each share is DKK 4 and no shares carry any special rights.

The treasury shares had a market value of DKK 6,476 million at December 31, 2020 (2019: DKK 4,172 million). The total cost of acquired

treasury shares in 2020 was DKK 453 million (2019: DKK 1,626 million). No treasury shares were sold during the year.

Treasury shares have been acquired under the share buyback program in order to reduce the share capital, hedge the option- and warrant-

based long-term incentive programs as well as the obligation under the convertible bond issued in 2019.

Shares, thousands

2020

2019

Weighted average number of outstanding shares

128,805

130,762

Dilutive effect of share-based payment with positive intrinsic value – average for the period

1,227

1,605

Diluted weighted average number of shares

130,032

132,367

DKK million

Profit (loss) for the year attributable to shareholders in GN Store Nord A/S used for the calculation of earnings per share

1,252

1,454

Dilutive effect of profit (loss) for the year

-

Profit (loss) for the year attributable to shareholders in GN Store Nord A/S used for the calculation of diluted earn-

ings per share

1,252

1,454

Cash distributions

DKK million

2020

2019

Dividend paid related to prior years

206

197

Share repurchase during the year

453

1,626

Total

659

1,823

Proposed dividend for the year

206

DKK per share

Dividend paid related to prior years

1.45

1.35

Proposed dividend for the year

1.45

Section 4

Capital structure

and financing items

88 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.1 Outstanding shares and treasury shares (Continued)

Accounting policies

Earnings per Share and Diluted Earnings per Share

Earnings per share (EPS) is calculated by dividing the profit for the year after tax by the weighted average number of shares outstanding in the

year. Diluted earnings per share is calculated by increasing the weighted average number of shares outstanding by the number of additional

ordinary shares that would be outstanding if potentially dilutive shares were issued. The dilutive effect of outstanding share based payment is

calculated using the Treasury Stock method.

Equity

Dividends

The expected dividend payment for the year is disclosed as a separate item in equity. Proposed dividends are recognized as a liability at the

date they are adopted by the Annual General Meeting (declaration date).

Hedging reserve

The hedging reserve includes the accumulated net change in the fair value of hedging transactions qualifying for hedge accounting.

Treasury Shares

Treasury shares are recognized at cost. Gains and losses on disposal of own shares are calculated as the difference between the purchase price

measured in accordance with the FIFO-principle and the selling price. Gains or losses are recognized directly in retained earnings. Dividends

received from treasury shares are recognized directly in retained earnings. Capital reductions from the cancellation of treasury shares are de-

ducted from the share capital at an amount corresponding to the nominal value of the shares.

Foreign exchange adjustments

The translation reserve in the consolidated financial statements comprises foreign exchange differences arising on translation of financial

statements of foreign subsidiaries from their functional currencies into the presentation currency used by GN Store Nord (DKK) and foreign

exchange adjustments of balances considered to be part of the total net investment in foreign entities

4.2 Financial risks

GN Store Nord is exposed to several financial risks arising from its operating, investing and financing activities, comprising currency risk, interest

rate risk, liquidity risk and credit risk. Financial risks are managed centrally by Group Treasury, except for commercial credit risk which is managed

decentralized by the Group’s operating businesses. The Group’s Treasury Policy has been reviewed by the Audit Committee and approved by the

Board of Directors.

Cash flow, liquid funds and debt are coordinated centrally to ensure the solvency and liquidity of the Group. Material financial risks are identified,

managed and reported adequately. Financial transactions are entered into only to mitigate risks from business activities or financing of the

Group.

The areas exposed to financial risks are mainly cash and cash equivalents as well as loans and other financial indebtedness, the Group’s Income

Statement in Financial income and expenses, the Group’s cash flow through Cash flow from financing activities and the Group’s Equity in Other

Comprehensive Income. GN’s objectives, policies and process for measuring and managing the risk exposure to these items are summarized in

the table and further explained in the notes below.

89 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.2 Financial risks (Continued)

Financial risk

Exposure

Risk Management Policy

Mitigating actions

Low Risk

Foreign

currency risk

Based on the current revenue and cost

composition, the anticipated primary for-

eign exchange exposures for the Group in

2021 (excluding EUR) are mainly arising

from USD, GBP, JPY and AUD, whereas

other currencies on a stand

-alone basis

would not have a material impact.

EUR denominated financing carries FX re-

valuation risk.

All hedging is conducted at Group

level.

A minimum of 75% and not more than

100% of the Net currency exposure in

each operating

business to maintain

this hedging level at any point in time.

EUR denominated financing is hedged

into DKK by natural hedging

, through

EUR denominated assets or

through

fore

ign exchange derivatives.

GN has hedged a substantial part of the

expected net cash

-flow in foreign curren-

cies to secure the EBITA contribution of

the material trading currencies for the

next 12 months across both GN Hearing

and GN Audio.

GN is also

monitoring the combined im-

pact of minor trading currencies and

hedges those on a case

-by-case basis.

Low Risk

Interest rate

risk

A large part of the non

-current financing

carried fixed interest rates as of 31 Decem-

ber

2020.

At least 50% of all Interest

-Bearing

Debt should be fixed in interest, either

through fixed

rate agreements or

through derivative instruments.

To mitigate the cash

-flow risk from rising

interest rates on its variable debt, GN

will

consider to enter into

interest rate deriva-

tives to swap

part of the floating debt into

fixed

-rate.

Low Risk

Liquidity risk,

f

unding, and

capital

structure

GN’s net interest

-bearing debt has

decreased

during 2020 to DKK 4,198

million mainly driven through

moderate

growth with strong cash generation from

normal operations which was off

-set by

investments,

dividend and share

buyback.

The latest share buyback

program was finalized in Q1 2020.

GN’s loans, bonds and Revolving Credit Fa-

cilities are long

-term with maturities be-

tween 2022 to 202

5 with predominantly

fixed and for a smaller potion variable in-

terest

rates based on short term reference

rates.

GN’s cash flow, liquid funds and debt

are coordinated centrally to ensure

the solvency and liquidity of the

Group.

To mitigate

potential liquidity or refinanc-

ing risks, GN has access to a Revolving

Credit Facility of DKK 2,000 million (which

can be upsized to DKK 4,000 million at the

discretion of the Lenders) as well as an ad-

ditional Revolving Credit Facility of USD

40 million.

At December 31, 2020 the Re-

volving Credit Facilities were unutilized.

GN has improved its maturity profile by re-

ducing short

-term debt and has in 2020

entered

into a new EUR 50 million loan

maturing in 2025

.

Financial

credit risk

Low Risk

GN’s exposure to credit risk arises primarily

from trade and other receivables.

GN has established policies for credit

risk management related to custom-

ers including the use of credit rating

agencies.

GN has decentralized the credit risk man-

agement relating to customer including

the use of credit rating agencies to the

divisions (GN Hearing and GN Audio).

90 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.2 Financial risks (Continued)

Foreign currency risk

GN Store Nord has exposure towards foreign currencies exchange rate risk, mainly arising from the fluctuations of USD, in connection with

commercial transactions. The general policy is to minimize GN Store Nord's currency exposure through natural matching of in- and out-flows

to mitigate the impact of exchange rate fluctuations on earnings and cash flow, thereby increasing the predictability of the financial results.

Additionally, the Group uses approved hedging instruments, including currency derivatives such as FX Spot, FX Forward, FX Swaps and FX

Option contracts, to protect the Group’s EBITA and Free Cash Flow from adverse currency movements by determining the aggregate of the

expected net cash flow 12 months forward and monetary balance sheet items.

Sensitivity analysis for foreign currency risk

The below sensitivity analysis illustrates the potential change in GN Store Nord’s profit or loss and equity in response to a weakening /

strengthening of the currencies of which GN Store Nord has significant exposure to at the balance sheet date. This analysis assumes that all

other variables, in particular interest rates, remain constant. At year-end an increase of 5% in the exchange rates would affect the Income

statement and Equity as outlined in the table below:

USD

GBP

DKK million

2020

2019

2020

2019

Income statement

18

-93

-21

-2

Other Comprehensive Income

20

21

-11

The sensitivity analysis comprises cash and cash equivalents, current receivables, trade payables, current and non-current loans, intercompany

balances and derivative exchange rate instruments as of December 31. The effects of a change in foreign exchange rates related to these

items would be included in the Income statement. A change in the value of derivative exchange rate instruments used for hedging would be

included in Other comprehensive income if hedge accounting is applied.

The above exposure at year-end is not necessarily representative of the past or future exposure of the Group.

Interest rate risk

A large portion of GN Store Nord’s non-current debt has a fixed interest rate: listed instruments of EUR 330 million Bond-with-Warrant-Units

0% and EUR 220 million notes issued under the EMTN program with 0.75% as well as bilateral loans with fixed and variable interest rates.

The long-term debt with variable interest rate consist of a bilateral loan of nominal EUR 100 million at short term rates plus margin.

An increase of variable interest rates on the bank loans of 1 percentage point before considering the mitigating effect of the interest rate

swaps would result in a net increase in the annual interest expenses of DKK 7 million (2019: DKK 15 million).

Specification of net interest-bearing debt

DKK million

2020

2019

Cash and cash equivalents

1,657

1,728

Bank loans and issued bonds, non-current liabilities

-5,069

-5,345

Bank loans, current liabilities

-341

-1,197

Lease liabilities

-445

-489

Total

-4,198

-5,303

Funding, liquidity and capital structure

The Group’s capital structure includes interest bearing long-term debt with maturities between 2022 and 2025, including bank loans,

convertible bonds, notes under the Euro Medium Term Note (EMTN) program and a drawing right attached to a DKK 2,000 million revolving

credit facility and a USD 40 million short-term revolving facility, which on December 31, 2020 were unutilized. In addition, the Group utilizes

short-term uncommitted facilities from its main relationship banks as well as its Euro Commercial Paper program which was utilized at EUR 45

million.

In May 2019 GN Store Nord issued EUR 330 million convertible bonds consisting of Bond-with-Warrant Units. The Bond-with-Warrant Units

consists of senior unsecured zero coupon bonds due 2024 with detachable unsecured warrants expiring 2024. The bonds have a denomination

of EUR 100,000 per Bond.

91 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.2 Financial risks (Continued)

Initially 5.2 million treasury shares are underlying the warrant units and those treasury shares will be kept to hedge the future obligations of

GN Store Nord under the warrant units. The bonds carry no interest and will be redeemed at par at maturity, unless redeemed or purchased

and cancelled earlier under their terms.

Any Unit holder may, at any time until 2024, exercise a warrant unit and require GN to redeem the corresponding bond at its principal amount.

GN does not expect to issue any new shares upon exercise of warrant units, but will deliver up to 5.2 million shares currently held in treasury,

based on the initial strike price (DKK 473.8512), which is subject to adjustment from time to time upon certain customary events (anti-dilution

clauses). The proceeds from the sale of these treasury shares at the initial strike price will amount to DKK 2,465 million corresponding to the

nominal amount of the issued bonds of EUR 330 million at the exchange rate at the time of pricing of DKK/EUR 7.4684.

In May 2019 GN Store Nord repurchased the EUR 225 million convertible bonds consisting of Bond-with-Warrant Units issued in 2017 and due

in 2022.

In December 2019 GN Store Nord issued EUR 220 million Eurobonds consisting of senior unsecured notes due 2023 under its newly

established EMTN program. The notes were issued at a price of 99.683% of the nominal amount with a fixed coupon of 0.750% per annum and

have been listed on Euronext Dublin. The bonds have a denomination of EUR 100,000 per bond. The bonds will be redeemed at par at

maturity, unless redeemed earlier under their terms. GN Store Nord has an issuer call option and may redeem the bonds at a redemption

margin of +0.250%.

On December 31, 2020, GN Store Nord had an equity ratio of 31.0% (2019: 29.1%) and net interest-bearing debt of DKK 4,198 million (2019:

DKK 5,303 million). GN has a long-term capital structure target of a net interest-bearing debt between one- and two-times EBITDA. As of

December 31, 2020 GN Store Nord had undrawn committed borrowing facilities of DKK 2,000 million (2019: DKK 2,000 million) and USD 40

million (2019: 0).

GN’s overall financial target is to deliver a competitive shareholder return through a combination of dividend payments and share price

appreciation. GN aims to pay out a dividend corresponding to 15 - 25% of the annual net profit and to distribute additional excess cash to

shareholders through share buyback programs.

Financial credit risk

Credit risk is defined as an unexpected loss in cash and earnings if the customer is unable to pay its obligation in due time. GN may incur losses

if the credit quality of its customers deteriorates or if they default on their payment obligations to GN. GN’s exposure to credit risk arises pri-

marily from trade and other receivables. Such credit risk is managed decentralized through the divisions (GN Hearing and GN Audio). Assess-

ment of credit risks related to customers is further described in note 3.7 Trade receivables and note 3.5 Other non-current assets.

Surplus cash positions in GN Store Nord’s subsidiaries are centralized through Group Treasury if feasible, and cash is mainly held in current

accounts or as short-term money market deposits. Cash positions are primarily held with financial institutions through which GN Store Nord

conducts its day-to-day banking transactions and which are highly rated with Moody’s and Standard & Poor’s. GN Store Nord had cash and

cash equivalents of DKK 1,657 million at December 31, 2020 (2019: DKK 1,728 million).

92 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.3 Financial instruments

Contractual maturity analysis for financial liabilities

DKK million

Less than

one year

Between

one and

three

years

More

than

three

years

Total

2020

Issued bonds

12

1,661

2,455

4,128

Bank loans, non-current

1

745

373

1,119

Bank loans, current

341

-

341

Other non-current liabilities

-

62

195

257

Other current liabilities

116

-

116

Trade payables

1,238

-

1,238

Contingent consideration

34

-

34

Total non-derivative financial liabilities

1,742

2,468

3,023

7,233

Derivative financial liabilities

53

-

53

Total financial liabilities

1,795

2,468

3,023

7,286

2019

Issued bonds

12

25

4,121

4,158

Bank loans, non-current

-

1,418

-

1,418

Bank loans, current

1,197

-

1,197

Other non-current liabilities

6

49

208

263

Other current liabilities

22

-

22

Trade payables

1,058

-

1,058

Contingent consideration

42

39

-

81

Total non-derivative financial liabilities

2,337

1,531

4,329

8,197

Derivative financial liabilities

19

2

-

21

Total financial liabilities

2,356

1,533

4,329

8,218

The maturity analysis is based on non-discounted cash flows.

Derivative financial instruments

Exchange rate instruments and interest rate swaps

2020

2019

DKK million

Average

rate (DKK)

Contract

amount, net*

Fair value,

assets

Fair value,

liabilities

Average

rate (DKK)

Contract

amount, net*

Fair value,

assets

Fair value,

liabilities

USD / DKK

624

-134

7

33

664

1,794

7

-

USD / EUR

613

731

10

-

666

535

1

-

JPY**

6.01

240

6

-

6.30

126

4

-

GBP**

824

566

1

3

836

209

-

9

AUD / DKK

449

31

-

1

456

196

-

3

EUR / DKK

744

-484

1

743

297

-

2

Other currency pairs

616

3

14

761

1

5

Interest swaps denominated in DKK

0.35%

400

-

1

0.35%

400

-

2

Total

28

53

13

21

* Positive contract amounts indicate sale of currencies vs. DKK or EUR

** Includes exchange rate instruments vs. DKK and EUR

All exchange rate instruments and the interest swap mature within 12 months from the balance sheet date. The interest rate swap is denomi-

nated in DKK.

93 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.3 Financial instruments (Continued)

Fair value adjustments of cash flow hedges

DKK million

2020

2019

Fair value adjustment for the year recognized in Other comprehensive income

8

-40

Reclassified from equity to revenue during the year

-21

61

Adjustment of cash flow hedges in Other comprehensive income

-13

21

Fair value adjustment of non-designated hedges recognized in Other operating income and costs, net

-20

-10

Net gain / loss and fair value adjustment of ineffective hedges recognized in Other operating income and costs, net

7

-

Fair value adjustment of non-designated hedges recognized in financial items

81

-27

The gains and losses on cash flow hedges recognized in Other comprehensive income as of December 31, 2020 will be recognized in the In-

come statement in the period during which the hedged forecasted transaction affects the Income statement.

Categories of financial assets and liabilities

The financial assets and liabilities presented in the balance sheet can be grouped in the following categories:

DKK million

2020

2019

Financial assets

Trade receivables

2,676

2,809

Other receivables

370

276

Other non-current assets

789

855

Financial assets at amortized cost

3,835

3,940

Derivative financial instruments included in Other receivables

15

8

RAP, SIP, DCP and Ownership interests included in Other non-current assets

398

460

Financial assets at fair value through profit or loss

413

468

Derivative financial instruments included in Other receivables

13

5

Financial assets at fair value through Other comprehensive income

13

5

Financial liabilities

Issued bonds (bond-with-warrant units)

2,326

2,296

Issued Eurobonds

1,627

1,631

Bank loans, non-current

1,116

1,418

Bank loans, current

341

1,197

Lease liabilities

445

489

Other non-current liabilities

27

25

Other current liabilities

114

22

Trade payables

1,238

1,058

Financial liabilities at amortized cost

7,234

8,136

Derivative financial instruments included in Other liabilities

15

3

RAP, SIP and DCP included in Other non-current liabilities

230

238

Contingent consideration included in Other liabilities

34

81

Financial liabilities at fair value through profit or loss

279

322

Derivative financial instruments included in Other liabilities

38

18

Financial liabilities at fair value through Other comprehensive income

38

18

94 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.3 Financial instruments (Continued)

Fair value hierarchy

2020

2019

DKK million

Quoted

prices

(level 1)

Observa-

ble input

(level 2)

Unobserva-

ble input

(level 3)

Total

Quoted

prices

(level 1)

Observa-

ble input

(level 2)

Unobserv-

able input

(level 3)

Total

Financial assets

Derivative financial instruments included in Other

receivables

-

15

-

15

-

8

-

8

RAP, SIP, DCP included in Other non-current assets

-

280

-

280

-

272

-

272

Ownership interests included in Other non-current assets

-

118

-

188

Financial assets at fair value through profit or loss

-

295

118

413

-

280

188

468

Derivative financial instruments included in Other

receivables

-

13

-

13

-

5

-

5

Financial assets at fair value through

Other comprehensive income

-

13

-

13

-

5

-

5

Financial liabilities

Derivative financial instruments included in Other

liabilities

-

15

-

15

-

3

-

3

RAP, SIP and DCP included in Other non-current liabilities

-

230

-

230

-

238

-

238

Contingent consideration included in Other liabilities

-

34

-

81

Financial liabilities at fair value through profit or loss

-

245

34

279

-

241

81

322

Derivative financial instruments included in Other

liabilities

-

38

-

38

-

18

-

18

Financial liabilities at fair value through

Other comprehensive income

-

38

-

38

-

18

-

18

In addition to the above, Other non-current liabilities include a liability of DKK 150 million (2019: DKK 126 million) related to put options issued

on shares held by non-controlling interests which is measured at fair value (fair value hierarchy level 3). Adjustments to the fair value are ac-

counted for as other equity transactions.

DKK million

2020

2019

Fair value net gains (losses) recognized in the income statement:

Net fair value gains (losses) on RAP, SIP and DCP

6

1

Net fair value gains (losses) on ownership interests and derivatives re. ownership interests

36

66

Net fair value gains (losses) on contingent consideration

8

2

Exchange rate instruments and interests rate swaps

The fair value of the exchange rate instruments and interest rate swaps are determined using quoted forward exchange rates and forward

interest rates, respectively at the balance sheet date and can be categorized as level 2 (observable inputs) in the fair value hierarchy.

Ownership interests

The fair value of the ownership interests is based on a market approach model. The key input is market observations of sales prices of compa-

rable retail entities, combined with internal GN data such as number of sold hearing aids and the financial statements in which GN holds an

interest. In the model, the ownership interests are divided into four groups of revenue multiple, according to the relative size and profitability

of the dispensers. Since most of the data is based on non-observable data, the model is categorized as level 3 in the fair value hierarchy. The

model is updated on a quarterly basis and any changes are reflected in the Income statement or in Other comprehensive income as applicable.

The fair value models are sensitive to the dispenser’s financial performance for the last twenty-four months rolling on a quarterly basis.

95 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.3 Financial instruments (Continued)

Derivative financial instruments related to ownership interests

Derivative financial instruments related to ownership interests in dispensers of GN Hearing products, are recognized in the balance sheet at fair

value. The fair value model is based in a market approach model, using market observations of sales prices of comparable retail entities. The

key inputs used are the number of hearing aid units sold by customer, average selling prices, and the estimated probability that the instru-

ments will be exercised. The fair value model is categorized as level 3 in the fair value hierarchy, and is updated on a quarterly basis, and any

material changes are reflected in the income statement. The fair value models are sensitive to the customers financial performance the last

twelve months of any quarter and the probability of the instruments being exercised.

RAP, SIP and DCP programs

RAP (Retirement Advantage Plan) and SIP (Savings and Investment Plan) are programs in which customers earn funds based on purchases

made. DCP (Deferred Compensation Plan) is a program in which Management in certain foreign subsidiaries may choose to defer compensa-

tion. The asset value is based on the fair value of the mutual fund investments, and the liability is based on the value generated by participant

contributions, participant distributions, forfeitures, and investment earnings or losses. Both asset and liabilities are categorized as level 2 in the

fair value hierarchy. Each quarter GN receive a report regarding the fair value of the assets from a third-party contractor, and will update the

financial statements according to this report.

Contingent consideration

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combina-

tion. The fair value is based on discounted cash flows and contractual terms of the contingent considerations and on non-observable inputs,

such as the financial performance of the acquired enterprises. The key assumptions take into consideration the probability of meeting each

performance target and the discount factor. Contingent considerations are categorized as level 3 (unobservable inputs) in the fair value hierar-

chy. The models are updated on a quarterly basis and any changes are reflected in the income statement. The fair value models are sensitive

to the financial performance of the acquired enterprises, the probabilities of meeting the agreed objectives and the discount factor.

Fair value disclosures re. financial instruments at amortized cost

Based on observable inputs (fair value hierarchy level 2) the fair value of issued bonds (zero coupon) amounted to DKK 2,394 million at De-

cember 31, 2020 (2019: DKK 2,530 million), and the fair value of Eurobonds amounted to DKK 1,673 million (2019: DKK 1,643 million). For

other financial assets and liabilities, the fair value is approximately equal to the carrying amount.

Accounting policies

Derivative Financial Instruments

Derivative financial instruments are initially and subsequently recognized in the balance sheet at fair value. Positive and negative fair values of

derivative financial instruments are recognized as other receivables and payables, respectively. Fair values of derivative financial instruments

are computed on the basis of market data and generally accepted valuation methods.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recog-

nized asset or liability are recognized in the income statement together with changes in the value of the hedged asset or liability as far as the

hedged portion is concerned. Changes in the portion of the fair value of derivative financial instruments designated as and qualifying as a cash

flow hedge that is an effective hedge of changes in the value of the hedged item are recognized in other comprehensive income. If the hedged

transaction results in gains or losses, amounts previously recognized in other comprehensive income are transferred from equity to the same

item as the hedged item.

When a hedging instrument expires, or is terminated, or when a hedge no longer meets the criteria for hedge accounting, any gains or losses

previously recognized in Other comprehensive income remains in Equity until the forecast transaction occurs. When the forecast transaction is

no longer expected to occur, the cumulative gain or loss that were reported in equity are immediately reclassified to the income statement.

For derivative financial instruments, where hedge accounting is not applied (economic hedges), changes in fair value are recognized in the

Income statement as either Other operating income and costs, net or Financial items.

96 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.3 Financial instruments (Continued)

Financial Liabilities

Amounts owed to credit institutions and banks as well as the issued Eurobonds are recognized at the date of borrowing at fair value of the

proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortized cost, corresponding to

the capitalized value using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value is recognized in

the income statement over the term of the loan.

Issued Bond-With-Warrant units are initially recognized at fair value less related transaction costs. The fair value of the bonds is estimated by

calculating the present value of all contractual future cash flows using an interest rate for a bond with similar credit risk and duration as the

issued bonds, but without the attached warrants. The difference between the fair value and the proceeds is considered to be the value of the

warrants and is recognized in Equity. The equity component is not re-measured subsequently. After initial recognition the bonds are measured

at amortized cost using the effective interest method. By applying the effective interest method a constant interest rate is used to increase the

carrying amount of the bonds and the difference between the carrying amount and the principal amount is in this way recognized as an inter-

est expense in Financial expenses over the remaining term to maturity. In case the bonds are redeemed before maturity, the difference be-

tween the carrying amount at amortized cost and the principal amount will be recognized as a loss in Financial expenses.

Other liabilities, comprising trade payables, amounts owed to associates as well as other payables, are measured at amortized cost

4.4 Liabilities from financing activities

DKK million

Bank loans,

non-current

Issued bonds*

Other non-cur-

rent liabilities

Lease liabilities

Bank loans,

current

Total

Liabilities at January 1

1,418

3,927

507

489

1,197

7,538

Cash flows

-296

-

-21

-141

-855

-1,313

Foreign exchange adjustments

-6

-15

-26

-23

-1

-71

New leases

-

120

-

120

Non-cash interest expenses

-

41

-

41

Other non-cash adjustments

-

22

-

22

Liabilities at December 31, 2020

1,116

3,953

482

445

341

6,337

Liabilities at January 1

2,238

1,604

306

-

28

4,176

Recognized on adoption of IFRS 16 Leases

-

527

-

527

Cash flows

-821

2,290

-35

-146

1,168

2,456

Foreign exchange adjustments

1

-

3

2

1

7

New leases

-

106

-

106

Non-cash interest expenses

-

33

-

33

Other non-cash adjustments

-

233

-

233

Liabilities at December 31, 2019

1,418

3,927

507

489

1,197

7,538

* In 2019 a loss of DKK 20 million related to the repurchase of the 2017 bonds is recognized in financial items. Please refer

to the cash flow statement for a specification of the cash flows

related to the issue and repurchase of bonds in 2019.

97 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

4.5 Financial income and expenses

DKK million

2020

2019

Financial income:

Gains and fair value adjustments on ownership interests

50

263

Interest income*

5

47

Financial income, other

123

18

Fair value adjustments of derivative financial instruments

81

2

Foreign exchange gain

35

25

Total

294

355

Financial expenses:

Losses and fair value adjustments on ownership interests

-14

-

Interest expenses*

-68

-111

Financial expenses, other

-93

-196

Fair value adjustments of derivative financial instruments and impairments

-70

-94

Foreign exchange loss

-55

-46

Total

-300

-447

*Interest income and expenses from financial assets and liabilities at amortized cost

Fair value adjustments of derivative financial instruments and impairments include an impairment loss of DKK 70 million (2019: DKK 65 mil-

lion) mainly related to Loans to dispensers of GN Hearing products and fair value gains at DKK 81 million (2019: loss of DKK 27 million) related

to non-designated hedges. Financial income, other include an income relating to reversal of a provision on a financial guarantee obligation

regarding an associated company’s bank credit facility, income from government grants and other items.

Accounting policies

Financial income and expenses

Financial income and expenses comprise interest income and expense, costs of permanent loan facilities, gains and losses on securities, receiv-

ables, payables and transactions denominated in foreign currencies, credit card fees, amortization and impairment of financial assets and liabil-

ities, etc. Also included are realized and unrealized gains and losses on derivative financial instruments that are not designated as hedges.

Borrowing costs that are directly attributable to the construction or production of a qualifying asset form part of the cost of that asset. Other

borrowing costs are recognized as an expense. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for

its intended use

98 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.1 Acquisition and divestment of companies and operations

Acquisitions

During 2020, GN Hearing acquired and divested a few minor hearing instrument chains and distributors, primarily in the US. These acquisitions

all strengthen GN Hearing's sales and distribution channels.

Fair value at

acquisition date

DKK million

2020

2019

Altia

Other

Identifiable assets acquired, liabilities assumed and consideration transferred

Non-current assets

-

5

3

2

Current assets

1

21

-

Non-current liabilities

-2

-66

-

Current liabilities

-13

-8

-

Fair value of identified net assets

-14

-48

-50

2

Goodwill

14

425

423

2

Other intangible assets

-

432

392

40

Consideration transferred

-

809

765

44

Fair value of assets transferred

-

-35

-

-35

Payable consideration

-

-111

-110

-1

Acquired cash and cash equivalents

-

-9

-

Cash consideration paid

-

654

646

8

Goodwill relating to the above transactions is allocated to the cash-generating units GN Hearing with DKK 14 million (2019: DKK 2 million) and

GN Audio DKK 0 million (2019: DKK 423 million). GN has not recognized any deferred tax assets (2019: DKK 2 million) as part of identified

assets and liabilities, which were not recognized in the acquired companies prior to acquisition.

In 2020, GN paid out DKK 147 million (2019: DKK 50 million) in contingent consideration and other payable consideration related to prior

years’ acquisitions. The payments were mainly related to the acquisition of Altia and Audigy Group. An adjustment of DKK 8 million (2019:

DKK 2 million) has been recognized as financial income in the income statement, mainly related to the Audigy acquisition.

Section 5

Other

disclosures

99 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.1 Acquisition and divestment of companies and operations (Continued)

DKK million

2020

2019

The share of revenue and profit (loss) for the year from the acquisition date can be specified as follows:

Revenue

4

42

EBIT

-3

-19

Profit (loss) for the year

-3

-19

Acquired operations if they had been owned throughout the year:

Revenue

7

51

EBIT

-5

-24

Profit (loss) for the year

-5

-25

Divestments etc.

In 2020 GN Hearing divested a number of minor hearing instrument distributors primarily in the US.

DKK million

2020

2019

Non-current assets

-22

-70

Current assets

-1

-

Disposed net assets

-23

-70

Fair value of assets received

31

66

Fair value of liabilities assumed

-9

-13

Cash consideration received

1

2

Gain (loss) on divestment of operations

-

-15

Other adjustments

-4

-6

Gain (loss) on divestment of operations etc.

-4

-21

Accounting policies

Business Combinations

Enterprises acquired or formed during the year are recognized in the consolidated financial statements from the date of acquisition or for-

mation. The acquisition date is the date when the parent company effectively obtains control of the acquired enterprise. Enterprises disposed

of are recognized in the consolidated income statement until the disposal date. The comparative figures are not restated for acquisitions.

For acquisitions of new enterprises in which the parent company is able to exercise control over the acquired enterprise, the purchase method

is used. The acquired enterprises’ identifiable assets, liabilities and contingent liabilities are measured at fair value at the acquisition date. Iden-

tifiable intangible assets are recognized if they are separable or arise from a contractual right. Deferred tax on revaluations is recognized.

Any excess of the cost over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognized as goodwill under

intangible assets. Goodwill is not amortized but is tested at least annually for impairment. The first impairment test is performed within the

end of the acquisition year. Upon acquisition, goodwill is allocated to the cash-generating units, which subsequently form the basis for the

impairment test. Goodwill and fair value adjustments in connection with the acquisition of a foreign entity with another functional currency

than the presentation currency used by GN Store Nord are treated as assets and liabilities belonging to the foreign entity and translated into

the foreign entity’s functional currency at the exchange rate at the transaction date.

The cost of a business combination comprises the fair value of the consideration agreed upon. When a business combination agreement pro-

vides for an adjustment to the cost of the combination contingent on future events, the amount of that adjustment is included in the cost of

the combination if the adjustment is probable and can be measured in a reliable manner. Subsequent changes to contingent considerations are

recognized in the income statement. If uncertainties regarding measurement of identifiable assets, liabilities and contingent liabilities exist at

the acquisition date, initial recognition will take place on the basis of preliminary fair values. If identifiable assets, liabilities and contingent lia-

bilities are subsequently determined to have different fair value at the acquisition date than first assumed, goodwill is adjusted up until twelve

months after the acquisition. The effect of the adjustments is recognized in the opening balance of equity and the comparative figures are

restated accordingly.

100 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.1 Acquisition and divestment of companies and operations (Continued)

When acquiring a controlling interest in steps, GN Store Nord assesses the fair value of the acquired net assets at the time control is obtained.

At such time, interests acquired previously are also adjusted to fair value. The difference between the fair value and the carrying amount is

recognized in the income statement.

Acquisition of additional equity interest after a business combination is not accounted for using the acquisition method, but rather as equity

transactions. Disposals of equity interest while retaining control are also accounted for as equity transactions. Transactions resulting in a loss

of control result in a gain or loss being recognized in the income statement.

When acquiring less than 100% of the shares in a company, GN Store Nord recognizes the goodwill on a transaction-by-transaction basis or as

a proportion of goodwill in accordance with GN Store Nord’s ownership interest.

In business combinations where put options have been issued regarding shares held by non-controlling interests the non-controlling interests

are recognized initially. As long as the put options remain unexercised the non-controlling interests are updated at the end of each reporting

period, including its share of allocations of profit or loss. The non-controlling interests are thereafter derecognized by recognizing a financial

liability for the put options and the difference is included as an equity transaction. If the put options are exercised, the same treatment is ap-

plied up to the date of exercise. The amount recognized as the financial liability at that date, is extinguished by the payment of the exercise

price. If the put option expires unexercised, the position is unwound so the non-controlling interest is recognized at the amount it would have

been, had the put options never been issued. The financial liability is derecognized in equity

101 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.2 Remuneration of the Board of Directors and Executive Management

Remuneration to Executive Management and other Key Management personnel can be specified as follows:

2020

2019

DKK million

Fixed

salary

Other

benefits*

Bonus

Share-

based

incentives

Total

Fixed

salary

Other

benefits*

Bonus

Share-

based

incentives

Total

René Svendsen-Tune, CEO of

GN Audio & GN Store Nord

7.0

0.2

7.3

6.6

21.1

6.7

0.2

6.5

3.8

17.2

Gitte Pugholm Aabo, CEO of GN

Hearing from September 20, 2019

6.9

0.2

4.1

3.9

15.1

2.0

-

1.7

0.4

4.1

Marcus Desimoni, CFO of

GN Store Nord

4.4

0.8

3.8

10.1

19.1

4.5

0.6

4.7

2.7

12.5

Jakob Gudbrand, CEO of GN Hearing

from February 18, 2019 until Septem-

ber 20, 2019**

-

7.9

0.2

10.1

-

18.2

Total

18.3

1.2

15.2

20.6

55.3

21.1

1.0

23.0

6.9

52.0

Other key management personnel***

2.4

0.4

1.4

1.2

5.4

4.6

0.4

2.6

0.8

8.4

Board of Directors remuneration

7.8

0.6

-

8.4

7.2

1.1

-

8.3

Total

10.2

1.0

1.4

1.2

13.8

11.8

1.5

2.6

0.8

16.7

Total Executive Management and

Board of Directors remuneration

28.5

2.2

16.6

21.8

69.1

32.9

2.5

25.6

7.7

68.7

* Other benefits include car allowances, company paid telephone, internet, housing cost and travel allowance for the Board of Directors

** In 2019 the former CEO of GN Hearing, Jakob Gudbrand, was given a one

-time sign-on bonus in the amount of DKK 7 million in connection with entering into his service agreement with

GN. On

September 20, 2019, Jakob Gudbrand informed the company that he needed to resign from his position as CEO of GN Hearing for personal and family reasons. Jakob Gudbrand was

given his base salary, car allowance, and the target bonus for the full duration of his notice period.

***In 2019 Other Key Management personnel remuneration includes remuneration to the former CEO of GN Hearing Anders Hedegaard until April 30, 2019.

Share-based incentive plans

The Group's long-term equity-settled incentive program is specified and described in note 5.3 share-based incentive plans.

Executive Management and Board of Directors Remuneration

The total remuneration of the Executive Management is based on the “General Guidelines for Incentive Pay to Management”, as adopted at

GN´s Annual General Meeting. Total salary (Fixed salary, Other benefits & Bonus) of the Executive Management, decreased by 23% or DKK

10.4 million from 2019 to 2020, partly driven by a DKK 7 million sign-on bonus to former CEO of GN Hearing A/S, Jakob Gudbrand, in 2019. In

light of the negative financial impact on the company of the COVID-19 pandemic, Executive Management took a voluntary and temporary

10% pay reduction on their base salary from May onwards (reinstated in October 2020).

On September 30, 2020, GN announced that CFO of GN Store Nord, Marcus Desimoni, would step down as of December 31, 2020. As a good

leaver of the company Marcus Desimoni remains entitled to his non-vested share-based incentives on the same terms, and these have been

recognized as fully expensed in 2020. Peter la Cour Gormsen, CFO of GN Audio, was appointed new CFO of GN Store Nord, effective January

1, 2021.

The remuneration of the Executive Management is based on a fixed base salary and participation in GN Store Nord’s option- and warrant-

based long-term incentive programs. Furthermore, the remuneration includes a yearly bonus plan with a target bonus of 50% of the base sal-

ary with a potential to underperform or outperform the target leading to an effective potential bonus range between 0 - 100% of the base

salary. The Executive Management´s bonus is based on three parameters in light of the Group's focus areas:

• René Svendsen-Tune’s bonus is subject to the performance of GN Audio’s EBITA, GN Audio’s revenue and individual performance targets.

• Gitte Pugholm Aabo’s bonus is subject to the performance of GN Hearing’s EBITA, GN Hearing’s revenue and individual performance targets.

• Marcus Desimoni’s bonus is subject to the performance of GN Store Nord’s EBITA, GN Store Nord’s revenue and individual performance

targets.

The Group does not make pension contributions for members of the Executive Management. Executive Management has usual severance

agreements and change-of-control agreements.

102 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.2 Remuneration of the Board of Directors and Executive Management (Continued)

Members of the Board of Directors receive a fixed remuneration as approved by the shareholders at the Annual General Meeting on March 11,

2020. The fixed remuneration is based on GN Store Nord´s corporate governance structure in which an audit committee, a strategy commit-

tee, a remuneration committee and a nomination committee have been established. Further, the appointed board members of GN Store Nord

also serve on the Board of Directors of GN Hearing A/S and GN Audio A/S.

The full-year remuneration of the Board of Directors is as follows (DKK thousand):

GN Store Nord A/S

GN Hearing A/S

Chairman

870

Chairman

288

Deputy Chairman

580

Deputy Chairman

201

Other Board members

290

Other Board members

115

Remuneration Committee Chairman

350

Remuneration Committee, other members

175

Audit Committee Chairman

350

Audit Committee, other members

175

Strategy Committee Chairman

350

GN Audio A/S

Strategy Committee, other members

175

Chairman

288

Nomination Committee Chairman

170

Deputy Chairman

201

Nomination Committee, other members

85

Other Board members

115

In addition to the remuneration, members of the Board of Directors who are not Danish residents are entitled to a fixed travel allowance in

connection with participation in board meetings in Denmark. For European-based board members the allowance amounts to DKK 22,500 per

meeting and for Non-European based board members the allowance amounts to DKK 45,000 per meeting.

In light of the negative financial impact on the company of the COVID-19 pandemic, the Board in April decided to temporarily reduce their fee

by 10% from May onwards (reinstated in October 2020), the reduction is reflected in the total Board of directors remuneration below:

DKK thousand

2020

2019

Board fee Board of Directors

Per Wold-Olsen (Chairman)

2,033

2,035

Jukka Pertola (Deputy chairman)

992

-

William E. Hoover, Jr. (Deputy chairman until March 2020)

333

1,286

Wolfgang Reim

1,058

1,052

Helene Barnekow

641

701

Ronica Wang

660

Montserrat Pascual

609

-

Anette Weber

609

-

Gitte Pugholm Aabo (until September 2019)

-

660

Leo Larsen*

276

275

Morten Andersen*

276

275

Marcus Stuhr Perathoner*

276

275

Total fee Board of Directors

7,763

7,219

* Employee elected members

DKK thousand

2020

2019

Fixed travel allowance & social security

Per Wold-Olsen

112

203

Helene Barnekow

175

298

Montserrat Pascual (from Q2 2020)

152

-

Wolfgang Reim

89

203

Ronica Wang

45

405

Total Board of Directors travel allowance and social security

573

1,109

103 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.3 Share-based incentive plans

Option and warrant programs

GN Store Nord has an option-based and a warrant-based long-term equity-settled incentive program whereby the Executive Management and

other employees in key positions are granted options and warrants linked to shares in GN Store Nord A/S, GN Hearing A/S and GN Audio A/S.

For members of Executive Management the grant size can vary between 50-100% of their base salary. Warrants and options are granted at no

consideration.

Calculation of share price for GN Hearing A/S and GN Audio A/S

The 2019 and 2020 option programs are based on GN Store Nord A/S shares, whereas the warrant programs for 2015-2018 are based on GN

Hearing A/S and GN Audio A/S shares. On a quarterly basis the share price for GN Hearing A/S and GN Audio A/S is calculated, using a top-

down approach based on analysis of external broker reports for the allocation of GN Store Nord A/S’ share price into GN Hearing, GN Audio

and Other. This calculation is also the basis for the Black-Scholes valuation as stated below regarding valuation of warrants.

Vesting conditions and exercise of warrants

The 2015-2018 warrant programs are incentive programs with a three-year vesting period from the grant date. Warrants vest when a set of

criteria are met: The share price of GN Store Nord has increased and the share price of GN Hearing A/S and GN Audio A/S has outperformed a

peer group index of competitors and industry indices, as defined by the Board of Directors of GN Hearing and GN Audio, respectively. Vested

warrants may be exercised during a four-week exercise window opening each quarter for a three-year period after vesting. The quarterly four-

week exercise window will open following the release of an external Valuation Report concerning the value of the shares of GN Hearing A/S

and GN Audio A/S.

Vesting conditions and exercise of options

The 2019 and 2020 programs are long-term incentive programs with a three-year vesting period from the grant date. The programs include a

performance multiplier, based on revenue growth and EBITDA improvement relative to a broad peer group of comparable companies. This

means, that after the three-year vesting period, the initial share option grant can either increase, decrease or stay the same, depending on GN’s

performance relative to a peer group. The maximum effect of the performance multiplier is to increase the number of options by a factor of 2.

For executive management the gross return on each annual grant is capped at a value equal to four times the annual base salary at the time of

grant. Vested options may be exercised at any time outside black-out periods for a three-year period after vesting.

Valuation model and assumptions

The market value of the warrants and options are calculated using the principles of the Black-Scholes option pricing model. For the 2015-2018

warrants the model has taken the overperformance criteria into account using Monte Carlo simulation. The market values of options granted

during the year are based on the underlying market prices at the grant dates.

The following assumptions were applied for the calculation of the market value at the grant date of GN Store Nord A/S options:

Executive

Management

Other employees

2020

2019

2020

2019

Number of options granted in the year

158,480

247,488

535,641

608,352

Share price of GN Store Nord A/S at ordinary grant date

390

312

390

312

Vesting period

3 years

Life of option

6 years

Volatility*

29%

27%

29%

27%

Expected dividend

0.4%

Risk-free interest rate**

0.00%

Fair value per option at ordinary grant (DKK)***

83

61

87

68

Total market value at grant (DKK million)****

13

15

47

41

Amortization period of the program

2020 -

2023

2019 -

2022

2020 -

2023

2019 -

2022

For 2019 and 2020 the grants are based on options and the fair value includes any market vesting conditions.

* Volatility is estimated by external experts, and is calculated based on data from a historical period matching the expected time to expiry of the options

** Risk-free interest rate is estimated by external experts and based on the zero yield curve derived from Danish government bonds with maturity equal to the expiry of the options

*** The fair value includes any market vesting conditions.

**** For 2019, the number of options and total market value for executive management have been impacted by grants to both Jak

ob Gudbrand and Gitte Pugholm Aabo, of which 77,200

options have been

forfeited in 2019. Executive management have been granted a number of options with a value equal to the same percentage of their base salary as was granted in the

previous program.

104 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.3 Share-based incentive plans (Continued)

The exercise price for the annual ordinary grant of options is based on the average share price for GN Store Nord A/S in the five days following

the release of the annual report in the year in which the options are awarded.

Exercise of warrants

When employees exercise their warrants they are exchanged with shares in GN Store Nord A/S based on the relationship between the value of

the warrant and the value of the GN Store Nord A/S share at the time of exercise. Hereafter the employee is free to keep the GN Store Nord

A/S shares or sell them on the open market.

Warrant and option programs

GN Hearing A/S

GN Audio A/S

DKK

Number

DKK

Number

Average

exercise

price

Executive

Manage-

ment*

Other

employees

Total

Average

exercise

price

Executive

Manage-

ment

Other

employees

Total

Outstanding warrants at January 1, 2019

29,021

2,443

13,681

16,124

28,273

3,134

7,259

10,393

Warrants exercised during the year

26,766

-1,970

-5,485

-7,455

23,401

-496

-2,571

-3,067

Warrants forfeited during the year

30,278

-

-937

32,919

-

-103

Outstanding warrants at December 31, 2019

31,042

473

7,259

7,732

30,275

2,638

4,585

7,223

Warrants exercised during the year

29,927

-240

-3,168

-3,408

28,381

-1,060

-2,232

-3,292

Warrants forfeited during the year

31,792

-

-86

32,491

-

-93

Outstanding warrants at December 31, 2020

31,923

233

4,005

4,238

31,865

1,578

2,260

3,838

Weighted average term to maturity (Years)

3.0

2.8

2.2

2.9

2.6

Exercisable warrants at December 31, 2019

-

748

1,234

430

1,664

Exercisable warrants at December 31, 2020

-

618

840

236

1,076

* Includes Anders Hedegaard, former CEO of GN Hearing in 2019 figures

Average share price at exercise: GN Hearing: DKK 55,660 (2019: DKK 45,010) GN Audio: DKK 93,417 (2019: DKK 69,862).

GN Store Nord A/S

DKK

Number*

Average

exercise

price

Executive

Manage-

ment**

Other

employees

Total

Outstanding options at January 1, 2019

-

Options granted during the year

311

247,488

608,352

855,840

Options forfeited during the year

313

-77,200

-3,639

-80,839

Outstanding options at December 31, 2019

311

170,288

604,713

775,001

Options granted during the year

381

158,480

535,641

694,121

Options forfeited during the year

350

-

-29,228

Outstanding options at December 31, 2020

344

328,768

1,111,126

1,439,894

Weighted average term to maturity (Years)

4.7

Exercisable options at December 31, 2019

-

Exercisable options at December 31, 2020

-

* The performance multiplier can decrease the number of options or as maximum effect increase the number of options by a factor of 2

** Includes Jacob Gudbrand, former CEO of GN Hearing in 2019 figures

105 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.3 Share-based incentive plans (Continued)

Outstanding warrants at December 31, 2020 in GN Hearing A/S and GN Audio A/S by grant date are shown below:

GN Hearing A/S

GN Audio A/S

DKK

Number

DKK

Number

Grant date

Exercise

price

Executive

Management

Other

employees

Total

Exercise

price

Executive

Management

Other

employees

Total

March 2016

26,936

-

188

22,495

346

65

411

March 2017

30,451

-

339

28,794

494

171

665

May 2017

35,873

-

56

36,781

-

August 2017

39,391

-

35

NA

-

February 2018

31,792

233

3,125

3,358

33,913

738

1,996

2,734

May 2018

NA

-

42,338

-

28

August 2018

46,342

-

49

NA

-

September 2018

44,817

-

22

NA

-

December 2018

34,047

-

191

NA

-

Outstanding warrants at December 31

233

4,005

4,238

1,578

2,260

3,838

Outstanding options at December 31, 2020 in GN Store Nord A/S by grant date are shown below:

GN Store Nord A/S

DKK

Number*

Grant date

Exercise

price

Executive

Manage-

ment

Other

employees

Total

April 2019

313

125,895

565,182

691,077

June 2019

325

-

26,479

September 2019

282

44,393

-

44,393

February 2020

381

158,480

508,512

666,992

May 2020

311

-

7,605

November 2020

476

-

3,348

Outstanding options at December 31

328,768

1,111,126

1,439,894

* The performance multiplier can decrease the number of options or as maximum effect increase the number of options by a factor of 2

Accounting policies

Share-based incentive plans

The Executive Management and a number of key employees are included in share-based incentive plans (equity-settled plans). For equity-

settled programs, the warrants and options are measured at the fair value at the grant date and recognized in the income statement as a staff

cost of the respective functions over the vesting period. The counter item is recognized in equity. On initial recognition, an estimate is made of

the number of warrants and options expected to vest. This estimate is subsequently revised for changes in the number of warrants and options

expected to vest. Accordingly, recognition is based on the number of warrants and options that are ultimately vested. The fair value of granted

warrants and options is estimated using the Black-Scholes option pricing model. Vesting conditions are taken into account when estimating

the fair value of the warrants and options

106 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.4 Pension obligations

DKK million

2020

2019

Present value of defined benefit obligations

359

349

Fair value of plan assets

-323

Net obligations

36

26

The present value of defined benefit obligations includes unfunded pension obligations not covered by

payments to insurance companies of DKK 18 million (2019: DKK 9 million).

Development in present value of defined benefit obligations

Obligations at January 1

349

335

Foreign exchange adjustments

-26

7

Costs for the year

4

5

Interest expense

9

12

Actuarial (gains) losses regarding demographic assumptions

-2

-3

Actuarial (gains) losses regarding financial assumptions

33

26

Pension payments, unfunded

-

-1

Settlements, amendments etc.

9

-16

Pension payments

-17

-16

Obligations at December 31

359

349

Maturity of pension obligations

Less than one year

17

Between one and five years

72

76

More than five years

270

256

Total

359

349

Development in fair value of plan assets

Plan assets at January 1

323

281

Foreign exchange adjustments

-28

7

Interest income

7

9

Return on plan assets in excess of interest income

30

40

Payment by GN Store Nord

2

3

Settlements, amendments etc.

4

-1

Pension payments

-15

-16

Plan assets at December 31

323

Pension costs recognized in the income statement

Costs for the year

-4

-5

Interest expense

-9

-12

Interest income from plan assets

7

9

Defined benefit plans total

-6

-8

Defined contribution plans total

-130

-129

Total pension costs recognized in the income statement

-136

-137

The costs are recognized in the following income statement items:

Production costs

-19

-17

Development costs

-33

-34

Selling and distribution costs

-48

-44

Management and administrative expenses

-34

-40

Financial expenses

-2

Total

-136

-137

The following accumulated actuarial gains (losses) since January 1, 2005 are recognized in the State-

ment of other Comprehensive Income:

Accumulated actuarial gains (losses)

-60

-59

Breakdown of plan assets:

Shares

61%

62%

Bonds

37%

36%

Cash and cash equivalents

2%

Total

100%

107 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.4 Pension obligations (Continued)

At the balance sheet date the actuarial calculations for the prevailing American defined benefit plan are based on a discount rate of 2,25%

(2019: 3%).

A 25 basis point decrease in the discount rate will result in a DKK 10 million increase in the defined benefit obligation and a 25 basis point in-

crease will result in a DKK 10 million decrease in the defined benefit obligation.

Defined contribution plans

The Group has pension commitments regarding certain groups of employees in Denmark and abroad. Pension plans are generally defined con-

tribution plans. The pension plans are funded by current payments to independent pension funds and insurance companies, which are responsi-

ble for payment of the pension benefits. When contributions to defined contribution plans have been paid, the Group has no further commit-

ments to present or former employees. Contributions to defined contribution plans are recognized in the income statement when they are

due.

Defined benefit plans

The Group has an American pension plan, which is not covered by payments to insurance companies but is partly off-set by the fair value of

reserved pension funds. At July 1, 2003, the pension plan was frozen, meaning that employees covered by the plan will continue to be entitled

to the pension payments earned up to this date. However, employees will not earn further pension payments.

Accounting policies

Pensions

Contributions to defined contribution plans are recognized in the income statement in the period to which they relate and any contributions

outstanding are recognized in the balance sheet as other payables.

Defined benefit plans are subject to an annual actuarial estimate of the present value of future benefits under the defined benefit plan. The

present value is determined on the basis of assumptions about the future development in variables such as salary levels, interest rates, infla-

tion and mortality. The present value is determined only for benefits earned by employees from their employment with the Group. The actuar-

ial present value less the fair value of any plan assets is recognized in the balance sheet under pension obligations. Pension costs for the year

are recognized in the income statement based on actuarial estimates and financial expectations at the beginning of the year. Any difference

between the expected development in plan assets and the defined benefit obligation and actual amounts results in actuarial gains or losses.

Actuarial gains or losses are recognized in other comprehensive income

5.5 Contingent liabilities

DKK million

2020

2019

Guarantees

4

5

Guarantees

The majority of guarantees are related to performance guarantees.

Security

The Group has not pledged any assets as security in the present or prior financial years.

Purchase obligations

GN Store Nord has agreed with a number of suppliers that the suppliers will purchase components for the production of hearing instruments

and headsets based on sales estimates prepared by GN Store Nord. To the extent that GN Store Nord's sales estimates exceed actual pur-

chases from suppliers, GN Store Nord is under an obligation to purchase any remaining components from the suppliers.

Management assesses sales estimates on an ongoing basis. To the extent that component inventories at suppliers exceed the volumes ex-

pected to be used, GN Store Nord recognizes a provision for onerous purchase contracts.

108 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.5 Contingent liabilities (Continued)

Pending litigations and disputes

GN Store Nord and its subsidiaries are parties to pending litigations, claims and disputes arising out of the normal conduct of their business

including various cases involving patent infringements. While provisions that management deems to be reasonable and appropriate have been

made for probable losses, there are uncertainties connected with these estimates. GN Store Nord does not expect the pending litigations and

claims to have a material impact on GN Store Nord’s financial position, operating profit or cash flows in addition to the amounts recognized as

provisions for legal disputes.

Sig

nificant accounting estimates and judgments

Provisions, Contingencies and Litigations

GN Store Nord’s Management assesses provisions, contingent assets and contingent liabilities and the likely outcome of pending or threaten-

ing litigations and claims on an ongoing basis. The outcome depends on future events that are by nature uncertain. In assessing the likely out-

come of litigations, claims and tax disputes, etc., Management bases its assessment on external legal assistance and decided cases

5.6 Investments in associates

DKK million

2020

2019

Aggregated financial information for associates is provided below:

Total share of profit (loss) in associates for the year

-9

3

Total unrecognized profit (loss) in associates for the year

30

-

Total share of net assets in associates

523

227

Cumulative unrecognized loss in associates

-

-30

Carrying amount of associates

523

257

Transactions with associates comprise sale of goods of DKK 66 million (2019: DKK 44 million) and purchase of services, licenses and other

assets of DKK 87 million (2019: DKK 8 million). At year end GN has DKK 150 million (2019: DKK 78 million) in receivables from associates.

Accounting policies

Investments in Associates in the Consolidated Financial Statements

On acquisition of investments in associates, the purchase method is used, cf. Business Combinations.

In the consolidated financial statements investments in associates are recognized according to the equity method. Investments in associates

are measured at the proportionate share of the enterprises’ net asset values calculated in accordance with the Group’s accounting policies

minus or plus the proportionate share of unrealized intra-group profits and losses and plus the carrying amount of goodwill.

Profit (loss) from Investments in Associates

The proportionate share of the profit (loss) after tax of the individual associates is recognized in the income statement of the Group after elimi-

nation of the proportionate share of intra-group profits (losses)

5.7 Other non-cash adjustments

DKK million

2020

2019

Share-based payment (granted)

77

39

(Gain) loss on divestment of operations

-

15

Loss allowance on trade receivables, inventory write-downs, etc.

130

10

Adjustment of provisions

139

28

Total

346

92

109 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

5.8 Fees to statutory auditors

DKK million

2020

2019

Statutory audit

-9

-8

Tax advice services

-1

Other services

-5

-4

Fee to statutory auditors

-15

-13

Fees for services other than statutory audit of the financial statements amounts to DKK 6 million (2019: DKK 5 million). Services other than

statutory audit of the financial statements provided by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab (Pricewaterhouse-

Coopers Denmark) comprise services primarily related to tax compliance and transfer pricing, project support and technical accounting advi-

sory services.

5.9 Related parties

No single entity or person has control or exercises significant influence over the GN Group as a whole. Key Management personnel and associ-

ated companies are the sole related parties of the Group. Transactions with Key Management personnel constitute remuneration, as disclosed

in note 5.2 Remuneration of the Board of Directors and Executive Management and 5.3 Share-based incentive plans, and transactions with

associates are disclosed in note 5.6 Investments in associates.

5.10 Events after the reporting period

No events have occurred after the reporting date of importance to the consolidated financial statements.

110 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Domicile

Currency

Ownership

%

Share capital

GN Store Nord A/S

Denmark

DKK

569,072,400

GN Ejendomme A/S

Denmark

DKK

100

115,625,000

GN Financing A/S

Denmark

DKK

100

400,000

GN Audio A/S

Denmark

DKK

100

34,873,800

GN Audio Australia Pty Ltd.

Australia

AUD

100

2,500,000

GN Áudio Brasil Importacão & Comércio Ltda.

Brazil

BRL

100

407,821

GN Audio Canada Inc.

Canada

CAD

100

409,800

GN Audio (China) Ltd.

China

CNY

100

65,116,155

GN Audio (Shanghai) Co., Ltd.

China

CNY

100

15,481,000

GN Audio Logistic (Xiamen) Ltd.

China

CNY

100

4,133,738

GN Audio France SA

France

EUR

100

80,000

GN Audio Germany GmbH

Germany

EUR

100

51,000

GN Audio Hong Kong Limited

Hong Kong

HKD

100

33,500,000

GN Audio India Private Limited

India

INR

100

40,000,000

Jabra Connect India Private Limited

India

INR

51

20,000,000

GN Audio Italy s.r.l.

Italy

EUR

100

10,200

GN Audio Japan Ltd.

Japan

JPY

100

10,000,000

GN Audio Benelux B.V.***

Netherlands

EUR

100

18,000

GN Audio Poland Sp. Z.o.o.

Poland

PLN

100

50,000

GN Audio Singapore Pte. Ltd.

Singapore

SGD

100

700,000

Jabra Connect Singapore Pte.Ltd.

Singapore

USD

51

12,000

GN Audio Spain, S.A.

Spain

EUR

100

66,111

GN Audio Sweden AB

Sweden

SEK

100

5,100,000

GN Audio UK Ltd.**

United Kingdom

GBP

100

100,000

GN Audio USA Inc.

USA

USD

100

45,900,000

Altia Systems Inc.

USA

USD

100

22,980,067

GN Hearing A/S

Denmark

DKK

100

64,986,300

GN Hearing Australia Pty. Ltd.

Australia

AUD

100

4,000,002

GN Hearing Austria GmbH

Austria

EUR

100

500,000

GN Áudio Brasil Importacão & Comércio Ltda.

Brazil

BRL

100

1,019,327

Beltone Holdings Canada, LTD

Canada

CAD

100

1,039

GN Hearing Care Canada Ltd.

Canada

CAD

100

8,435,000

GN Hearing Shanghai Ltd.

China

CNY

100

20,491,300

GN ReSound China Ltd.

China

CNY

100

34,000,000

GN Hearing Czech Republic spol. s r.o.

Czech Republic

CZK

100

102,000

Audigy Group International A/S

Denmark

DKK

100

400,000

Dansk Hørecenter ApS

Denmark

DKK

100

165,657,000

FalCom A/S

Denmark

DKK

100

88,500,000

GN Hearing Finland Oy/Ab

Finland

EUR

100

55,502

GN Hearing SAS

France

EUR

100

2,300,000

GN Hearing GmbH

Germany

EUR

100

296,549

GN ReSound GmbH Hörtechnologie

Germany

EUR

100

2,162,253

GN Hearing India Private Limited

India

INR

100

20,983,210

GN Hearing S.r.l.

Italy

EUR

100

181,190

GN Hearing Japan K.K.

Japan

JPY

100

499,000,000

GN Hearing Korea Co., Ltd.

Korea

KRW

100

136,700,000

GN Hearing (Malaysia) Sdn Bhd

Malaysia

MYR

100

2,500,000

GN Hearing Benelux B.V.

Netherlands

EUR

100

680,670

GN Hearing New Zealand Limited

New Zealand

NZD

100

2,000,000

GN Hearing Norway AS

Norway

NOK

100

2,000,000

GN Hearing RUS LLC

Russia

RUB

100

10,000

GN Hearing Pte. Ltd.

Singapore

SGD

100

1,740,000

Nessa Hearing Pte. Ltd.

Singapore

SGD

49

250,000

Interton Slovakia S.R.O.

Slovakia

EUR

85

6,639

GN Hearing Care S.A.

Spain

EUR

100

66,110

GN Hearing Sverige AB

Sweden

SEK

100

100,000

GN Hearing Switzerland AG

Switzerland

CHF

100

500,000

Companies in GN Group

111 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

Companies in the GN Group (Continued)

Domicile

Currency

Ownership %

Share capital

GN Hearing A/S continued:

GN Hearing UK Ltd.

United Kingdom

GBP

100

7,376,000

GN US Holdings Inc.

USA

USD

100

36,000,000

GN Advanced Hearing Protection, LLC*

USA

USD

100

-

GN Hearing Care Corporation

USA

USD

100

190,000

GN ReSound Holdings, LLC.

USA

USD

100

31,634

ReSound Holdings, Inc.

USA

USD

100

10,000

Beltone Holdings US, LCC

USA

USD

100

3,000

Beltone Hearing Care Foundation*

USA

USD

100

-

Audigy Group, LLC

USA

USD

100

400,000

Audigy Medical, LLC*

USA

USD

100

-

Audigy Venture, LLC*

USA

USD

100

-

Associates

Audio Nova S.R.L.

Romania

ROL

49

1,000

Himpp A/S

Denmark

DKK

11

1,600,000

HIMSA A/S

Denmark

DKK

25

1,000,000

HIMSA II A/S

Denmark

DKK

17

500,000

Himsa II K/S

Denmark

DKK

15

3,250,000

K/S Himpp

Denmark

DKK

9

19,950,000

audEERING Gmbh

Germany

EUR

25

8,378,000

Hearing Center of the East Bay, LLC

USA

USD

50

25,000

BelMart LLC

USA

USD

30

3,556,822

Beltopia LLC

USA

USD

25

1,734,500

* Without par value

** GN Audio UK Ltd. with UK company registration number 02230550 and GN Hearing UK Ltd. with UK company registration number 0

2984645, are exempt from audit of their financial

statements under s479A of the UK Companies Act 2006.

*** GN Audio Benelux B.V. (registration number 20113074) and GN Hearing Benelux B.V. (registration number 09033081) applies t

he group exemption of article 2:403 of the Dutch Civil

Code and does not prepare individual financial statements.

Note: A few minor companies have been omitted from the list.

112 Financial statements ⋅ Consolidated Contents

GN Store Nord A/S

In this annual report the following financial terms (non-IFRS measures) are used:

Operating profit (loss)

Profit

(loss) before tax and financial items.

EBITDA

Operating profit (loss) before depreciation and impairment of property, plant and equipment, amortization and impairment

of intangible assets, except development projects, impairment of goodwill and

gains (losses) on divestment of operations

etc.. EBITDA therefore include amortization of development projects.

EBITA

Operating profit (loss) before amortization and impairment of acquired intangible assets, impairment of goodwill and gains

(losses) on divestment of operations etc. EBITA therefore include amortization of development projects and software

developed in

-house.

Free cash flow

Cash flow from operating and investing activities

Convertible bond

EUR 330 million

senior unsecured zero coupon bonds due 2024 with detachable unsecured warrant units expiring 2024

(refer to note 4.2 Financial risks).

Key Ratio Definitions

Organic growth

=

Absolute organic revenue growth

Revenue in comparative period

Organic growth is a measure of growth excluding the impact of acquisitions, divestments and foreign exchange

adjustments from year-on-year comparisons.

Net working capital (NWC)

=

Inventories + receivables + other operating current assets - trade payables - other operating current liabilities

Net interest bearing debt (NIBD)

=

Bank loans and issued bonds + Lease liabilities - Cash and cash equivalents

Dividend payout ratio

=

Total dividend

Profit (loss) for the year

Gross margin

=

Gross profit

Revenue

EBITA margin

=

EBITA

Revenue

ROIC (Return on invested

capital including goodwill)

=

EBITA

Average invested capital including goodwill

Invested capital

=

NWC +

property, plant and equipment and intangible assets + loans to dispensers of GN Hearing products + pre-paid

discounts + ownership interests

– provisions

Cash conversion

=

Free cash flow excl. company acquisitions and divestments

EBITA

Return on equity (ROE)

=

Profit (loss) for the year

Average equity of the Group

Equity ratio

=

Equity of the Group

Total assets

Earnings per share, basic (EPS)

=

Profit (loss) for the year

Average number of shares outstanding

Earnings per share, fully diluted

(EPS diluted)

=

Profit (loss) for the year

Average number of shares outstanding, fully diluted

Market capitalization

Number of shares outstanding x share price at the end of the period

Outstanding shares

Number of shares listed - treasury shares

113 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

Notes – Income statement and balance

sheet

1 Staff costs 118

2 Share-based incentive plans 119

3 Depreciation, amortization and impairment 119

4 Fees to statutory auditors 120

5 Financial income and expenses 120

6 Tax 120

7 Intangible assets 121

8 Property, plant and equipment 121

9 Leases 122

10 Investments in subsidiaries 122

11 Investments in associates 123

12 Deferred tax 123

Notes – Other disclosures

13 Contingent assets and liabilities 124

14 Financial instruments 124

15 Outstanding shares and treasury shares 125

16 Related party transactions 126

17 Liabilities from financing activities 126

18 Accounting policies 127

Parent company

Financial statements 2020

Financial statements

Income statement and statement of

comprehensive income

114

Balance sheet at December 31

115

Statement of cash flow

s 116

Statement of equity

117

Notes to the parent company financial statements

114 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

Income statement

DKK million

Note

2020

2019

Revenue

456

358

Gross profit

456

358

Development costs

-90

-72

Management and administrative expenses

1,2,3,4

-549

-448

Operating profit (loss)

-183

-162

Share of profit after tax in subsidiaries

10

1,332

1,722

Share of profit (loss) in associates

11

-3

-2

Financial income

5

110

102

Financial expenses

5

-143

-188

Profit (loss) before tax

1,113

1,472

Tax on profit (loss)

6

139

-18

Profit (loss) for the year

1,252

1,454

Proposed profit appropriation/distribution of loss

Transferred to reserve for net revaluation according to the equity method

1,332

-278

Retained earnings

-286

1,526

Proposed dividends for the year

206

1,252

1,454

Statement of comprehensive income

DKK million

2020

2019

Profit (loss) for the year

1,252

1,454

Other comprehensive income

Items that will not be reclassified subsequently to the income statement

Other changes in equity in subsidiaries

-1

12

Items that may be reclassified subsequently to the income statement

Adjustment of cash flow hedges

4

7

Tax relating to other comprehensive income

-1

-2

Foreign exchange adjustments, etc.

-601

161

Other changes in equity in subsidiaries

-2

5

Other comprehensive income for the year

-601

183

Total comprehensive income for the year

651

1,637

115 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

Balance sheet at December 31

DKK million

Note

2020

2019

Assets

Intangible assets

7

369

298

Property, plant and equipment

8, 9

71

64

Investments in subsidiaries

10

8,618

9,590

Investments in associates

11

24

27

Amounts owed by subsidiaries

14

3,704

3,951

Total non-current assets

12,786

13,930

Tax receivables

-

73

Other receivables

14

138

54

Cash and cash equivalents

1,230

1,410

Total current assets

1,368

1,537

Total assets

14,154

15,467

Equity and liabilities

Share capital

569

Other reserves

-1,610

-2,231

Proposed dividends for the year

206

Retained earnings

6,013

6,305

Total equity

5,178

4,849

Bank loans and issued bonds

14, 17

5,069

5,345

Lease liabilities, non-current

9

30

34

Deferred tax liabilities

12

28

240

Total non-current liabilities

5,127

5,619

Bank loans

14, 17

334

1,196

Lease liabilities, current

9

7

Trade payables

14

56

50

Tax payables

156

-

Amounts owed to subsidiaries

14, 17

3,087

3,663

Other payables

209

83

Total current liabilities

3,849

4,999

Total equity and liabilities

14,154

15,467

116 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

Statement of cash flows

DKK million

Note

2020

2019

Operating activities

Operating profit (loss)

-183

-162

Depreciation, amortization and impairment

7, 8

94

70

Other non-cash adjustments

13

3

Cash flow from operating activities before changes in working capital

-76

-89

Change in receivables

-84

-16

Change in trade payables and other payables

136

14

Total changes in working capital

52

-2

Cash flow from operating activities before financial items and tax

-24

-91

Interest and dividends, etc. received

2,023

2,000

Interest paid

-

-37

Tax paid, net

159

43

Cash flow from operating activities

2,158

1,915

Investing activities

Investments in intangible assets

-149

-127

Investments in tangible assets

-22

-16

Amounts owed by subsidiaries

247

-2,542

Cash flow from investing activities

76

-2,685

Cash flow from operating and investing activities (free cash flow)

2,234

-770

Financing activities

Decrease of long-term loans

17

-303

-826

Increase in short-term loans and amounts owed to subsidiaries

17

-

2,681

Decrease of short-term loans and amounts owed to subsidiaries

17

-1,471

-

Net proceeds from issue of bonds (bond-with-warrant units)

-

2,272

Net proceeds from issue of warrants (bond-with-warrant units)

-

204

Repurchase of bonds issued in 2017

-

-1,632

Repurchase of warrants issued in 2017

-

-604

Net proceeds from issue of Eurobonds

-

1,630

Paid dividends

-187

-178

Purchase/sale of treasury shares

-453

-1,626

Cash flow from financing activities

-2,414

1,921

Net cash flow

-180

1,151

Cash and cash equivalents, beginning of period

1,410

259

Cash and cash equivalents, end of period

1,230

1,410

117 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

Statement of changes in equity

Other reserves

DKK million

Share

capital*

Hedging

reserve

Treasury

shares

Reserve

according

to the

equity

method

Proposed

dividends

for the

year

Retained

earnings

Total

equity

Balance sheet total at December 31, 2018

583

-2

-2,585

1,255

197

5,648

5,096

Profit (loss) for the period

-

-278

-

1,732

1,454

Adjustment of cash flow hedges

-

7

-

7

Other changes in equity in subsidiaries

-

31

-

31

Foreign currency translation adjustments of investments in

subsidiaries etc.

-

161

-

161

Tax relating to other comprehensive income

-

-2

-

-14

-

-16

Other comprehensive income for the year

-

5

-

178

-

183

Total comprehensive income for the year

-

5

-

-100

-

1,732

1,637

Reduction of the share capital

-14

-

536

-

-522

-

Fair value of warrants issued with bonds

-

204

Repurchase of warrants issued with bonds in 2017

-

-604

Other changes in equity in subsidiaries

-

-3

-

-3

Purchase of ownership interests in subsidiaries by payment in

treasury shares

-

251

-

20

271

Share-based payment (granted)

-

3

Tax related to share-based incentive plans

-

38

-

11

49

Purchase of treasury shares

-

-1,626

-

-1,626

Proposed dividends for the year*

-

206

-206

-

Paid dividends

-

-178

-

-178

Dividends, treasury shares

-

-19

19

-

Balance sheet total at December 31, 2019

569

3

-3,424

1,190

206

6,305

4,849

Profit (loss) for the period

-

1,332

-

-80

1,252

Adjustment of cash flow hedges

-

4

-

4

Other changes in equity in subsidiaries

-

-18

-

-18

Foreign currency translation adjustments of investments in

subsidiaries etc.

-

-601

-

-601

Tax relating to other comprehensive income

-

-1

-

15

-

14

Other comprehensive income for the year

-

3

-

-604

-

-601

Total comprehensive income for the year

-

3

-

728

-

-80

651

Other changes in equity in subsidiaries

-

51

-

51

Purchase of ownership interests in subsidiaries by payment in

treasury shares

-

237

-

-43

194

Share-based payment (granted)

-

13

Tax related to share-based incentive plans

-

55

-

5

60

Purchase of treasury shares

-

-453

-

-453

Proposed dividends for the year*

-

206

-206

-

Paid dividends

-

-187

-

-187

Dividends, treasury shares

-

-19

19

-

Balance sheet total at December 31, 2020

569

6

-3,640

2,024

206

6,013

5,178

* Equivalent to DKK 1.45 per share (2019: DKK 1.45 per share)

The reserve according to the equity method includes foreign exchange adjustments of DKK -1,500 million (2019: DKK -910 million).

Retained earnings, which are available for distribution from the Parent Company amounts to DKK 2,585 million (2019: DKK 3,090 million).

118 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

1 Staff costs

DKK million

2020

2019

Wages, salaries and remuneration

167

149

Pensions

11

13

Share-based incentives

13

3

Other social security costs

1

Total

192

166

Executive Management remuneration can be specified as follows:

Marcus Desimoni, CFO of GN Store Nord

Fixed salary

4.4

4.5

Other benefits

0.8

0.6

Bonus

3.8

4.7

Share-based incentives*

9.1

1.1

Total

18.1

10.9

Board of Directors remuneration

5.9

5.5

Total remuneration

24.0

16.4

Staff costs are included in Management and administrative expenses.

Average number of employees

225

175

Number of employees at year-end

250

200

*In 2020 non-vested share-based incentives have been expensed for the full vesting period and recognized per December 31, 2020

For information regarding Executive Management and Board of Directors total remuneration please refer to note 5.2 Remuneration of the

Board of Directors and Executive Management in the consolidated financial statements.

119 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

2 Share-based incentive plans

For 2019 and 2020 a share-based incentive plan has been implemented in GN Store Nord. For a description of this, see note 5.3 Share-based

incentive plans in the consolidated financial statements. The following assumptions were applied for the calculation of the market value at the

grant date of the options:

Executive

Management

Other employees

2020

2019

2020

2019

Number of option awarded in the year

39,303

50,367

54,560

67,022

Share price GN Store Nord at ordinary grant date

390

312

390

312

Vesting period

3 years

Life of option

6 years

Volatility*

29%

27%

29%

27%

Expected dividend

0.4%

Risk-free interest rate**

0.00%

Fair Value per option at ordinary grant (DKK)***

83

61

87

68

Total market value at grant (DKK million)

3

4

5

Amortization period of the program

2020 -

2023

2019 -

2022

2020 -

2023

2019 -

2022

* Volatility is estimated by external experts, and is calculated based on data from a historical period matching the expected time to expiry of the options

** Risk-free interest rate is estimated by external experts and based on the zero yield curve derived from Danish government bonds with maturity equal to the expiry of the options

*** The fair value includes any market vesting conditions.

DKK

Number*

Average

exercise

price

Executive

Manage-

ment

Other

employees

Total

Outstanding options at January 1, 2019

-

Options granted during the year

313

50,367

67,022

117,389

Outstanding options at December 31, 2019

313

50,367

67,022

117,389

Options granted during the year

384

39,303

54,560

93,863

Options forfeited during the year

345

-

-13,497

Outstanding options at December 31, 2020

344

89,670

108,085

197,755

Weighted average term to maturity (Years)

4.6

Number of exercisable options at December 31, 2019

-

Number of exercisable options at December 31, 2020

-

* The performance multiplier can decrease the number of options or as maximum effect increase the number of options by a factor of 2

Outstanding options at December 31, 2020 in GN Store Nord A/S by grant date are shown below:

DKK

Number*

Grant date

Exercise

price

Executive

Manage-

ment

Other

employees

Total

April 2019

313

50,367

59,957

110,324

February 2020

381

39,303

44,780

84,083

November 2020

476

-

3,348

Outstanding options at December 31

89,670

108,085

197,755

* The performance multiplier can decrease the number of options or as maximum effect increase the number of options by a factor of 2

3 Depreciation, amortization and impairment

Depreciation, amortization and impairment for the year of property, plant and equipment (incl. leased assets) and intangible assets of DKK 94

(2019: DKK 70 million), is recognized in the income statement as management and administrative expenses.

120 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

4 Fees to statutory auditors

DKK million

2020

2019

Statutory audit

-2

-1

Tax advice services

-1

Other services

-3

-4

Total

-6

Services other than statutory audit are described in note 5.8 Fees to statutory auditors in the consolidated financial statements.

5 Financial income and expenses

DKK million

2020

2019

Financial income

Interest income from subsidiaries*

68

62

Interest income from bank balances*

4

38

Financial income, other

3

-

Foreign exchange gain

35

2

Total

110

102

Financial expenses

Interest expense to subsidiaries*

-7

-44

Interest expenses on bank loans and issued bonds*

-65

-78

Financial expenses, other

-26

-32

Fair value adjustments of derivative financial instruments and impairments

-

-23

Foreign exchange loss

-45

-11

Total

-143

-188

*Interest income and expenses from financial assets and liabilities at amortized cost

6 Tax

DKK million

2020

2019

Tax on profit (loss)

Current tax for the year

-83

48

Deferred tax for the year

132

5

Adjustment to current tax in respect of prior years

10

13

Adjustment to deferred tax in respect of prior years

80

-84

Total

139

-18

Reconciliation of effective tax rate

Danish tax rate

22.0%

Non-taxable income

-0.1%

0.0%

Non-deductible expenses

0.3%

0.1%

Adjustment of tax with respect of prior years

-8.1%

4.8%

Share of profit (loss) in subsidiaries

-26.3%

-25.7%

Share of profits (loss) in associates

0.1%

0.0%

Other, including provisions for uncertain tax positions

-0.4%

0.0%

Effective tax rate

-12.5%

1.2%

In 2020, the company paid preliminary taxes of DKK 223 million in Danish corporate income tax for the year on behalf of the joint Group

taxation (For the Year 2019 DKK 91 million was paid in final tax for the year in Danish corporate income tax).

121 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

7 Intangible assets

Software

DKK million

2020

2019

Cost at January 1

522

395

Additions

149

127

Other adjustments

-1

-

Cost at December 31

670

522

Amortization and impairment at January 1

-224

-165

Amortization

-77

-56

Impairment

-

-3

Amortization and impairment at December 31

-301

-224

Carrying amount at December 31

369

298

Amortized over

1 - 7 years

The carrying amount includes software in progress of DKK 191 million (2019: DKK 158 million).

8 Property, plant and equipment

2020

2019

DKK million

Factory

and office

buildings

Operating

assets and

equipment

Total

Factory

and office

buildings

Operating

assets and

equipment

Total

Cost at January 1

-

30

-

14

Additions

-

22

-

16

Cost at December 31

-

52

-

30

Depreciation and impairment at January 1

-

-7

-2

Depreciation

-

-10

-

-5

Depreciation and impairment at December 31

-

-17

-

-7

Carrying amount at December 31

-

35

-

23

Leased assets, c.f. note 9

35

1

36

39

2

41

Total carrying amount at December 31

35

36

71

39

25

64

Operating assets and equipment are depreciated over 2-7 years.

122 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

9 Leases

The following right-of-use assets are included in property, plant and equipment:

Leased assets

2020

2019

DKK million

Factory

and office

buildings

Operating

assets and

equipment

Total

Factory

and office

buildings

Operating

assets and

equipment

Total

Carrying amount at January 1

39

2

41

44

1

45

Additions

-

2

Remeasurements

2

-

2

-

Depreciation

-6

-1

-7

-5

-1

-6

Carrying amount at December 31

35

1

36

39

2

41

Lease liabilities

DKK million

2020

2019

Contractual maturity analysis of lease liabilities:

Less than one year

7

Between one and three years

13

12

More than three years

18

23

Total

38

42

The maturity analysis is based on non-discounted cash flows.

Amounts expensed in the income statement and total cash outflow

DKK million

2020

2019

Total cash outflow for leases

6

5

The parent company’s leases mainly consist of property leases of e.g. offices but also include cars and office equipment. Rental contracts are

typically made for fixed periods but may have extension options. Contracts may contain both lease and non-lease components. In such cases

the consideration in the contract is allocated to the lease and non-lease components based on their relative stand-alone prices. Lease terms

are negotiated on an individual basis and contain a wide range of different terms and conditions.

10 Investments in subsidiaries

DKK million

2020

2019

Cost at January 1

6,400

6,129

Additions, capital contribution

194

271

Cost at December 31

6,594

6,400

Value adjustment at January 1

3,190

3,255

Share of profit after tax in subsidiaries

1,332

1,722

Foreign currency translation adjustments

-601

161

Direct equity postings in subsidiaries

103

52

Dividends received

-2,000

Value adjustments at December 31

2,024

3,190

Carrying amount at December 31

8,618

9,590

Group companies are listed on page 110.

123 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

11 Investments in associates

DKK million

2020

2019

Aggregated financial information for associates is provided below:

Total share of loss in associates for the year

-3

-2

Total share of net assets in associates

24

27

Carrying amount of associates

24

27

12 Deferred tax

DKK million

2020

2019

Deferred tax, net

Deferred tax at January 1, net

-240

-161

Adjustment in respect of prior years

80

-84

Deferred tax for the year recognized in profit (loss) for the year

132

5

Deferred tax at December 31, net

-28

-240

Deferred tax, net relates to:

Intangible assets

-42

-34

Retaxation

-

-127

Provisions

-

-91

Other

14

12

Total

-28

-240

124 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

13 Contingent assets and liabilities

The parent company has issued guarantees on behalf of subsidiaries of DKK 23 million (2019: DKK 130 million).

The company is jointly taxed with all Danish subsidiaries. The company is jointly and severally liable with the other companies in the joint taxa-

tion for Danish corporate taxes and withholding taxes on dividend, interests and royalties within the joint taxation.

14 Financial instruments

Contractual maturity analysis for financial liabilities

DKK million

Less than

one year

Between one

and three years

More than

three years

Total

2020

Issued bonds*

12

1,661

2,455

4,128

Long-term bank loans

1

745

373

1,119

Short-term bank loans

334

-

334

Amounts owed to subsidiaries

3,087

-

3,087

Other payables

19

-

19

Trade payables

56

-

56

Total non-derivative financial liabilities

3,509

2,406

2,828

8,743

Derivative financial liabilities

102

-

102

Total financial liabilities

3,611

2,406

2,828

8,845

2019

Issued Bonds

12

25

4,121

4,158

Long-term bank loans

-

1,418

-

1,418

Short-term bank loans

1,196

-

1,196

Trade payables

50

-

50

Amounts owed to subsidiaries

3,663

-

3,663

Total non-derivative financial liabilities

4,921

1,443

4,121

10,485

Derivative financial liabilities

2

-

4

Total financial liabilities

4,923

1,445

4,121

10,489

The maturity analysis is based on non-discounted cash flows.

* Carrying amount of bonds is DKK 3,954 million.

Categories of financial assets and liabilities

DKK million

2020

2019

Other receivables

55

44

Amounts owed by subsidiaries

3,704

3,951

Financial assets at amortized cost

3,759

3,995

Derivative financial instruments included in Other receivables

83

10

Financial assets at fair value through profit or loss

83

10

Issued bonds (bond-with-warrant units)

2,326

2,296

Issued Eurobonds

1,627

1,631

Bank loans, non-current

1,116

1,418

Lease liabilities

37

41

Bank loans, current

334

1,196

Other payables

19

-

Trade payables

56

50

Amounts owed to subsidiaries

3,087

3,663

Financial liabilities at amortized cost

8,602

10,295

Derivative financial instruments included in Other payables

102

4

Financial liabilities at fair value through profit or loss

102

4

125 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

14 Financial instruments (Continued)

Fair value disclosures re. financial instruments at amortized cost

Based on observable inputs (fair value hierarchy level 2) the fair value of issued bonds (zero coupon) amounted to DKK 2,394 million at De-

cember 31, 2020 (2019: DKK 2,530 million), and the fair value of Eurobonds amounted to DKK 1,673 million (2019: 1,643 million). For other

financial assets and liabilities, the fair value is approximately equal to the carrying amount.

The foreign currency risk in GN Store Nord A/S mainly arises from translation of receivables, debt and cash balances related to EUR and USD,

of which a large part of the USD risk is related to intercompany balances. The foreign currency risk is mitigated through non-designated deriva-

tives. At year end 2020 the FX derivatives had a fair value of DKK -18 million (2019: +8 million), of which DKK -21 million (2019: +7 million) are

related to derivatives of USD vs EUR or DKK. Interest swaps have value of DKK -1 million (2019 DKK -2 million). The fair value of derivatives is

categorized as level 2 (observable inputs) in the fair value hierarchy.

DKK million

2020

2019

Fair value adjustment for the year recognized in Other comprehensive income

4

7

15 Outstanding shares and treasury shares

For information regarding outstanding shares and treasury shares please refer to note 4.1 Outstanding shares and treasury shares in the con-

solidated financial statements.

Funding, liquidity and capital structure is managed at Group level, please refer to note 4.2 Financial risks in the consolidated financial state-

ments.

126 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

16 Related party transactions

In addition to disclosures given in note 5.9 Related parties, related parties for the parent company comprise group enterprises and associates

over which GN Store Nord A/S exercises control or significant influence.

Group companies are listed on page 110. Trade with group enterprises comprised:

DKK million

2020

2019

Sale of services to group enterprises

456

418

Lease income from group enterprises

25

18

Purchase of services from group enterprises

-89

-127

Lease costs paid to group enterprises

-30

-22

The parent company's balances with group enterprises at December 31, 2020 are disclosed in the balance sheet. Interest income and expenses

with respect to group enterprises are disclosed in note 5 Financial income and expenses. Further, balances with Group enterprises comprise

trade balances related to the purchase and sale of goods and services.

Sale of services to group enterprises consists of facility services, canteen services, management fee and IT costs. Purchase of services from

group enterprises mainly consists of facility services and canteen services. Furthermore, the parent company has purchased development ser-

vices from subsidiaries related to the exploring research projects.

No transactions have been carried out with the Board of Directors, the Executive Management, senior employees, major shareholders or other

related parties, apart from remuneration disclosed in notes 5.2 Remuneration of the Board of Directors and Executive Management and 5.3

Share-based incentive plans in the consolidated financial statements.

17 Liabilities from financing activities

DKK million

Bank loans

Issued bonds*

Lease liabilities

Bank loans,

current

Amounts owed

to subsidiaries

Total

Liabilities at January 1

1,418

3,927

41

1,196

3,663

10,245

Cash flows

-296

-

-7

-862

-609

-1,774

Foreign exchange adjustments

-6

-15

-

0

33

12

New leases

-

3

-

3

Non-cash interest expenses

-

41

-

41

Liabilities at December 31, 2020

1,116

3,953

37

334

3,087

8,527

Liabilities at January 1

2,238

1,604

-

13

2,157

6,012

Recognized on adoption of IFRS 16 Leases

-

45

-

45

Cash flows

-821

2,290

-5

1,182

1,499

4,145

Foreign exchange adjustments

1

-

1

7

9

New leases

-

1

-

1

Non-cash interest expenses

-

33

-

33

Liabilities at December 31, 2019

1,418

3,927

41

1,196

3,663

10,245

* In 2019 a loss of DKK 20 million related to the repurchase of the 2017 bonds is recognized in

financial items. Please refer to the cash flow statement for a specification of the cash flows

related to the issue and repurchase of bonds in 2019.

127 Financial statements ⋅ Parent Company Contents

GN Store Nord A/S

18 Accounting policies

The financial statements of the parent company, GN Store Nord A/S have been prepared in accordance with International Financial Reporting

Standards as adopted by the EU and Danish disclosure requirements for annual reports of listed companies. The financial statements have

been prepared in accordance with the historical cost convention, as modified by the revaluation of certain financial instruments (including

derivative financial instruments) at fair value.

The accounting policies for the financial statements of the parent company have been changed in line with the changes to accounting policies

described in note 1.1 in the consolidated financial statements. These changes have not had any material impact on recognition and measure-

ment in the parent company. Apart from the above-mentioned changes the accounting policies for the financial statements of the parent com-

pany are unchanged from the last financial year and are the same as for the consolidated financial statements with the following additions:

Supplementary accounting policies for the parent company

Investments in subsidiaries

Revenue in the parent company primarily relates to services rendered to GN Group companies during the year.

Investments in subsidiaries are accounted for using the equity method whereby the investment is initially recognized at cost and adjusted

thereafter for the post-acquisition change in the share of the subsidiaries net assets. The share of the subsidiaries profit or loss, less unrealized

intra-Group profits, is included in the income statement of the parent company and the share of the subsidiaries other comprehensive income

is included in other comprehensive income of the parent company. Received dividends reduce the carrying amount of the investments in sub-

sidiaries.

To the extent net profit in subsidiaries exceeds declared or proposed dividends from such companies, net revaluation of investments in subsidi-

aries is transferred to Net revaluation reserve under Equity according to the equity method.

Management’s report for the GN Parent company

The GN Parent Company reports GN Corporate level activities and investments into GN Hearing and GN Audio. Revenue in 2020 grew DKK 98

million (2019: DKK 96 million), primarily due to changes in the Group Functions. Costs increased during the year due to increased activities

related to research initiatives at Corporate level and changes in the Group Functions. The GN Parent Company applies the equity method for

recognizing share of profit and investments in subsidiaries and profit for the year and total equity developed in line with the Group’s overall

development. In 2020 cash flow from operations was positively impacted by dividends received in the total amount of DKK 2,000 million

(2019: DKK 2,000 million).

128 Financial statements ⋅ Statement by the Executive Management and the Board of Directors Contents

GN Store Nord A/S

Today, the Executive Management and the Board of Directors have

discussed and approved the GN Store Nord Annual Report 2020.

The annual report has been prepared in accordance with International

Financial Reporting Standards as adopted by the EU and additional

requirements of the Danish Financial Statements Act.

It is our opinion that the consolidated financial statements and the

parent company financial statements give a true and fair view of the

financial position of the group and the parent company at 31

December 2020 and of the results of the group's and the parent

company's operations and cash flows for the financial year 1 January

– 31 December 2020.

Further, in our opinion, the Management's report gives a fair review of

the development in the group's and the parent company's activities

and financial matters, results of operations, cash flows and financial

position as well as a description of material risks and uncertainties

that the group and the parent company face.

In our opinion, the Annual Report of GN Store Nord A/S for the finan-

cial year 1 January to 31 December 2020 with the file name GNST-

2020-12-31.zip is prepared, in all material respects, in compliance

with the ESEF Regulation.

We recommend that the annual report be approved at the Annual

General Meeting.

Statement by the Executive

Management and the Board of

Directors

Ballerup, February 11, 2021

Executive Management

René Svendsen-Tune

CEO, GN Store Nord

& GN Audio

Gitte Pugholm Aabo

CEO, GN Hearing

Peter la Cour Gormsen

CFO, GN Store Nord

& GN Audio

Board of Directors

Per Wold-Olsen

Chairman

Jukka Pekka Pertola

Deputy chairman

Hélène Barnekow

Montserrat Maresch

Pascual

Wolfgang Reim

Ronica Wang

Anette Weber

Morten Andersen

Leo Larsen

Marcus Stuhr Perathoner

129 Financial statements ⋅ Independent Auditor’s Reports Contents

GN Store Nord A/S

To the shareholders of GN Store Nord A/S

Report on the audit of the Financial Statements

Our opinion

In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s

and the Parent Company’s financial position at 31 December 2020 and of the results of the Group’s and the Parent Company’s operations

and cash flows for the financial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as

adopted by the EU and further requirements in the Danish Financial Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors.

What we have audited

The Consolidated Financial Statements and Parent Company Financial Statements of GN Store Nord A/S for the financial year 1 January to 31

December 2020, pp 56-127 comprise income statement and statement of comprehensive income, balance sheet, statement of changes in

equity, statement of cash flows and notes, including summary of significant accounting policies for the Group as well as for the Parent Com-

pany. Collectively referred to as the “Financial Statements”.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Den-

mark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the

Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Profes-

sional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulfilled our other ethical responsibili-

ties in accordance with the IESBA Code.

To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not

provided.

Appointment

We were first appointed auditors of GN Store Nord A/S on 21 March 2019 for the financial year 2019. We have been reappointed in 2020 by

shareholder resolution for a total period of uninterrupted engagement of two years including the financial year 2020.

Independent Auditor’s Reports

130 Financial statements ⋅ Independent Auditor’s Reports Contents

GN Store Nord A/S

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for

2020. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon,

and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Pre-paid discounts and dispenser loans (financial support ar-

rangements)

The Group provides financial support arrangements to certain

of its customers, primarily in the US. The financial support con-

sists of providing pre-paid discounts and loans (dispenser

loans).

The financial support arrangements are complex due the multi-

ple and complex contract elements where the accounting

treatment and assessment of the recoverability includes judge-

ments and assumptions.

We focused on this area because of the significant impact on

the Consolidated Financial Statements and the multiple and

complex contract elements in the arrangements.

Refer to note 3.5 in the Consolidated Financial Statements.

We assessed whether the Group’s accounting policies are in accordance

with IFRS.

We selected a sample of contracts related to financial support arrange-

ments and evaluated classification of the individual elements of the con-

tracts.

We examined the principles for recognition and valuation of loans and

pre-paid discounts by obtaining external confirmations of outstanding

balances. We examined the principles for amortisation of pre-paid dis-

counts and recalculated the amortisation schedule.

We evaluated and challenged Management’s assessment of valuation

and impairment of financial support arrangements based on an assess-

ment of recoverability and history of payments.

Capitalisation and valuation of development costs

The Group capitalises development costs within both the hear-

ing and audio segment when certain criteria according to IFRS

are met.

The criteria for recognition and measurement of development

costs is subject to Management’s judgement and assumptions,

which is uncertain by nature.

Completed development projects are assessed quarterly for

impairment indications. For in-progress development projects

impairment tests are performed quarterly. The impairment

tests are based on strategy plan approved by Management and

value-in-use calculations based on expected future cash flows.

We focused on this area because the criteria for recognition

and measurement of development projects are subject to Man-

agement judgements and assumptions.

Refer to note 3.1 in the Consolidated Financial Statements.

We assessed whether the Group’s accounting policies are in accordance

with IFRS.

We selected a sample of in-progress development projects and consid-

ered whether all criteria described in IFRS were met as basis for capitali-

sation. We assessed relevant internal controls and performed substantive

audit procedures to verify capitalised amounts.

We evaluated and challenged Management’s assessment of impairment

indicators of completed development projects based on the commercial

prospects of the projects.

For in-progress development projects, we challenged the key assump-

tions applied in the value-in-use calculations. Our work was based on our

understanding of the business cases and key assumptions applied. We

challenged whether the intent to finalise the projects remain and

whether the projects are expected to generate future economic benefits

exceeding the carrying values.

Statement on Management’s Report

Management is responsible for Management’s Report, pp 1-55.

Our opinion on the Financial Statements does not cover Management’s Report, and we do not express any form of assurance conclusion

thereon.

In connection with our audit of the Financial Statements, our responsibility is to read Management’s Report and, in doing so, consider

whether Management’s Report is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise

appears to be materially misstated.

131 Financial statements ⋅ Independent Auditor’s Reports Contents

GN Store Nord A/S

Moreover, we considered whether Management’s Report includes the disclosures required by the Danish Financial Statements Act.

Based on the work we have performed, in our view, Management’s Report is in accordance with the Consolidated Financial Statements and the

Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act.

We did not identify any material misstatement in Management’s Report.

Management’s responsibilities for the Financial Statements

Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true

and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish

Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial state-

ments that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management

either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but

is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a

material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggre-

gate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and

maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum-

stances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by

Management.

• Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained,

whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Com-

pany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may

cause the Group or the Parent Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial

Statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to

express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the

group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding inde-

pendence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independ-

ence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit

of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report

unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter

should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the pub-

lic interest benefits of such communication.

132 Financial statements ⋅ Independent Auditor’s Reports Contents

GN Store Nord A/S

Report on compliance with the ESEF Regulation

As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the Annual Report of GN Store

Nord A/S for the financial year 1 January to 31 December 2020 with the file name GNST-2020-12-31.zip is prepared, in all material respects, in

compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which

includes requirements related to the preparation of the Annual Report in XHTML format and iXBRL tagging of the Consolidated Financial

Statements.

Management is responsible for preparing an Annual Report that complies with the ESEF Regulation. This responsibility includes:

• The preparation of the Annual Report in XHTML format;

• The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to ele-

ments in the taxonomy, for all financial information required to be tagged using judgement where necessary;

• Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and

• For such internal control as Management determines necessary to enable the preparation of an Annual Report that is compliant with the

ESEF Regulation.

Our responsibility is to obtain reasonable assurance on whether the Annual Report is prepared, in all material respects, in compliance with the

ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of

procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements

set out in the ESEF Regulation, whether due to fraud or error. The procedures include:

• Testing whether the Annual Report is prepared in XHTML format;

• Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process;

• Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements;

• Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension

elements where no suitable element in the ESEF taxonomy has been identified;

• Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and

• Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements.

In our opinion, the Annual Report of GN Store Nord A/S for the financial year 1 January to 31 December 2020 with the file name GNST-2020-

12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation.

Hellerup, 11 February 2021

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR no 3377 1231

Mogens Nørgaard Mogensen

Mads Melgaard

State Authorised Public Accountant

mne21404

mne34354

133 Management's report ⋅ Independent Auditor’s Reports Contents

GN Store Nord A/S

Lautrupbjerg 7

2750

Ballerup

Denmark

Co.reg. no 24257843

+45 45 75 00 00

info@gn.com

gn.com

and FalCom are trademarks of GN Hearing A/S. Beltone is a trade

mark of GN Hearing Care Corporation. All other

trademarks and logos included herein are the property of their respective owners.