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07/09/01

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Bang & Olufsen Group Report and accounts 2000 / 2001

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Side 1
Courage to constantly question the ordinary in search of surprising, long-lasting experiences.
Bang & Olufsen AudioVisual a/s Bang & Olufsen AudioVisual develops, manufactures, markets and distributes Bang & Olufsens audio and video products. Also over the coming years the business unit will account for by far the largest share of turnover and earnings of the Bang & Olufsen Group. Both new, unique concepts as well as updated, well-known and successful products will contribute to earnings. In both categories focus will be on providing customers with experiences that exceed their expectations in terms of durability, design and user-friendliness. One major challenge lies in the large number of new technologies constantly emerging. Choices must be made in order to exploit the right technologies at the right time in the interests of customers, not for the sake of technology itself. Bang & Olufsen AudioVisual will pursue the distribution strategy which in recent years has proved its worth. The number of well located and well staffed B1 shops and shop in shop solutions will be increased across the world and individual retailers will be provided with the best possible tools for achieving higher sales. Besides a strong product portfolio, retailer support will include targeted marketing. In the important European markets as well as in the US and Japan, Bang & Olufsen AudioVisual operates subsidiaries with responsibility for developing its distribution network. A regional head office for Asia was recently established in Singapore. In addition, a significant number of sole distributors represents the Group in overseas markets.

Side 4

Bang & Olufsen Telecom a/s Bang & Olufsen Telecom is responsible for the development and sales of new telephony concepts. The company operates in a challenging environment in which new technologies arrive as fast as existing ones mature. At the same time the Internet is setting new standards for how we communicate with each other. Telecoms challenges lie in the development of telephony concepts which surprise and bring order to the daily lives of users irrespective of whether they are at home or in the office. Technology for technologys sake is immaterial which is why Telecom makes choices on behalf of customers so as to provide optimum user-friendliness. Recently, this has been further emphasised with the cordless BeoCom 2, which boasts both intelligent functions and a challenging design. Telecoms products are sold via the traditional Bang & Olufsen distribution system as well as through tele-shops. New partnerships with strong distributors are high on the companys agenda.

Side 6

Bang & Olufsen New Business a/s In terms of turnover, Bang & Olufsen ranks among the worlds largest producers of loudspeakers and our acoustic skills have been developed, enhanced and documented throughout the lifetime of the company. On this foundation, Bang & Olufsen New Business is responsible for developing our acoustic competencies and ensuring that they are applied in the most rational and business-like fashion. This will be done by maintaining and expanding our market for loudspeakers for private consumers and by entering new areas such as loudspeakers for professional sound studios and in-car entertainment. By entering the field of professional sound studios we are not only opening up new business opportunities. We are also increasing awareness of our acoustic competencies. This is likely to have a positive effect on the market for loudspeakers for the home. In-car entertainment can also impact on both the business area and the brand itself. A series of pioneering acoustics patents offers a strong platform for new partnerships and new distribution channels and thus for generating new business.

Side 22

Regarding PowerHouse, Bang & Olufsen stated: At the end of the year, PowerHouse will relocate to Lyngby partly to strengthen co-operation with Denmarks Technical University. Several key customers have decided to apply ICEpower for active loudspeakers and amplifiers. New President/CEO On March 15, Bang & Olufsen informed Copenhagen Stock Exchange that Torben Ballegaard Srensen had been appointed President & CEO with effect from July 1, 2001. Torben Ballegaard Srensen succeeds Anders Knutsen who last year announced his intention to leave his position as President & CEO no later than 2002. Downgrading of result for the year Bang & Olufsen a/s is downgrading its expectations for the current years result, the Group announced in a statement to the Copenhagen Stock Exchange on April 5. This was due to the continued downturn in sales in the US and an incipient downturn in certain European markets. On the basis of this, Bang & Olufsens result was approx. DKK 35 million below the third quarter last year. We are now expecting a pre-tax result between DKK 250-270 million after investments of approx. DKK 40 million in new business areas. High investment level On April 18, Bang & Olufsen, in its quarterly statement for the third quarter, announced that the high investment levels in both new business areas and distribution and marketing would be maintained.
The announcement stated that operating profit for Bang & Olufsen a/s fell from DKK 269 million to DKK 253 million. The ordinary result before tax was DKK 214 million or DKK 37 million less than the year before. This was primarily due to three factors: the continuing international downturn, losses from the opening of own retail shops in the US due to the downturn and a significant decline in the sales of telephones. Regarding the expectations for the full year, Bang & Olufsen stated: On a background of the decline in a number of major markets and uncertainties as to whether the downturn will spread or intensify, Bang & Olufsen expects an ordinary result for the full year of between DKK 250 and 270 million. This is after investments of DKK 40-50 million in new business areas.
Annual General Meeting The Annual General Meeting will be held on Friday September 7, 2001 at 4.30 pm at Struer Gymnasium. Environment Report The Environment Report is available from the Information Department, tel: +22. Address, etc. Bang & Olufsen a/s, Peter Bangs Vej 15, DK-7600 Struer Tel: +22. Fax: 18 88. Website: www.bang-olufsen.com Financial calendar 2001 Thursday, August 9, Annual Accounts (2000/01) Friday, September 7, Annual General Meeting Monday, October 22, Quarterly accounts (1st Quarter 2001/02) 2002 Wednesday, January 16, Interim Accounts (2001/02) Wednesday, April 17, Quarterly Accounts (3rd Quarter 2001/02) Wednesday, August 14, Annual Accounts (2001/02)

Side 24

Group Structure (new) Bang & Olufsen AudioVisual a/s* 100 % owned Development and sale of Bang & Olufsens audio/visual products and global distribution.
Bang & Olufsen Scandinavia a/s ** Kalvebod Brygge 43, 1560 Copenhagen V. Director: Lars Kirstein Andersen Bang & Olufsen Deutschland G.m.b.H. Rudolf-Diesel-Strasse 8, 82205 Gilching Director: Peter Dalm Bang & Olufsen France S.A. 141 rue Jules Guesde, 92300 Levallois-Perret Director: Elisabeth Sandager Bang & Olufsen United Kingdom Ltd. UNIT 630, Wharfdale Road, Winnersh Triangle, Berkshire RG41 5TP Director: Derek Mottershead Bang & Olufsen PowerHouse a/s 76.4 % owned Develops, produces and markets products based on highly advanced amplifier technology. S.A. Bang & Olufsen Belgium N.V. Heide 9, 1780 Wemmel Director: Peter Sommer Bang & Olufsen Italia S.p.A. Via Meravigli 2, 20123 Milano Director: Francesco Canale Bang & Olufsen AG Grindelstrasse 15, 8303 Bassersdorf, Schweiz Director: Heinz Mller Bang & Olufsen Espana S.A. Avenida Europa 2, Parque Empresarial La Moraleja, 28108 Alcobendas, Madrid Director: Alberto De Lucio Bang & Olufsen Ges.m.b.H. Hietzinger Kai 137A, 1130 Wien, Austria Director: Gernot Timmermann Bang & Olufsen America Inc. 780 West Dundee Road, Arlington Heights, IL-60004 Director: Ole Bek Bang & Olufsen Japan K. K. Shiba Boat Building 9th floor, 3-1-15, Shipa, Minato-Ku, Tokyo 105-0014 Director: Lars Myrup Bang & Olufsen Asia Pte Ltd. 23, Ubi Road 4, 5th floor, Olympia Industrial Building, Singapore 408620 Director: Lars Flyvholm
Bang & Olufsen Danmark a/s** Peter Bangs Vej 15, 7600 Struer Director: Erik Wamberg Bang & Olufsen AS vre Torggate 18, 3007 Drammen, Norway Director: Bengt Bengtson Bang & Olufsen Svenska AB Gullbergs Strandgata 4, Gteborg Director: Bengt Bengtson
Bang & Olufsen Telecom a/s 100 % owned Develops and markets new telephony concepts as part of electronic communication in the home. Bang & Olufsen a/s Brand building, Group staff functions.
Bang & Olufsen New Business a/s 100 % owned Develops new business areas based on Bang & Olufsens competencies and market position.
Bang & Olufsen Multimedia a/s 100 % owned Continuing development of the Groups overall net competencies.

Directorships in other Danish companies with the exception of 100 % owned subsidiaries Peter Skak Olufsen A/S Fiil-S Hunsballe Fr A/S A/S Jydsk Landvinding Holli Fr A/S Plantningsselskabet Steen Blicher A/S Jyllands-Posten A/S Jrgen Worning Bryggerigruppen A/S Chr. Hansens Laboratorium A/S Ejendomsaktieselskabet af 3/Incentive A/S Nuuk Imeq A/S Albani Bryggerierne A/S Peter Leschly Cimbria A/S Jernstberiet Dania A/S Sahva A/S Team Hyldahl A/S Tinglev Elementfabrik A/S Trelleborg Hadsten A/S KPC-Holding A/S Multicept A/S SDC DanDisc a/s Agramkow A/S ALO Danmark A/S Dansk Formpladeindustri A/S DPL Invest A/S Feltwave A/S Omada A/S JKE Design A/S Torsten E. Rasmussen Bruhn Holding ApS Coloplast A/S JAI A/S Morgan Management ApS Vola A/S Best Buy Group A/S Uni-Chains A/S Bekaert Variant Handling Systems A/S Vest-Wood A/S Vestas Wind Systems A/S A/S Det stasiatiske Kompagni TK Development A/S NatImmune A/S CPD Invest A/S Amadeus Invest A/S Torben Ballegaard Srensen Radiometer A/S SimCorp A/S Purup-Eskofot A/S Peter Thostrup Osteometer Biotech A/S CCBR A/S
Bang & Olufsen AudioVisual a/s Struer. (100 % owned) Cvr. no. 14344403
Torben Ballegaard Srensen Peter Thostrup Ann-Charlott Fischer Karsten Okholm Larsen Peter Eckhardt
Bang & Olufsen Telecom a/s Struer. (100 % owned) Cvr. no. 24062112 Bang & Olufsen New Business a/s Struer. (100 % owned) Cvr. no. 25051637 Bang & Olufsen Multimedia a/s Struer. (100 % owned) Cvr. no. 26035392 Bang & Olufsen Operations a/s Struer. (100 % owned) Cvr. no. 26035406 Bang & Olufsen Medicom a/s Struer. (100 % owned) Cvr. no. 24053415 Bang & Olufsen PowerHouse a/s Lyngby-Trbk. (76.4 % owned) Cvr. no. 25053591

Jens Peter Zinck

Poul Henrik Sjberg

John Bennett-Therkildsen

Henrik Kagenow

Jrgen Johansen

Side 30
Main and key figures Operating profit DKK million 0 96/97 97/98 98/99 99/00 00/01 The Group (DKK million) 1996/97 1997/98 1998/99 1999/00 2000/01
Result Net turnover 3,008 Turnover in foreign markets as percentage of above 77 Operating profit 303 Result from ordinary operations before tax 321 Ordinary result after tax 216 Extraordinary result after tax Result for the year 216 Result after tax and minority interests 170 Balance sheet Total assets at year end Share capital Equity capital at year end Minority interests Cash flow for the year Employment Number of employees at year end Key figures Profit ratio, % Rate of return, % Return on equity, % Current ratio Debt-equity ratio, % Earnings per share (nominal DKK 10) Intrinsic value (nominal DKK 10) Quoted share price on 31 May Price/earnings Quoted share price/intrinsic value Dividend per share (nominal DKK 10)
(Parentheses denote negative figures)

Own shares As at May 31, 2001, Bang & Olufsen a/s holds shares of nom. DKK 8,949,510. This corresponds to approx. 6.7 per cent of the share capital. An options programme for directors and senior managers in the Group has been set up. The options pool totals approx. 112,000 shares which can be exercised during the period 2002-2008. Register of shareholders in accordance with Danish Company Law 28B Shareholders holding at least 5 per cent of the share capital: Lnmodtagernes Dyrtidsfond, Vendersgade 28, 1363 Copenhagen K. ATP, Kongens Vnge 8, 3400 Hillerd. Nordea Companies Danmark A/S (formerly Unidanmark A/S), Torvegade 2, 1786 Copenhagen V.
Shares held by members of the Board of Management As at May 31, 2001, members of the Board of Management of Bang & Olufsen a/s own nominally DKK 2,000 ordinary shares (multiple voting shares) and nominally DKK 19,860 ordinary shares. Annual General Meeting and payment of dividend The Annual General Meeting will take place at 4.30 pm on Friday, September at Struer Gymnasium. Payment of dividend is expected to take place on Thursday, September 13, 2001.
Market value of shares in relation to the equity capital as at 31 May
DKK million 6,000 5,000 4,000 3,000 2,000 1,96/97 97/98 98/99 99/00 00/01
Market value of shares Equity capital
The share capital consists of: Ordinary shares (multiple voting shares): 1,147,500 of DKK 10 Ordinary shares: 12,244,746 of DKK 10 Total
Circulating shares DKK 11,475,000 DKK 122,447,460 DKK 133,922,460 Issued shares - Less own ordinary shares Total Average circulating shares 13,392,246 (894,951) 12,497,295 12,489,138
Ordinary shares (multiple voting shares) not listed on the Copenhagen Stock Exchange are included at the same price as the ordinary shares.
Key figures Share capital, DKK million Earnings per share (nom. DKK 10) Intrinsic value (nom. DKK 10) Quoted share price as at May 31 Dividend per share (nom. DKK 10)

1996/395 2.5

1997/441 7.5

1998/462 5.0

1999/283 6.0

2000/268 3.5

Side 34
Directors Report, Bang & Olufsen a/s Group Turnover in the Bang & Olufsen a/s Group reached DKK 3,810 million in the 2000/01 financial year against DKK 3,722 million the previous year. This constitutes a rise of DKK 88 million, or 2 per cent. The result of primary operations was DKK 271 million against DKK 337 million the year before, i.e. a fall of DKK 66 million or 20 per cent. The ordinary pre-tax result was DKK 224 million against DKK 317 million a fall of DKK 93 million or 29 per cent. The result is after costs of DKK 43 million relating to the development of new business areas within Bang & Olufsen Multimedia (DKK 27 million), Bang & Olufsen PowerHouse (DKK 10 million) and Bang & Olufsen New Business (DKK 6 million). The lower result is attributable to four significant factors: 1. Own shops in the US contributed negatively by approx. DKK 25 million less than last year. 2. With a fall in turnover of 6 per cent, the German market once again proved disappointing. Germany contributed approx. DKK 20 million less than last year. 3. With an expected fall in turnover of 12 per cent, Denmark contributed approx. DKK 15 million less than last year. 4. Bang & Olufsen Telecom a/s contribution declined by approx. DKK 24 million. Totalling around DKK 80 million, these four factors have a direct impact on the result for the year. Compared to the ongoing expectations over the year, the final result is lower than envisaged. Trends during the second half year and, in particular, during the fourth quarter proved considerably worse than originally expected. The first warning was given in the Interim Report on January 24, 2001. On the basis of the result for the 1st halfyear, which was above that for the same period the year before, expectations for the full year were maintained. At the time, however, it was stated that the US market had suffered lower growth compared to the early part of the financial year and that this would affect the second half year and thus the full year negatively if slackening demand were to spread to Europe. This is what happened. On April 5, expectations for the full year were revised downwards to DKK 250-270 million due to the continuing slump in US sales. This had also spread to a number of European markets. These expectations were maintained in the Quarterly Report of April 18, 2001. The slowdown, however, was further intensified in the fourth quarter when the fall in turnover with few exceptions spread across the board. In particular, losses from own shops in the US exceeded expectations. Turnover in the 4th quarter declined by DKK 36 million to DKK 905 million compared to the 4th quarter of the previous year. The result after tax fell by DKK 48 million to DKK 6 million. Although neither the targets for turnover nor growth in earnings were achieved, the Group maintains and continues to follow the basic strategies for the Groups development. Within the Group, the companies Bang & Olufsen AudioVisual and Bang & Olufsen Telecom have under performed while Bang & Olufsen Medicom, Bang & Olufsen New Business, Bang & Olufsen Multimedia and Bang & Olufsen PowerHouse have developed in line with expectations. As mentioned, DKK 43 million was spent on the development of new business areas during the year. Product development costs were DKK 346 million against DKK 308 million in the previous financial year. Product development costs now account for 9 per cent of the turnover. Distribution and marketing costs rose by DKK 69 million or 10 per cent, of which DKK 58 million relates to expansion in the US. The overall tax percentage for the year rose from 30 to 34 per cent. The rise in the tax rate is mainly due to the fact that the foreign subsidiaries have used up their tax losses. Of the tax expense of DKK 76 million, DKK 65 million relates to Bang & Olufsen AudioVisual a/s and DKK 11 million to other companies in the Bang & Olufsen a/s Group. During the financial year, the balance sheet increased by DKK 158 million from DKK 2,144 million to DKK 2,302 million. The increase primarily derives from stock which increased by DKK 101 million and other receivables which saw an increase of DKK 59 million. The increase in stock is due to the opening of own B1 shops that required extra stock as well as the reduced turnover in the 4th quarter. The rise in other receivables mainly relates to corporation tax receivable, due to the lower than expected result. Tangible fixed assets saw a net increase of DKK 48 million to DKK 895 million largely due to the completion of Bang & Olufsen Medicoms new building and investment in new production equipment.

Side 44

Directors Report, Bang & Olufsen Multimedia a/s This business area focuses on Bang & Olufsens efforts within multimedia and Internet related products, physical as well as virtual, and within existing as well as new product categories. The endeavour is, at least initially, centred upon the following three areas in which DKK 27 million was invested during the year. Link systems: Web enabling of Bang & Olufsens existing and future products, i.e. providing the user with direct access to music on the Internet through Bang & Olufsens products and the home PC. During the year, work has primarily focused on the development of BeoLink PC 2. Portable: Products which can also be used outside the home, e.g. portable digital music players. During the 2001/02 financial year, a small, elegant and robust MP3-player will be launched. The player will, for the first time, allow users to carry Bang & Olufsen audio/visual products in their pocket. BeoPlayer: Virtual software products, where Bang & Olufsens competencies within design, in combination with simple and user-friendly operation, enable the user to find and organise relevant content on the Internet for simple and easy application and operation. In November 2000, BeoPlayer, a virtual digital MP3-player for PCs, was test launched. The BeoPlayer represents Bang & Olufsens first contribution in respect of the organisation of music in the digital world. In May 2001, BeoPlayer was the official music and video player on the Eurovision Song Contest website. During the coming year, development work will target integrating multimedia applications for core audio/visual products. Whereas costs of development activities during the past financial year have been devoted to identifying the Groups business opportunities within multimedia, the requirements for development activities within the next financial year will be characterised by intensified commercial focus and close integration within the field of audio/video.
Directors Report, Bang & Olufsen Medicom a/s For the fourth consecutive year, Bang & Olufsen Medicom achieved growth and met its targets. During the financial year, turnover rose to DKK 233 million, a rise of DKK 34 million. The result before tax increased by DKK 4 million to DKK 34 million. As the result for the previous year comprised a share of profits of DKK 3 million from Ericsson Diax A/S. Medicoms basic earnings are in line with the target. Within the last couple of years, Medicom has implemented a well-planned strategy in which Medicoms flexible and efficient production layout remains a central element. This has now been enhanced by technological competences which, to an increasing extent, result in new products based on patented technologies. Underlying this development are Bang & Olufsens core competencies within integrated product development, userfriendliness and design. A number of research and development tasks are being carried out in conjunction with industrial partners and international academic institutions. This is expected to generate rising licence income in the coming years. The strategic development has resulted in an increasing number of international customers within the pharmaceutical and diagnostic sectors, with Novo Nordisk, AstraZeneca and 3M as the largest. Medicom develops intelligent products for pharmaceutical companies, products which contribute to a more user-friendly, safe and more simplified administration of medical treatment. The new generation of electronic dosing systems also provides patients with a better overview of their dosage needs. The next step within this field is expected to be an integration between products and the Internet whereby patients will benefit from individually adapted information and better communication with doctors. Medicom develops intelligent electronic products for diagnostic companies, which ensure better decisionmaking processes for the assessment of a patients condition in connection with diagnostic examinations. These products exploit Bang & Olufsens competencies within acoustics and data signal processing, in particular. Medicom expects to maintain growth in turnover as well as result through expanding the number of contracts with existing and new customers.

Side 46

Directors Report, Bang & Olufsen PowerHouse a/s Bang & Olufsen PowerHouse is responsible for the Groups activities within digitalised, intelligent and efficient amplifer technology. In January, the company relocated to Kgs. Lyngby. The new facilities offer scope for the companys planned expansion and its location benefits its intensified collaboration with Denmarks Technical University. Since January, the organisation has been awarded considerable resources for research, patent generation and the maturing of technologies as well as for product development. Sales and Marketing is also being built up. As a consequence of this, the company, which is still in its establishment phase, has incurred a loss of DKK 11 million. To maximise business opportunities, PowerHouse operates within three business units with differentiated products: 1. Standard products of which the first series of modular amplifier components is in production. The products are supplied to customers within the professional audio market sector as well as the home audio market. In the latter category, Sony has chosen ICEpower technology as the amplifier element in its new subwoofers. 2. Customer specified system products where a number of initial development projects are in the pipeline. 3. Partner alliances where Bang & Olufsen has signed a letter of intent with Sanyo Electric Co. Ltd. concerning design, development, production, marketing and sales of integrated and hybrid amplifiers based on ICEpower technology. The final agreement is under preparation. It envisages that PowerHouse will supply technology, development support and access to knowledge and patents. Sanyo is the largest supplier of hybrid and integrated amplifiers in the market. In the coming financial year, sales efforts will be intensified in the three main markets USA, Japan and Europe with focus on relevant market segments. As mentioned, PowerHouse is still in the start-up phase and there will be a continual need for significant investment to maintain and develop the technological and market platform. The company will not be profitable for the next few years.
The 2001/02 Financial Year Launch of new products Bang & Olufsen AudioVisual The new financial year has commenced with the continued launch of BeoVision Avant RealFlat and the new launch of BeoLab 2, Bang & Olufsens first subwoofer. BeoLab 2 exploits the overall sound competencies for which Bang & Olufsen is renowned and combines them with the latest ICEpower technology. BeoLab 2 reproduces the breadth of the deep bass area and can be used in conjunction with all other Bang & Olufsen audio products and active loudspeakers. In the latter part of the financial year, Bang & Olufsen AudioVisual will launch four new products. One integrates video and DVD, the other is a new TV with widescreen, i.e. 16:9. The two final products are plasma concepts for the US and European market. These launches will meet growing customer demand for integrated DVD solutions and plasma screens. Bang & Olufsen Telecom During the financial year, Telecom will capitalise on BeoCom 2 and BeoCom 3, which were launched recently. During the year, a further development of BeoCom 2 will be launched which, for instance, can be linked up with BeoCom 6000. BeoCom 3 will be launched before Christmas 2001 in a special two-line version for the US. Finally, BeoCom 6000 will be subject to extensive design and functionality upgrading. Bang & Olufsen Multimedia BeoLink PC 2 will be launched in August 2001. BeoLink PC 2 makes it possible to link the home PC with other Bang & Olufsen audio systems through the BeoLink concept, thus enabling users to listen to MP3-files from the PC through an existing Bang & Olufsen system. BeoSound 2, which is expected to be launched in the first quarter of 2002, will allow users to carry Bang & Olufsens virtual products in their pocket for the first time. In a simple and user-friendly way, users can transfer and store their MP3-files from their computer to the small, elegant player. Expectations for the 2001/02 financial year Bang & Olufsen will adhere to its basic strategies. However, in the light of recent developments, adjustments will be implemented within a number of areas. Within the audio/video business, focus will be on a qualitative consolidation of the B1 distribution following the strong expansion of recent years. This will be supported by enhanced management and control systems. The long-term global target of 800-1,000 B1 shops will be maintained, but the pace of the expansion will match the more rigorous quality requirements. In the US, the need for consolidation in order to strengthen the retail business and ensure a sound platform for growth in the coming financial years is evident. In Germany there is a need to develop partnerships and trust with the multibrand shops alongside the development of shop-inshop activities. Product development will be further intensified. Particularly in the latter part of the coming financial year, a strong product programme, for which there are high hopes, will be launched. During the coming financial year, Medicom is expected to continue its positive advances. In Telecom, whose competencies are important for the whole group, focus will be on continued development of the distribution system and new product launches. In the three new business areas, Multimedia, PowerHouse and New Business, there will be long-term investments in future earnings and in the capitalisation of the Groups brand. The three companies will have a negative impact on the Groups result next year. In the longer-term, all business areas must be profitable. Focus will be on the exploitation of competencies and developments across the whole group to the benefit of the core business. On the background of the chosen strategies and new product launches, Bang & Olufsen expects a moderate increase in turnover for the coming financial year. The result will remain unchanged. The first two months of the year have progressed satisfactorily, but the summer months are traditionally less important in terms of turnover as well as earnings and therefore do not provide a clear trend. There are no immediate signs of changes to either the economic climate or the sales of high-end consumer goods. A continuing downturn in the international economy will have a negative impact on the Groups sales potential.

Side 48

Financial Report Profit & Loss Account Increase in turnover of DKK 88 million Group turnover for 2000/01 increased by DKK 88 million to DKK 3,810 million a rise of 2 per cent. The rise is due to advances in Bang & Olufsen AudioVisual a/s and Bang & Olufsen Medicom a/s. However, Bang & Olufsen Telecom a/s turnover declined. Bang & Olufsen AudioVisual a/s turnover rose by DKK 66 million. Due to the increased number of Bang & Olufsen B1 shops, turnover in the US rose by DKK 74 million. Turnover for audio products increased by 1 per cent and for video products by 7 per cent. On a group basis, turnover in telephones fell by DKK 86 million, i.e. 37 per cent. The development in turnover has meant that the audio and video products share of the turnover was 43 and 38 per cent against last years 44 and 38 per cent. Other products share of the turnover fell from 20 to 19 per cent. Measured in local currencies, the largest increases for Bang & Olufsen a/s occurred in the US (17 per cent), France (12 per cent) and UK (2 per cent). Expansion Markets increased by 19 per cent. The following main markets experienced a fall in turnover: Germany (-6 per cent), Denmark (-12 per cent), Holland (- 4 per cent) and Switzerland (- 3 per cent). Gross margin rose by 0.6 percentage points Gross margin for Bang & Olufsen a/s rose by 0.6 percentage points to 40.1 per cent. The increase can be attributed to Bang & Olufsen AudioVisual. Costs in relation to turnover Product development, distribution, marketing and administration costs rose by DKK 120 million, i.e. 11 per cent, in 2000/01. Costs account for 33 per cent of the turnover against 31 per cent in 1999/00. Distribution and marketing costs were DKK 69 million up, i.e. 10 per cent. The increase partly arises from the continued development of the distribution system in foreign markets and partly from the continuing development of own retail organisation in the USA where distribution and marketing increased by DKK 58 million. The establishment of a new subsidiary in Singapore also played a role. Product development costs increased by DKK 38 million, i.e. 12 per cent, primarily because of the development of BeoCenter 1 and BeoLab 2 and product updates of BeoVision 1 LS and BeoVision RealFlat. BeoVision 1 LS is a further development of BeoVision 1 which offers users the opportunity to link the product to the BeoLink system. BeoVision Avant RealFlat is equipped with a high quality, flat TV screen in widescreen format. The development of cordless telephones and ISDN telephones continues. Other operating income The 1999/00 financial year was the last in which the Group received profit contributions from Ericsson Diax A/S. Result of ordinary operations in associated company At the start of the 1999/00 financial year, Bang & Olufsen AudioVisual a/s took a 33 per cent stake in John Bjerrum Nielsen A/S. The impact on the result from this transaction is DKK 3.4 million before tax. Dividend for the year is DKK 2 million. Financing Net financing costs rose by DKK 27 million of which DKK 11 million is interest on loans in connection with increased borrowing as a consequence of the Groups negative cash flow. DKK 22 million can be attributed to changes to exchange rates. Increased tax rate The overall tax percentage for the year rose from 30 to 34 per cent. This is mainly due to the fact that the foreign subsidiaries have used up their tax losses. Of the tax expense of DKK 76 million, DKK 65 million relates to the Bang & Olufsen AudioVisual a/s Group and DKK 11 million to other companies in the Bang & Olufsen a/s Group. Extraordinary income Extraordinary income of DKK 20 million during 1999/00 relates to the sale of the companys BAAN shares. Minority shares The item concerns the minority share of 23.6 per cent in Bang & Olufsen PowerHouse a/s and a minority share of 50 per cent in a joint venture in the US.

198.8 187.5 386.3

169.9 200.0 369.9
254.7 52.8 128.6 249.3 685.4
224.8 42.5 119.3 197.5 584.1
454.5 2.0 96.3 5.5 558.3 53.0 1,296.7 2,301.5
453.3 37.4 6.3 497.0 130.1 1,211.2 2,144.0
168.6 581.2 32.5 0.1 782.4 0.2 782.6 1,242.0
210.7 95.0 0.3 0.1 306.1 0.2 306.3 1,204.9
27.5 88.5 186.5 1.9 25.5 291.4 46.9 668.2 1,054.5 2,301.5
13.5 8.2 231.6 2.1 6.5 286.0 80.4 628.3 998.2 2,144.0
6.0 42.2 46.9 95.1 95.1 1,242.0
3.1 63.4 80.4 146.9 146.9 1,204.9
Notes: see pages 65 - 75 60
Notes: See pages 65 - 75 61

Side 62

Cash flow statement Bang & Olufsen a/s, The Group (DKK million) Notes. Result for the year Depreciation and write-offs 25. Adjustments 26. Change in working capital Cash flow from operations before financial items Interest received, etc. Interest paid, etc. Cash flow from ordinary operations Corporation tax paid Cash flow from operational activities Purchase of intangible fixed assets Purchase of tangible fixed assets Purchase of financial fixed assets Change in financial debtors Dividend from associated company Sale of shares Sale of intangible fixed assets Sale of tangible fixed assets Cash flow from investment activities New long-term debt Reduction in long-term liabilities Financing of minority interests Sale/purchase of own shares Tax relating to disposal of own shares Proceeds from capital increase and dividend from own shares Dividend paid Cash flow from financing activities Change in liquid funds - Cash flow for the year Liquid funds, 1 June 27. Liquid funds, 31 May 153.5 171.1 118.2 (170.1) 272.7 16.9 (67.2) 222.4 (84.8) 137.6 (53.8) (221.8) 13.9 2.0 2.7 14.3 (242.7) 51.0 (20.6) 6.9 (21.6) 7.2 5.2 (80.4) (52.3) (157.4) 121.9 (35.5) 243.4 162.4 91.6 (123.7) 373.7 14.3 (37.2) 350.8 (106.2) 244.6 (28.2) (279.9) (17.0) 15.3 33.0 11.1 (265.7) 200.0 (14.2) (84.3) 5.2 (66.8) 39.9 18.8 103.1 121.9 2000/01 1999/00
Outgoings given in parentheses. Notes: See pages 65 - 63

Side 64

Notes Group (DKK million) Notes. 1. Net turnover Net turnover in main markets Denmark Germany UK Switzerland Rest of Europe Rest of world 2000/01 1999/00 Parent company 2000/01 1999/00

758.9 563.2 460.4 280.7 1,212.7 534.1 3,810.0 80.1
786.2 596.0 449.2 276.4 1,224.6 390.0 3,722.4 78.9
Exports as percentage of turnover 2. Employees Wages, salaries, fees Pensions Other statutory contributions

782.1 27.4 28.3 837.8

731.2 21.0 22.8 775.0
Apart from the Board of Management, the parent company has no employees. Remuneration on Group basis to the Board of Management in parent company: Bonus (included in above): Bonus for the Board of Management has been earned in the previous financial year. Remuneration including bonus to departing directors is included until the time of their departure. Emoluments to the Board of Directors in parent company : Average no. of full-time employees: Denmark Abroad 2,2,780 2,2,861 1.7 1.7

10.6 3.5

12.3 2.9
A share options programme for a number of directors and senior managers in the Group has been set up. The options pool totals approx. 112,000 shares which can be exercised in the period 2002-2008. The options comprise 3 exercise prices of 270, 305 and a price determined as the average of the 10 trading days which follow after the publication of the annual accounts in August 2001. The options are apportioned by approx. 1/3 to each of the above-mentioned exercise prices. Parentheses denote negative figures or amounts to be deducted. 64 65

Side 66

Group (DKK million) Notes. 3. Depreciation Depreciation for the year is included in the following items: Production costs Product development costs Distribution and marketing costs Administration costs 2000/01 1999/00
Parent company 2000/01 1999/00 ( DKK million) Notes. 8. Tax In the profit and loss account tax has been accounted for: Parent company: - Current tax - Change in deferred tax - Adjustment previous year, current and deferred tax Total for parent company Subsidiaries and associated company: - Current tax - Change in deferred tax - Adjustment previous year, current and deferred tax - Adjustment deferred tax resulting from changed tax rate Total for subsidiaries and associated company Tax on result for the year Corporation tax paid in the parent company including tax paid on an instalment basis amounted to DKK 13.1 million Bang & Olufsen AudioVisual a/s is jointly taxed with the company. Payments on account transferred from Bang & Olufsen AudioVisual a/s total DKK 26.6 million. 9. Extraordinary costs/income Profit from sale of Baan shares

Group 2000/01 1999/00

Parent company 2000/01 1999/00

92.1 44.8 24.4 9.8 171.1

96.8 30.8 24.1 10.7 162.4

0.4 1.4 (3.9) (2.1)

0.4 (0.3) (0.3) (0.2)
4. Other operating income, net Share of profits from Ericsson Diax A/S

3.2 3.2

5. Result from ordinary operations in subsidiaries Subsidiaries result before tax Change in unrealised consolidated gross profit Income from investment in subsidiaries The subsidiaries result before tax can be apportioned as follows: - Subsidiaries showing a profit - Subsidiaries showing a loss

223.3 4.3 227.6

318.1 (1.9) 316.2
71.4 5.6 4.5 (3.1) 78.4 76.3
95.6 (0.1) (0.7) 94.8 94.6

228.2 (4.9) 223.3

318.1 318.1
6. Financing income Interest income from banks, etc. Interest income from affiliated companies Cash discounts Other interest received

1.9 8.5 6.5 16.9

2.1 7.0 5.2 14.3

0.1 8.6 0.7 9.4

7.0 0.3 7.3

20.4 20.4

7. Financing costs Interest on amounts owed to banks, etc. Interest on mortgage loans Currency losses Cash discounts Other interest paid
17.4 13.1 25.9 1.7 9.1 67.2
10.2 9.5 4.3 2.2 11.0 37.2

0.1 1.8 1.9

1.3 1.3
10. Leasehold improvements and rights Cost, 1 June Exchange adjustment, opening Reclassification Additions in the year Disposals in the year Cost, 31 May Acc. depreciation, 1 June Exchange adjustment, opening Reclassification Depreciation and write-offs for the year Adjustment for depreciation on assets sold Acc. depreciation, 31 May Net book value, 31 May
81.0 2.9 (6.2) 53.8 (10.1) 121.4 43.6 1.2 (0.4) 9.8 (7.4) 46.8 74.6
55.8 1.4 1.4 27.1 (4.7) 81.0 40.7 (3.8) 9.4 (2.7) 43.6 37.4
Parentheses denote negative figures or amounts to be deducted. 66
Parentheses denote negative figures or amounts to be deducted. 67

Side 68

Group (DKK million) Notes. 11. Patent Cost, 1 June Additions in the year Cost, 31 May Acc. depreciation, 1 June Depreciation for the year Acc. depreciation, 31 May Net book value, 31 May 12. Land and buildings Cost, 1 June Exchange adjustment, opening Reclassification Additions in the year Transferred to use Disposals in the year Cost, 31 May Acc. depreciation, 1 June Exchange adjustment, opening Reclassification Depreciation for the year Adjustment for depreciation on assets sold Acc. depreciation, 31 May Net book value, 31 May Value of property in Denmark (cash value) regarding most recent official valuation is DKK 297.7 million Cost price of property abroad is DKK 35.9 million 13. Plant and machinery Cost, 1 June Additions in the year Transferred to use Disposals in the year Cost, 31 May Acc. depreciation, 1 June Depreciation for the year Adjustment for depreciation on assets sold Acc. depreciation, 31 May Net book value, 31 May Parentheses denote negative figures or amounts to be deducted. 68 2000/01 1999/00 (DKK million) Notes. 14. Other equipment Cost, 1 June Exchange adjustment, opening Reclassification Additions in the year Transferred to use Disposals in the year Cost, 31 May Acc. depreciation, 1 June Exchange adjustment, opening Reclassification Depreciation for the year Adjustment for depreciation on assets sold Acc. depreciation, 31 May Net book value, 31 May 15. Prepayments for tangible fixed assets and plant & equipment in progress Cost, 1 June Additions in the year Transferred to use Disposals in the year Cost, 31 May 16. Investment in subsidiaries Cost, 1 June Purchase/formation of new companies Balance, 31 May Value adjustment Balance, 1 June Exchange adjustment, opening Equity capital adjustments Depreciation of Group goodwill Change in unrealised consolidated gross profit Net result for the year after tax Dividend Balance, 31 May Net book value, 31 May

31/5 01

31/5 00
1,004.8 685.4 558.3 53.0 2,301.5
932.8 584.1 497.0 130.1 2,144.0
864.2 635.1 453.2 52.6 2,005.1
833.7 540.0 481.7 126.4 1,981.8

50.3 1.4 19.5 71.2

49.9 1.4 47.8 99.1

70.6 2.5 48.2 76.4 197.7

67.3 1.1 74.7 143.1
1,146.9 1.3 98.8 386.3 668.2 2,301.5
1,058.0 87.8 369.9 628.3 2,144.0
350.0 98.2 338.0 1,218.9 2,005.1
786.4 86.0 369.9 739.5 1,981.8
Parentheses denote negative figures or amounts to be deducted. 76
Parentheses denote negative figures or amounts to be deducted. 77

Side 78

Print: Saloprint a/s, Denmark

Itemno.: 3654007

Side 80

Bang & Olufsen a/s, Peter Bangs Vej 15, P.O. box 40, DK-7600 Struer Main phone No. [45] 9684 1122, CVR-NR 4125 7911, www.bang-olufsen.com
To the Copenhagen Stock Exchange

17th of August 2005

BeoCom 2 2001
This is a notification of changes in the shareholdings of the companys management employees, who are obligated to give and pass on notifications, pursuant to the Danish Securities Trading Act. Bang & Olufsen a/s has been notified of the following transactions:
Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK) Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK)
Torben Ballegaard Srensen President, CEO, in compliance with article 28a (2.1.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Purchase (Execution of options) 15th of August 2005 Copenhagen Stock Exchange 10.000 2.010.000,00 Torben Ballegaard Srensen President, CEO, in compliance with article 28a (2.1.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Sale 15th of August 2005 Copenhagen Stock Exchange 10.000 4.731.000,00
Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK) Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK) Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK) Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK)
Peter Thostrup Executive Vice President in compliance with article 28a (2.1.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Purchase (Execution of options) 15th of August 2005 Copenhagen Stock Exchange 5.775 1.761.375,00 Peter Thostrup Executive Vice President in compliance with article 28a (2.1.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Sale 15th of August 2005 Copenhagen Stock Exchange 5775 2.739.891,00 John Bennett-Therkildsen Director, Operations, in compliance with article 28a (2.2.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Purchase (Execution of options) 16th of August 2005 Copenhagen Stock Exchange 1.312 327.383,00 John Bennett-Therkildsen Director, Operations, in compliance with article 28a (2.2.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Sale 16th of August 2005 Copenhagen Stock Exchange 1.312 662.819,78
Name Reason Issuer ISIN Designation Nature of Transaction Trading Date Market Number Market price (DKK)
Jesper Holmstrup Person connected to Director, Finance and Accounting, Randi Toftlund Pedersen, according to article 28a (4.1.) of the Danish Securities Trading Act Bang & Olufsen a/s DK0010218429 Shares Sale 15th of August Copenhagen Stock Exchange 250 118.500,00
Contact: Kim Bo Hansen Chief Legal Counsel Phone +5167