Annual Report 2000/01 - Sonova

Moving
to the top
Annual Report
2000/01

Front cover
At the end of August 2000, 150 senior Phonak
Group employees met for a week in the Bernese
Oberland. The aim of the meeting was to map out
the company's future and the program was
intensive and demanding. One thing was clear
from the start: we are on the way up.
1
2 Foreword
4 Five-year key figures
5 Management
Financial and business review
7 Overview / financial results
11 Capital structure
12 Products
13 Markets
15 Research and development
19 Production
19 Business information systems
19 Personnel
20 Holding company Board
20 Outlook
Portraits
22 Auris A/S
23 Indo Laem Audiologia SA
24 Unitron Industries Ltd.
25 Hansaton Akustische Geräte GmbH
Financial reporting
27 Consolidated Financial Statements
55 Financial Statements of Phonak Holding Ltd.
64 Information for the investor
67 Addresses
69 Claro product overview
Contents

Dear Shareholder,
The financial year 2000/01 proved to be an exceptionally suc-
cessful year. We clearly surpassed all our targets, with almost all
key figures climbing to record heights. Sales increased by 46.4 %
to CHF 460.2 million and consolidated profits soared by 93.1 % to
CHF 65.7 million. “Moving to the top”– the motto of this
year’s Annual Report – forcefully conveys our past commitment
and our determination to achieve continued success in the
future.
This would be impossible without highly motivated teams of qualified
employees at every level of activity. They provide the innovative potential, energy
and industry that are essential if we are to continue developing leading-edge tech-
nologies and products that perform well on the market. Phonak now has a younger
and stronger management staff, who are ideally equipped to meet the challenges
of the coming years.
Within no time, the fully digital Claro hearing computer range has
established itself as the driving force in our future development. Just one year after
launch, the system already accounts for approximately 30 % of our consolidated
sales. The purchase of the Canadian company Unitron Industries
Ltd. has enabled the Group to expand its activities massively and further
strengthened its market position. The acquisition has also made Phonak one of the
three largest manufacturers in the industry worldwide. Other acquisitions in
2

In August 2000 the Phonak Group's entire management staff met up in the Bernese
Oberland (Switzerland) under the motto “Join together – build the future”. The event was
an opportunity to swap ideas and opinions and develop strategies designed to ensure that
the success of the Phonak Group continues well into the future.
3
Foreword
Denmark, Spain and Austria, coupled with
the launch of new distribution companies
in Switzerland and the Middle East, have
further consolidated the Group’s position.
Finally, technological partner-
ships with the Australian implant manu-
facturer, Cochlear Ltd., and the American
Beckman Institute, which is based at the
University of Illinois, are opening promising
and lucrative avenues of development for
the future.
The Phonak Group is now on
the crest of another wave of
growth. This has been made
possible by the efforts of all our employees and we should like to extend a special thank you to
them. The high rates of growth place considerable demands on us all and represent a huge chal-
lenge. We should like to thank our shareholders for the confidence they have shown in us. We are
happy to see that during 2000/01 their number rose again from 4,900 to over 6,700.
Andreas E. Rihs Peter Pfluger
Chairman of the Board of Directors Chief Executive Officer

4
Five-year key figures (consolidated)
in CHF 1,000
unless otherwise specified 2000/01 1999/00 1998/99 1997/98 1996/97
Consolidated sales 460,152 314,281 258,668 218,600 171,020
increase compared to prev. year (%) 46.4 21.5 18.3 27.8 29.4
Operating profit (EBIT) 95,310 48,803 42,457 34,995 27,260
change compared to prev. year (%) 95.3 14.9 21.3 28.4 –2.1
in % of consolidated sales 20.7 15.5 16.4 16.0 15.9
Consolidated net profit 65,717 34,033 30,082 23,592 17,550
change compared to prev. year (%) 93.1 13.1 27.5 34.4 –0.6
in % of consolidated sales 14.3 10.8 11.6 10.8 10.3
in % of shareholders’ equity (ø) 26.0 20.4 21.6 20.2 17.7
Net cash from operating activities 91,454 36,391 27,652 23,171 22,629
change compared to prev. year (%) 151.3 31.6 19.3 2.4 37.3
in % of consolidated sales 19.9 11.6 10.7 10.6 13.2
Free cash flow 1) –63,221 17,126 16,381 –8,919 –37,163
in % of consolidated sales –13.7 5.4 6.3 –4.1 –21.7
Capital expenditure 21,842 17,426 11,815 28,038 21,961
Depreciation of tangible fixed assets 13,245 10,088 8,429 7,014 6,047
Research & development costs 33,400 25,300 20,200 16,000 15,000
increase compared to prev. year (%) 32.0 25.2 26.3 6.7 17.2
in % of consolidated sales 7.3 8.1 7.8 7.3 8.8
Total assets 704,498 346,273 300,180 268,238 227,542
Cash and cash equivalents 96,108 47,965 36,591 28,230 29,717
Shareholders’ equity 323,610 182,839 151,162 127,048 106,633
Quick ratio (%) 2) 132.1 155.2 150.0 148.9 153.1
Equity financing ratio (%) 3) 45.9 52.8 50.4 47.4 46.9
Personnel expenses 128,007 99,412 86,237 69,794 56,907
in % of consolidated sales 27.8 31.6 33.3 31.9 33.3
Number of employees (average) 1,583 1,239 1,064 906 748
Sales per employee 291 254 243 241 229
Total shares issued 646,864 630,875 628,872 628,297 627,054
average number of shares,
on which information
per share is based 632,574 628,885 628,022 627,795 627,054
Information per share
Earnings per share (CHF) 103.89 54.12 47.90 37.58 28.00
Shareholders’ equity per share (CHF) 511.58 290.74 240.70 202.37 170.05
Dividend per share (CHF) 0 4) 12.00 11.00 9.00 7.00
1) Net cash from operating activities less net cash used in investing acitivities
2) Cash and cash equivalents + receivables in % of current liabilities
3) Shareholders’ equity in % of total assets
4) Instead of a dividend, a repayment of CHF 15 on the nominal value per share
will be proposed to the General Meeting of July 5, 2001.

Board of Directors
Andreas E. Rihs
Chairman (until 2003 AGM)
Co-founder of Phonak Group
Dr. Alexander Krebs
Vice-Chairman (until 2003 AGM)
Partner CapVis Equity Partners Ltd.
Vice-Chairman of the Board of Tobler Management Holding Ltd.
Member of the Board of sia Abrasives Holding Ltd.
Dr. h.c. Daniel Borel
Member (until 2002 AGM)
Chairman of the Board of Logitech International Ltd.
Heliane Canepa
Member (until 2002 AGM)
Vice-Chairman of the Board of Nobel Biocare
Member of the Board of BB Medtech
Member of the Administration Board of Migros Cooperatives
Beda Diethelm
Member (until 2003 AGM)
Co-founder of Phonak Group
Hans-Ueli Rihs
Member (until 2003 AGM)
Co-founder of Phonak Group
Dr. Ernst Thomke
Member (until 2002 AGM)
Chairman of the Board of BB Biotech, BB Medtech,
Nobel Biocare and Metalor Technologies Ltd.
Member of the Executive Committee of the
Foundation Board of ISREC (Swiss Institute for
Experimental Cancer Research)
Audit Committee
Dr. Alexander Krebs (Chairman)
Heliane Canepa
Hans-Ueli Rihs
Auditors
Ernst & Young, Zurich
5
Management
Group Executive Management
Dr. Peter Pfluger
Chief Executive Officer
Ernst O. Vogelsang
Chief Financial Officer
Michael Jones
North American Markets
Alain Spinedi
International Sales
Stefan Dingerkus
Worldwide Operations

Top performance
Outstanding performance
is a precondition for
long-term market leadership

Since 1968, Martina Nicolai has been
suffering from otosclerosis – a condition
affecting the auditory ossicles, or small
bones in the ear – coupled with a progressive
loss of hearing in the inner ear.
Hearing loss was a particularly heavy blow
for the music therapist, now 54. Today,
thanks to the fully digital Claro hearing
system, she can hear her flute clearly and
undistorted again, even at the top end of
the scale.
1. Overview/financial results
1.1 Introduction
In many ways, 2000/01 was an extraordinary and
highly successful year. We achieved all our ambitious
financial objectives. Almost all key figures climbed to
record levels, both in terms of sales growth, which
stood at 46 % (of which 34 % was organic), and
margins, which reached more than 24 % on the
EBITDA level, more than 20 % on the EBIT level and
more than 14 % net. These pleasing figures are, in
the main, due to the resounding success of the Claro
fully digital hearing computer line which was
launched at the end of 1999.
However, it was also a year of acquisitions and
investment in the future. For the first time, Phonak
purchased a major competitor, the Canadian Unitron
Group, number seven world-wide. We also extended
our distribution network on several fronts, through
acquisitions of companies in Spain and Austria and
by establishing our own distribution companies in
Switzerland and the Middle East (Dubai). Finally, the
acquisition of a Danish manufacturer, Auris A/S,
strengthened our production resources in the
In-The-Ear (ITE) hearing instrument sector.
1.2 Consolidated sales
Overall, consolidated sales rose by CHF 145.9 million,
or 46.4 %, to CHF 460.2 million. Organic growth
accounted for approximately three quarters, or
34.3 %, of this figure, while the companies acquired
during the year contributed 9.7 % and foreign
exchange gains 2.4 %.
This exceptional level of organic growth was due
primarily to the strong impact made by the Claro
fully digital hearing computers on the market. The
acquisition-related growth came mainly from the
Unitron Group, which has been consolidated since
the beginning of January 2001, and contributed
CHF 24 million to consolidated sales. The other
acquired companies, the Spanish Laem and the
Danish Auris, made further contributions towards
sales. Gains from foreign exchange rates were due
exclusively to the strong North American currencies
(US and Canadian dollars). Gains relating to these
two currencies accounted for 4.6 % of the increase
in sales. While the pound remained stable, other
currencies, and in particular the Euro, weakened
7
Consolidated sales
550
500
450
400
350
300
250
200
150
100
50
0
CHF in millions
Financial and business review
96/97 97/98 98/99 99/00 00/01
against the Swiss franc and pared 2.2 % off consolidated
sales.
Claro's success has resulted in significant shifts in
the individual hearing instrument segments. The top
price and quality segment accounted for 31 %
(previous year 6.5 %) of sales, of which Claro alone
generated 29.6 % (previous year 5.3 %). The fully
digital products manufactured by other producers
and marketed by some of the Phonak companies, as
well as the initial sales of Unitron's Nexus line, made
up the rest. However, as expected, sales of the
medium-price segment of digitally programmable
hearing computers fell by 8.7 % in absolute terms as
PiCS, previously the leading range, was superseded
by Claro. Nevertheless, digitally programmable
instruments continued to account for 24.6 % of
consolidated sales. Despite a fall in its share of overall
sales (to 23.5 %), the lower segment – consisting
of classic-analog hearing instruments – still posted
continued growth of 13.5 % in 2000/01 (previous
year 9 %). In particular, the new Classica and
PicoForte3 lines, both introduced over the last two
years, were very much in demand.
Wireless communication (MicroLink and MicroVox
systems) had another extremely positive year,
growing by 38 % and contributing approximately
7 % to total sales. This was due in particular to the
encouraging success of the MicroLink MLx receiver,
which can also be used with our competitors' hearing
instruments.
Finally: the outstanding quality of the sales growth,
with well above average increase in the top hearing

Top technology
The compulsion to surmount existing technological
barriers has taken
hearing performance into
new dimensions.

For the first time ever, a digital microphone
designed by Phonak has been incorporated
in the new, miniaturized Claro CIC hearing
computer. Phonak is thus paving the way
towards new technological standards. The
device is destined to become an integrated
component of high-quality hearing instruments
in the future because it significantly
reduces the electromagnetic interference
from devices such as cell phones.
instrument segment, is also reflected in the fact that
the average unit price per hearing instrument sold
rose by more than 16%.
1.3 Operating cash flow and operating profit
At 85.9 %, operating cash flow (EBITDA) grew
almost twice as strongly as sales, and the operating
profit measures EBITA (before amortization of goodwill)
and EBIT, at 97.1 % and 95.3 % respectively,
increased more than twice as strongly as sales.
This resulted in significant increases in margins:
for EBITDA from 19.4 % to 24.6 %, for EBITA from
16.1 % to 21.7 % and for EBIT from 15.5 % to
20.7 %. On the one hand, these improvements are
due to the strong shift towards products in the top
price segment and, on the other hand, to the fact
that operating expenses grew less strongly than
sales (+35.5 %, versus 46.4 % sales growth).
However, periods of strong growth such as Phonak
experienced in 2000/01, are necessarily followed by
a period of consolidation. The personnel, organization
and infrastructure have meanwhile been
reinforced to ensure success in the long term. In
cost terms, these measures will only become fully
effective in the new financial year.
1.4 Consolidated net profit
Consolidated net profit rose by 93.1 %, exactly twice
the rise in consolidated sales. The net margin could
be correspondingly improved to 14.3 % (previous
year 10.8 %). The fact that consolidated net profit
grew at a slightly lower level than the operating
profit is due primarily to a slightly disproportionate
rise in taxes. The reason for this can be found in the
significant increase in goodwill amortization which
followed on from the year's acquisitions and is, in
most cases, not tax-deductible. This meant that the
tax rate (taxes as a % of the pre-tax profit) rose
from 26.9% to 28.3%. As a result of new debt raised
in connection with the acquisition of Unitron, net
interest expense also rose by approximately 50 %.
However, the absolute increase (CHF 1.1 million)
remained at a modest level due to the fact that the
new debt was only contracted at the beginning of
the last quarter of the year.
9
Consolidated net profit
66
60
54
48
42
36
30
24
18
12
6
0
Financial and business review
CHF in millions in % of consolidated sales
96/97 97/98 98/99 99/00 00/01
22
20
18
16
14
12
10
8
6
4
2
0
1.5 Investment activity
In the course of 2000/01, investments touched a
record level of CHF 235 million, CHF 214 million of
which was accounted for by the acquisitions of
Auris (Denmark), Laem (Spain), Unitron (Canada) and
Hansaton (Austria). Hansaton is consolidated effective
from April 1, 2001 only.
Capital expenditure (investments in property, plant
and equipment) rose from CHF 17.4 million to
CHF 21.8 million (+25 %) and accounted for 24 %
(previous year 48 %) of cash flow from operating
activities. As in recent years, the biggest amounts
were invested in expanding and rationalizing production
facilities as well as IT systems.
1.6 Free cash flow
The free cash flow (cash flow from operating activities
minus investments) increased before acquisition
of subsidiaries from CHF 19.3 million to CHF 70.5
million. After deduction of acquisitions, for which a
total amount of CHF 133.7 million was spent (net
after deduction of the purchase price portions paid
in Phonak Holding shares, totaling CHF 80.8 million),
the free cash flow was negative for the first time in
several years (– CHF 63.2 million, previous year
+ CHF 17.1 million). This amount was financed by a
bank credit facility with a seven-year term, contracted
in connection with the Unitron acquisition.
As a result, net indebtedness (total interest-bearing
debt minus cash and cash equivalents) rose from
CHF 27.9 million to CHF 139.3 million during the
year.

Top teams
People value encourages efficient cooperation
and creates added value
for hearing instrument users, acousticians,
employees and shareholders.

Phonak places great value on a working
environment that encourages the exchange
of ideas and draws together the Group's
collective expertise. Close, target-oriented
cooperation in interdisciplinary teams
makes a crucial contribution to a
company's innovative strength.
1.7 Balance sheet
Particularly as a result of the Unitron acquisition, the
balance sheet structure has changed considerably.
The balance sheet total doubled from CHF 346 million
to CHF 704 million. On the assets side, current
assets fell from 56 % to 41 % while non-current
assets rose from 44 % to 59 %. The most important
non-current asset item is now goodwill, which rose
from CHF 30 million to CHF 214 million through the
purchase of Auris, Laem and Unitron. The goodwill
paid for Hansaton is not yet included, since this
company is consolidated only as of April 1, 2001. On
the liabilities and shareholders’ equity side, total
liabilities rose from 47 % to 54 %, with a particularly
high increase in debt (by CHF 160 million to
CHF 235 million). This debt can be contrasted to
cash and cash equivalents of CHF 96 million
(+ CHF 48 million) which are being used as a liquidity
reserve for the time being. The reported equity
financing ratio (equity in % of total assets) has
fallen from 53 % to 46 %. However, when deducting
cash and cash equivalents from debt, the equity
financing ratio remains at 53% – and thus the
Phonak Group remains solidly financed.
2. Capital structure
2.1 Conditional capital
In accordance with Art. 3a of the Articles of Assocation,
the Ordinary General Meeting of July 13, 2000
approved an increase of the conditional capital
by a maximum of CHF 1 million to a maximum of
CHF 1,382,500. This corresponds to an increase of at
most 50,000 registered shares with a par value of
CHF 20 each to a maximum of 69,125 registered
shares. In the financial year 2000/01, a further 2,911
registered shares of CHF 20 par value were issued to
key personnel within the Phonak Group. This reduced
the conditional capital to CHF 1,324,280 corresponding
to 66,214 registered shares of CHF 20 par value.
During the year, managerial staff in the Group companies
in Switzerland and abroad received a total of
11,121 options as part of the Phonak Key People
Program. Each of these options entitles the holder to
purchase one registered share in Phonak Holding Ltd.
after a waiting period of normally two years.
11
Capital expenditure
33
30
27
24
21
18
15
12
9
6
3
0
Financial and business review
CHF in millions % of cash flow 1)
96/97 97/98 98/99 99/00 00/01
1) Net cash from operating activities
175
160
145
130
115
100
75
60
45
30
15
0
2.2 Authorized capital
At the Extraordinary General Meeting held on
December 7, 2000 shareholders approved the creation
of an authorized capital for the first time. This
permits the Board of Directors to increase the company's
share capital by a maximum of CHF 400,000
through the issue of a maximum of 20,000 fully
paid-up registered shares of CHF 20 par value at any
time up to December 7, 2002. The Board of Directors
has already made use of this right in connection
with the acquisitions of the Canadian Unitron
Group and the Austrian Hansaton Akustische Geräte
GmbH. With the decisions of January 19, 2001 and
March 21, 2001 it increased the share capital by a
total of CHF 261,560 or 13,078 registered shares of
CHF 20 par value.
At March 31, 2001 the total number of issued shares
had risen from 630,875 to 646,864 and the share
capital from CHF 12,617,500 to CHF 12,937,280 as
a result of the capital increases from the conditional
and authorized capital.

In its December 2000 issue, the American
magazine Popular Science singled out the
Claro fully digital hearing computer and
associated WatchPilot remote control for a
“Medical Technology Grand Award”, an
acknowledgement of Phonak's outstanding
contribution to innovative technology. For
the first time ever, WatchPilot integrated
the hearing computer's remote control in a
stylish wristwatch.
Claro 21 dAZ: ITE hearing computer
with adaptive digital multi-microphone
technology.
Remote control WatchPilot –
Phonak’s latest exclusive innovation.
3. Products
3.1 Fully digital hearing computers
of the top-price segment
Just a year after market launch, the Claro fully digital
hearing computer line accounted for no less than
30 % of sales (CHF 137 million). This success confirms
how right we were to push ahead with our
strategy of innovation. Thanks to Claro, Phonak is
now present in the top-price segment with a breakthrough
system that is shaping the market. Some of
its features, such as Adaptive digital AudioZoom or
the ability to integrate an FM function for wireless
voice transmission, are unique and will set the standard
for quality products of the future. The system
offers users special advantages in the choice of their
hearing programs. They can choose freely between
manual adjustment via remote control (SoundPilot
and WatchPilot) and AutoSelect, the first fully automatic
program selector. Currently, more than 30 %
of all Claro users opt for a remote control. The market
has been particularly impressed by WatchPilot,
the world's first remote control of its type. In this
product, the remote control is built into an attractive
wristwatch. Thanks to this device, available on
the wrist whenever it is needed, all Claro instruments
can be operated comfortably and discreetly.
Over the past few months, the Claro range has been
extended to include several other instruments.
Thanks to the Claro 311 dAZ Behind-The-Ear (BTE)
instrument, individuals with moderate to severe
hearing impairment are now able to benefit from
Claro technology. Another BTE instrument, the
Claro 111 dAZ, offers people with steep high-frequency
hearing losses significantly better sound
quality coupled with improved speech intelligibility
in difficult acoustic environments.
The miniature Claro Completely-In-the-Canal (CIC)
instrument, which is based on the latest, exclusive
technology, holds out exciting prospects for the
future. A world first, it will be equipped with a digital
microphone designed and co-developed by
Phonak. The Claro CIC will be launched during the
summer of 2001 and has significant sales potential,
particularly in the ITE markets of North America and
Australia as well as in Germany and France.
During the first quarter of 2001, Unitron launched
Nexus, its leading-edge premium hearing computer
12
line. It is based on the world's first fully digital chip
which is genuinely open platform. This means the
system can be retrofitted with new audiological
features or functions without changing the hardware.
The introduction of the Nexus product line
will be concluded during the first six months of the
current financial year.
At the same time, Argosy, a 100 %-owned Unitron
subsidiary which has a solid base in the US market,
will be launching its own Axiom range of fully digital
hearing computers. Axiom is based on the same
platform as Nexus and offers the same possibility to
upgrade performance. The two product lines were
developed independently of each other and differ
primarily in their digital signal processing, their fitting
software and in other functions. With these two
products, the Unitron Group has succeeded in developing
two independent concepts that specifically
target the Unitron and Argosy markets. The flexibility
in creating and complementing the product portfolio,
that was made use of here for the first time,
demonstrates the strategic advantages of the open
platform.
3.2 Digitally programmable hearing instruments
of the mid-price segment
Despite focusing efforts on the introduction of the
Claro line, we also managed, by and large, to maintain
our market share in the mid-price segment
(reaching 91 % of last year’s sales). While the PiCS
range is most exposed to pressure from the competition’s
new digital products in the mid-price sector,
the Astro instruments performed well. As a result of
additional sales efforts in the existing lines and the
launch of a new, fully digital hearing computer
range during the second half of the current financial
year, Phonak expects to strengthen its position again
in the middle price segment.
3.3 Classical hearing instruments
The healthy demand for classical hearing instruments
continued through 2000/01. Sales were well
ahead of expectations despite a reduction in the
number of instruments on offer. Overall, sales rose
20 % by volume (units sold) and 14 % by value.
Classical hearing instruments continue to play an
important role, especially in countries with extensive

Worn almost invisibly, completely in the
ear canal, Claro 11 offers all the advantages
of Phonak’s digital technology despite its
tiny size.
welfare markets or regions lacking widespread
medical structures.
The PicoForte 3 line, designed for individuals with
moderate to severe hearing loss and successfully
introduced last year, was completed. Hearingcare
professionals can now choose between a total of
four different instrument models in this range. In
addition, the Phonak offer has been extended in the
Classica series of instruments, which offers five
models.
3.4 Cordless communication
Sales of wireless communication systems (MicroLink
and its predecessor, MicroVox) rose by 33 % in units
and by 38 % in value. Thanks to its unique radio
technology, MicroLink enables users to hear clearly
in noisy environments and even over distances such
as those encountered in conference halls or seminar
rooms. The market reacted very positively to the new
MLx radio receiver which is compatible with most of
the Behind-The-Ear (BTE) instruments offered by the
major suppliers.
In addition, a global distribution agreement was
concluded in mid March 2001 with Cochlear Ltd.,
Sydney (Australia), for Phonak's miniature FM communication
systems. Cochlear Ltd. is the world
leader in the fast-growing market for cochlear
implants. The new distribution agreement with
Cochlear now also enables patients who wear a
cochlear implant to benefit from the advantages of
wireless communication.
4. Markets
4.1 General market development
Unit sales on the overall global market are estimated
to have risen by 3 to 4 % with major differences
from country to country. While overall market
growth in America came to a standstill in the second
half of the year, the majority of European markets
and, in particular, Germany and France saw welcome
gains due to the continuing trend towards quality
products.
The shift towards hearing instruments based on
digital technology continues. In unit terms, digital
instruments now account for approximately 25 % of
instruments sold, whereas value-wise their share
reaches as much as 50 % of the overall market. This
13
Share of sales by product groups
in %
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40
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Financial and business review
96/97 97/98 98/99 99/00 00/01
Classical hearing instruments
Digitally programmable hearing computers
Fully digital hearing computers
Accessories/spare parts
Miscellaneous
Share of sales by main markets
2000/01 1999/00
Switzerland 4 % 5 %
Europe (excl. Switzerland) 42 % 50 %
North America 46 % 35 %
Australasia 4 % 5 %
Rest of the world 4 % 5 %
100% 100%
market share will continue to grow during the
current year and the increase will accelerate as
digital products take their place in the mid-price and
lower price segments.
Currently, annual sales of hearing instruments
amount to some 6 million. Approximately 45 % of
these are Behind-The-Ear (BTE) and 55 % In-The-Ear
(ITE) instruments. Of the ITE instruments, approximately
20 % are miniature – or CIC – instruments.
In 2000/01, sales of ITE instruments fell slightly in
Europe while continuing to grow in North America
and Asia. Traditionally, Phonak and Unitron have
occupied a strong position in the BTE segment. With
new products such as the Claro CIC and a completely
new, fully digital product line in the mid-price segment,
the Phonak Group intends to reinforce and
expand its market position in the ITE segment.

Top design
State-of-the-art digital technology packaged in
attractively shaped shells and housings has even caught
the eye of the fashion world and contributes to
the positive perception of modern hearing systems.

Star Japanese fashion designer Issey
Miyake puts on special shows for his
twice-yearly collections. The impression
made by the clothes presented at these
shows is crucial and everything else has
to complement them perfectly: movement,
choreography and lighting effects. Using
innovative communication systems such
as Claro dAZ FM, the director has constant
wireless contact with the models on the
catwalk.
4.2 Phonak's international markets
All markets where Phonak has its own sales organizations
made significant advances during the past
year. Once again, North America was particularly
successful, with sales excluding Unitron up by 36 %
and including Unitron by 50 %. Thanks to the acquisition
of Unitron, we were able to increase our market
share in the USA to approximately 15 % and in
Canada to over 20 %.
Thanks to Claro, the Phonak Group posted even
higher growth rates in Europe, where technologically
advanced products are decisive for capturing market
share. In the important German market, sales rose
by over 60 %, in Scandinavia by 40 %, in France by
35 % – and our young sales company, Phonak BV,
which was set up two years ago in the Netherlands,
reported even a sales increase of almost 120 %.
Our long-standing strategy of establishing our own
sales organizations in all major markets proved its
worth once again. In the year under review, we consistently
pursued this strategy. In Spain, following
our acquisition of Laem, the leading hearing instrument
importer and wholesaler, we increased our
market share from approximately 3 % to some 15 %
and are now number two in the market. In Austria,
we have also become one of the two leading suppliers
thanks to the acquisition of Hansaton. With
the establishment of our own sales company in
Switzerland, we believe we can further strengthen
our position in the domestic market. And finally, we
are convinced that the founding of Phonak Middle
East in Dubai will give us a more pre-eminent position
in the Middle East and enable us to participate
in the great potential of this region.
Generally speaking, markets served by independent
general agents have likewise done well, even if the
introduction of Claro takes longer here than in markets
with our own sales companies. The biggest
advances in 2000/01 were achieved in Argentina
where sales – partly as a result of our gaining
government contracts – more than doubled. This
makes Argentina the second most important agency
market after Japan, followed by Poland, South Africa
and Hong Kong.
Finally, significant effort was invested during the
year in the extension and reinforcement of our key
account management. Thanks to this work, sales to
15
Financial and business review
various national and international retail chains
operating in the hearing instrument sector were
significantly increased.
5. Research and development
The past year saw a substantial increase in the
Phonak Group's Research and Development activities:
The acquisition of the Canadian Unitron Group,
the setting-up of new development teams and the
conclusion of a series of new partnerships in the
USA have resulted in the creation of a strong, interdisciplinary
network of teams with various spheres
of responsibility. The activities of the various
R&D Centers, their core skills and the development
approaches they use are in the process of being
coordinated and harmonized. By optimizing the use
of existing resources and technologies, we aim to
make the planning and conduct of research and
development projects more efficient. We also have
an intensive staff-exchange program, which encourages
the transfer of ideas and know-how and avoids
duplication of effort.
During the year under review, spending on Research
and Development amounted to CHF 33.4 million.
This represents an increase of 32 % over the previous
year and is equivalent to 7.3 % of consolidated
sales. For the new financial year, we plan a further
increase in R&D expenditure approximately in line
with the growth in sales. In particular, the companies
in the Unitron Group will reinforce their own
R&D activities. The focus in terms of product development
will be placed on extending the range of
fully digital hearing computers in the mid-price and
high performance segment.
Alongside the work conducted by our own R&D team
of over 140 employees, some 35 employee years of
external R&D work was subcontracted outside the
company.

Top partners
Success depends on
business partnerships
that put big demands on the two partners involved.
Ultimately, this is of
immense benefit to both.

Martin Kind was selected as the Hanover
region's Businessman of the Year 2000.
With this award the jury honored the
owner of Germany's largest hearing
healthcare company. He has expanded his
parent's small business to a chain of more
than 200 specialist stores extending from
Spain to Georgia. The exacting demands
that the company makes of its partners
help Phonak achieve its own outstanding
performance.
TelCom, a new transmitter for the
MicroLink cordless communication system,
is the first stationary FM transmitter that
allows optimal television, telephone and
audio system use.
5.1 Extension of the Claro family
In the course of 2000/01, Phonak cooperated with
several universities abroad on in-depth evaluation of
the various new concepts (Digital Perception Processing,
AutoSelect, Adaptive digital AudioZoom) made
available to the world of hearing instrument technology
as part of the Claro system. These studies
revealed that the new functions introduced with
Claro represent a significant step forward in the
improvement of speech intelligibilty, hearing comfort,
operation and adaptation to the individual
requirements of users. However, field studies, in conjunction
with the practical experience of hearing
instrument acousticians, reveal further potential for
optimization. These improvements are fed directly
back to the market in the form of the PFG fitting
software and thus benefit all Claro customers.
With the introduction of the fully digital Claro CIC
instrument, Claro 11, Phonak has taken another
major step in the field of hearing computer technology
worldwide. To make a Claro CIC instrument a
technical possibility, considerable miniaturization
of the complex Claro microprocessor system was
necessary. This step was made possible through the
use of state-of-the-art microelectronics technologies
and cutting-edge microphone technology.
Largely conceived and developed by Phonak, the
Claro CIC has the first digital microphone to be
integrated in a hearing instrument.
5.2 Future product developments
One of the focal points of our research activity in
2000/01 was the development of new approaches to
high-performance digital hearing instruments, a project
that aims to make the advantages of digital technology
available to individuals with severe hearing loss.
This resulted in several major innovations to improve
speech intelligibility in difficult situations and in the
fitting of hearing instruments to the needs of individual
customers, particularly children.
Another focal point was work relating to subsequent
generations of the Claro family. The features that have
already been successfully integrated in the Claro concept
will be further developed. On top of this, Phonak
intends to go on introducing new technological standards
to the hearing instrument market in the future.
This work will also include the development of flexible
17
Financial and business review
production techniques because these will facilitate the
realization of a wide range of different products. This
step will make production techniques both simpler and
more efficient while significantly reducing development
times. Special attention will be paid to the development
of new computer-aided production techniques
for in-the-ear instruments. As yet, this sector still
requires a large amount of manual work.
5.3 Cordless communication
During the past financial year, our wireless communication
operations produced several most innovative
products. With Claro dAZ FM, Phonak successfully
launched the world's first digital hearing computer
with an integrated FM receiver.
We also successfully concluded the development of
TelCom, a new interface that permits the simultaneous
wireless connection of hearing instruments to
various TV and audio systems as well as telephones.
The system guarantees that people with hearing
impairment have top-quality sound from their television
sets at a volume they choose – or hear the
talker’s voice in case of a telephone call.
5.4 Fundamental research activities
Two subjects attracted in-depth attention during the
year under review. As regards automated production
technologies for in-the-ear hearing systems, we
made significant advances in the laser-controlled
construction of complex plastic components. The aim
of these efforts is to fully automate the methods
used to manufacture individual shells for in-the-ear
hearing systems.
In addition, Phonak entered into a partnership with
the Beckman Institute at the University of Illinois in
Urbana, USA. The Institute is one of the leading US
research centers in the fields of artificial intelligence,
intelligent interactions between humans and computers
and – of special interest to Phonak – the interfaces
between biology, neurology, signal processing
and electronics technology. Phonak is financing a
special research program dedicated to binaural hearing.
Phonak has also set up its own development laboratory
at the campus of the University of Illinois. The Phonak
team there is to develop commercially viable products
from the research results.

Top outlook
Determination, clear vision
and a stated objective are the
way to the top.

2000 was the first year in which the
“Phonak Hearing Systems” cycling team
actively participated in cycle races. The
team is young and highly motivated and
takes the name Phonak out onto Europe's
roads under the motto “Race for better
hearing”. Another group of people on its
way to the top.
Employees as of March 31, 2001
By region
Australasia
101 (5 %)
North America
889 (42 %)
By field of activity
Marketing/sales
and administration
995 (47%)
Switzerland
617 (29 %)
Europe (without
Switzerland)
515 (24 %)
Research and
development 142 (7 %)
Production
985 (46%)
5.5 Intellectual property
The number of patent applications made in the course
of 2000/01 rose to over 20. We were particularly
anxious to protect innovations stemming from our
R&D activities in the high-potential fields of materials
technology, digital signal processing and wireless communications.
With our long-term cooperation agreement with the
renowned Beckman Institute, Phonak has secured
exclusive access to state-of-the-art developments in
binaural signal processing and cordless communication
on the surface of the body.
6. Production
The number of hearing instruments manufactured at
the main production site in Stäfa increased by more
than a third during 2000/01. Generally speaking, the
year was characterized by the rapid, trouble-free
ramp-up of the production of Claro fully digital
hearing computers. The extension of flexible and
process-oriented production installations permitted
a striking increase in production levels.
The production sites of Unitron in Kitchener (Ontario,
Canada) and Minneapolis (USA) have considerably
extended the Group's production capacity. Thanks to
the great adaptability of their organization structure,
these two sites offer special strengths in the flexible
production of small series.
The output in units at the Murten production site
increased by approximately 60 %. This welcome
boost is due to the continuing increase in the market
acceptance of wireless communication systems.
The customized manufacture of shells and final
assembly of all In-The-Ear (ITE) instruments are
handled by the production laboratories of our
sales organizations. In response to market needs –
ITE instruments account for 80 % of total sales in
North America – centers of competence in ITE production,
with continuously rising production figures,
have developed particularly in Warrenville (Chicago)
and Minneapolis. In Europe, an ITE training center
has been established in recent years at Phonak
France headquarters in Lyon. In Denmark, the
acquisition of Auris A/S has greatly expanded ITE
instrument production capacity in northern Europe.
19
Financial and business review
7. Business information systems
During the year under review Phonak Ltd. introduced
the SAP R/3 ERP (Enterprise Resource Planning)
management system. The integration of the business
processes in all sectors of the company played a crucial
role in this project. Following successful introduction
of the new ERP system, internal processes
can now be optimized and adapted to the ever
increasing complexities of the corporate world. In
the future, Phonak intends to exploit the advantages
of a uniform solution worldwide. The integration of
further Group companies is planned.
8. Personnel
During 2000/01, the number of people employed by
the Phonak Group rocketed by 843 to 2,122 as of
March 31, 2001, in the wake of vigorous growth and
acquisitions. Acquisitions brought 650 new employees
into the Phonak Group. Another 72 are employed
in the newly founded companies Phonak Switzerland,
Phonak Middle East and Phonak Marketing
International. Finally, 121 new jobs were created in
the existing companies, 41 of them in Switzerland
and 36 in Phonak USA.
The average number of people employed by the
Phonak Group during the year was 1,583 (previous
year 1,239). This figure included 105 (+18) in research
and development, 688 (+155) in production,
604 (+134) in marketing and sales and 186 (+37)
in administration and management.

9. Holding company Board
The Annual General Meeting of July 13, 2000 reelected
the Chairman of the Board of Directors,
Andreas E. Rihs, the Vice Chairman of the Board,
Dr. Alexander Krebs, together with the members
Beda Diethelm and Hans-Ueli Rihs for a further
period of three years.
No elections to the Board of Directors are due to be
held at the forthcoming Annual General Meeting of
July 5, 2001.
10. Outlook
The Phonak Group expects a continued positive
development of business. As already announced in
the Shareholder Letter of April 2001, the current
financial year will be characterized again by strong
growth: we expect sales to increase by at least 30 %
and thereby to exceed the CHF 600 million mark.
This increase will consist of double-digit internal
growth, on the one hand, and growth through the
companies acquired in 2000/01 (primarily Unitron
and Hansaton) on the other. Internal growth will
again be fuelled mainly by new products during the
financial year 2001/02. We expect the miniature
Claro CIC instrument, which will be launched during
the summer of 2001, to provide a major impetus.
Unitron's business will be influenced largely by the
introduction of the Nexus and Axiom hearing computer
lines, which is currently under way. We foresee
these products making a considerable contribution
to sales and profits, especially in the second half of
the year.
We expect continued double-digit growth in consolidated
profits. The exact development of profits will
depend on different factors: on the progress made
with the integration of companies acquired in the
year 2000, on the question of how quickly the great
demand for the Nexus and Axiom products can be
met, on the overall market growth in Europe and
North America, etc.
Generally speaking, we can predict that the financial
year 2001/02 will be a year of two contrasting
halves: a somewhat quieter first half followed by a
clear upturn during the second half, due, in particular,
to Claro CIC and Nexus.
20
Financial and business review
Capital expenditure will rise significantly (a good
CHF 30 million have been budgeted) but still requires
only approximately a third of the cash flow
from operating activities. A main focus of the investment
activity will be on the three largest production
sites of Stäfa (Phonak), Kitchener and Minneapolis
(Unitron) where further investments will be made in
the renewal and modernization of production plant
and IT systems. At the same time, Phonak USA is
planning a sizeable investment in an e-commerce
project that will represent a pilot project for the
entire Group.

In the financial year 2000/01
acquired companies
at a glance
21
Portraits

Auris A/S strengthens Phonak's
position in northern European
in-the-ear sector.
Auris specializes in the manufacture of In-The-Ear (ITE)
hearing instruments. Its proven expertise will consolidate
and strengthen Phonak Denmark’s market
position in the ITE segment. Auris also manufactures
the ITE instruments sold by other Phonak companies in
northern Europe. Production at Auris is currently
undergoing further expansion and the product range –
which will continue to include “Auris” brand ITE instruments
– will be complemented with devices based on
Phonak's proven technological platforms.
Auris was founded in 1989 by Finn
Weber Nielsen and Ole Kaas Nielsen who
remained the owners and managers of
the company until it was purchased by
the Phonak Group. They continue to run
the company now it has become part of
Phonak.
Legally Auris is now part of Phonak
Denmark A/S and is run as a branch.
22
Headquarters Middelfart, island of Fyn, Denmark
Number of instruments sold in 2000/01 Approximately 3,000
Market share in Denmark Together with Phonak, approximately 25 %
Number of employees 25
Consolidated by Phonak since April 1, 2000
Cooperation with Auris will significantly
increase Phonak's market share in the
strategically important Danish in-the-ear
segment. Consequently, the necessary
investments are being made at the company's
own premises on the island of Fyn.
The management team of Phonak Denmark and Auris (left to right):
Lars Gertsen (Sales Manager), Kirsten Blak (Controller), Lars Peter
Offersen (Factory Manager), Finn Weber Nielsen and Ole Kaas
Nielsen (Production Management), Søren Iversen (Managing
Director).

Indo Laem Audiologia SA
gives Phonak
a strong sales network in Spain.
New company name Phonak Laem S.A.
(the company was merged with Phonak España SA
after being purchased by Phonak)
Locations Alicante and Madrid, Spain
Number of instruments sold in 2000/01 approximately 15,000
Market share in Spain together with Phonak, approximately 15 %
Number of employees approximately 75
Consolidated by Phonak since October 1, 2000
The management team of Phonak Laem (left to right): Miguel Tomás
(Technology), Cristina Rico (Purchasing), Ignacio Martínez
(Managing Director), Juan Miguel Ivorra (Finance), Jesús Borrell
(Sales) and Tomás Sánchez (Training).
Founded in 1952, the company was owned and managed by the
Gimeno family until 1997, when the family sold a majority interest to
Indo Internacional SA (Barcelona, Spain). The company was then
purchased in full by the Phonak Group in September 2000. Currently,
Phonak Laem SA is the second largest supplier in the Spanish
market.
23
Portraits
This company has been an established distributor of
hearing instruments in Spain for many years and is particularly
strong in the In-The-Ear (ITE) sector, with this
segment currently accounting for more than 50 % of
sales. Alongside the full Phonak range, the company
continues to market other manufacturers' products
and ensures their after-sales service.
The previous majority shareholder, Barcelona-based Indo Internacional
SA, had decided to focus on its core activity, the optical
business. Indo Laem’s management was, therefore, seeking an
industrial partner with a long-term interest in the business who
would guarantee first-class products, high service quality, professional
marketing and a genuine concern for employees' interests.

Unitron Industries Ltd.
strengthens Phonak's
multi-brand strategy.
The top management of the Unitron Group:
Paul Thompson (COO and CFO) and Gary
Ullman (President and CEO). The following
also belong to the management team:
Gary Maas (President of Lori/Unitron and
Argosy), Doug Brander (COO of Lori/Unitron
and Argosy), Roberto Reale (General
Manager of Unitron International),
Mike Moore (General Manager of the
distribution company in Canada) and
Wolfgang Wolter (General Manager of
Unitron Germany).
Headquarters Kitchener, Ontario, Canada
Subsidiaries Lori/Unitron, Golden Valley, Minnesota, USA
Argosy, Eden Prairie, Minnesota, USA
Unitron Industries GmbH, Bremen, Germany
Number of instruments sold in 2000/01 205,000
Current global market share 3.4 %
Number of employees approximately 600
Consolidated by Phonak since January 1, 2001
Unitron Industries designs and manufactures a range of analog, digitally programmable
and fully digital hearing instrument lines from high-performance
Behind-The-Ear (BTE) instruments through to miniature Completely-In-the-Canal
(CIC) devices. An expert in-house R&D team drives the development of new products,
including Nexus, a fully digital hearing computer line that features the first freely
programmable digital platform. This product was launched in Spring 2001.
In 2000 Unitron took one of the “50 Best Managed Private Companies
in Canada” awards. This prestigious award is presented each
year by the country's leading business federation in recognition of
exemplary management practices, attitudes towards employees
and customers, and technological innovation.
24
Founded in 1964, Unitron Industries
quickly earned a reputation for their
powerful instruments that helped users
overcome severe hearing impairment.
This success was largely responsible for
the company's growth into one of the
largest suppliers of hearing instruments
in North America. During 1999 and
2000, Unitron purchased two US companies
- Lori Medical Laboratories and
Argosy Electronics, both of which
specialize in In-The-Ear (ITE) instruments
and are located in Minnesota.

Hansaton gives
Phonak a
leading position in Austria.
Headquarters Salzburg, Austria
Branches 30 specialist outlets and approximately
100 consultancy and service centers
Number of instruments sold in 2000/01 Approximately 9,000
Market share in Austria Approximately 30 %
Number of employees 125
Consolidated by Phonak since April 1, 2001
Hansaton was founded in Salzburg in
1961 as the Austrian distributor of the
Hamburg-based German hearing instrument
manufacturer, Hansaton Fischer
KG. The company was sold to Siemens in
1981. In 1993 the top management took
over the company in a management
buy-out.
Integration with Phonak will ensure the successful, long-term
development of Hansaton. Andreas Schlatte (right) and Hannes
Reichl (left) – pictured here with Peter Pfluger (middle) at the
announcement of the tie-up – will remain joint managing directors
of the company.
Portraits
Hansaton provides the Austrian market, through its own specialist outlets as well as
further consultancy and service centers, with most modern hearing systems. Furthermore,
the company sells diagnostic equipment to Ear, Nose and Throat (ENT)
specialists throughout Austria. Hansaton holds a leading position as a supplier of
instruments for children with hearing impairment and has been successful with a
therapeutic program for tinnitus sufferers.
25

28 Consolidated Income Statement
29 Consolidated Balance Sheet
30 Consolidated Statement of Cash Flows
31 Summary of Changes in Shareholders’ Equity
32 Notes to the Consolidated Financial Statements
53 Report of the Group Auditors
27
Consolidated Financial Statements

Consolidated Income Statement 2000/01
2000/01 1999/00
Notes 1,000 CHF 1,000 CHF
Consolidated sales 4 460,152 314,281
Sales related costs 5 (30,555) (19,052)
Changes in finished goods and
work-in-process 4,171 (185)
Own work capitalized 6 1,979 2,554
Share of loss of unconsolidated associates (185) (203)
Other operating income 90 992
Operating income 435,652 298,387
Direct material costs (105,528) (71,772)
Personnel expenses (128,007) (99,412)
Other operating expenses 7 (97,133) (67,856)
Depreciation and amortization 8 (17,945) (12,122)
Exchange differences 7,219 2,282
Other income/(expense), net 9 1,052 (704)
Operating profit (EBIT) 95,310 48,803
Financial expense, net 10 (3,158) (2,091)
Profit before deduction of taxes
and minority interests 92,152 46,712
Taxes 11 (26,102) (12,587)
Minority interests’ share of profit (333) (92)
Consolidated net profit 65,717 34,033
Basic earnings per share (CHF/share) 12 103.89 54.12
Diluted earnings per share (CHF/share) 102.61 53.81
28

Consolidated Balance Sheet at March 31, 2001
29
Consolidated Financial Statements
Assets
31.3.2001 31.3.2000
Notes 1,000 CHF 1,000 CHF
Cash and cash equivalents 14 96,108 47,965
Trade receivables 15 92,616 66,429
Other receivables and prepayments 16 15,654 12,782
Inventories 17 85,555 68,114
Total current assets 289,933 195,290
Land and buildings 18 70,085 68,078
Plant and equipment 18 49,322 36,250
Total tangible fixed assets 119,407 104,328
Investments in associates 19 0 185
Other investments 20 47,577 3,682
Deferred tax assets 11 33,803 12,851
Intangible assets (Goodwill) 21 213,778 29,937
Total non-current assets 414,565 150,983
Total assets 704,498 346,273
Liabilities and shareholders’ equity
31.3.2001 31.3.2000
Notes 1,000 CHF 1,000 CHF
Short-term debts 22 32,687 12,973
Trade payables 31,380 25,992
Taxes payable 18,635 4,599
Other payables and accruals 23 71,987 38,376
Total current liabilities 154,689 81,940
Mortgages 24 42,504 44,656
Other long-term debts 25 160,263 18,266
Deferred tax liabilities 11 17,607 13,709
Other long-term provisions 26 5,282 4,367
Total long-term liabilities 225,656 80,998
Total liabilities 380,345 162,938
Minority interests 543 496
Share capital 27 12,937 12,618
Capital reserves 121,198 36,488
Treasury shares (3,969) (1,198)
Retained earnings 189,887 131,731
Cumulative translation adjustment 3,557 3,200
Total shareholders’ equity 323,610 182,839
Total liabilities and shareholders’ equity 704,498 346,273

Consolidated Statement of Cash Flows 2000/01
2000/01 1999/00
Notes 1,000 CHF 1,000 CHF
Consolidated net profit 65,717 34,033
Non cash items
Depreciation of tangible fixed assets 13,245 10,088
Amortization of intangible assets 4,480 1,814
Write-down of other investments 220 220
Loss on sale of tangible fixed assets, net 227 201
Minority interest in net profit 333 92
Share of loss of associates 185 203
Change in deferred taxes, net (6,173) (2,032)
Change in other long-term provisions, net (2,820) 9,697 650 11,236
Cash flow before changes in working capital 75,414 45,269
Changes in net current assets
Increase
Trade receivables (11,145) (13,347)
Other receivables and prepayments (1,534) (4)
Inventories (4,559) (4,176)
Increase
Trade payables (2,768) 7,662
Tax payable 13,940 (4,547)
Other payables and accruals 22,106 16,040 5,534 (8,878)
Net cash from operating activities 91,454 36,391
Purchase of tangible fixed assets (21,842) (17,426)
Proceeds from sale of tangible fixed assets 900 339
Acquisition of subsidiaries (net of cash acquired) 28 (109,272) (1,871)
Acquisition of minority interests 29 (632) (863)
(Increase)/decrease in other investments, net (23,829) 556
Net cash used in investing activities (154,675) (19,265)
Increase in short-term debts, net 4,029 3,629
Decrease in mortgages (2,626) (2,650)
Increase/(decrease) in other long-term debts, net 119,508 (1,994)
Capital increase Phonak Holding Ltd. 4,239 2,336
Acquisition of treasury shares (2,771) (83)
Dividend paid by Phonak Holding Ltd. (7,561) (6,908)
Minority interests in dividends paid
by Group companies (54) (61)
Net cash from financing activities 114,764 (5,731)
Currency translation differences (3,400) (21)
Increase in cash and cash equivalents 48,143 11,374
Cash and cash equivalents per April 1 47,965 36,591
Cash and cash equivalents per March 31 96,108 47,965
Additional details: • interest paid 4,640 3,298
• taxes paid 18,402 18,372
30

Summary of Changes in Shareholders’ Equity
31
Consolidated Financial Statements
Share Capital Retained Cumulative Treasury Total
capital reserves earnings translation shares shareholders’
1,000 CHF adjustment equity
Balance April 1, 1999
Capital increase of
12,577 34,193 104,540 967 (1,115) 151,162
Phonak Holding Ltd. 1)
Acquisition of
41 2,295 2,336
treasury shares
Dividend paid
(83) (83)
by Phonak Holding Ltd. (6,908) (6,908)
Consolidated net profit
Currency translation
34,033 34,033
differences 2,233 2,233
Other changes 66 66
Balance March 31, 2000
Capital increases of
Phonak Holding Ltd.
12,618 36,488 131,731 3,200 (1,198) 182,839
1)
from conditional capital 58 4,181 4,239
from authorized capital 2)
Acquisition of
261 80,529 80,790
treasury shares
Dividend paid
(2,771) (2,771)
by Phonak Holding Ltd. (7,561) (7,561)
Consolidated net profit
Currency translation
65,717 65,717
differences 357 357
Balance March 31, 2001 12,937 121,198 189,887 3,557 (3,969) 323,610
1)
The capital increase was made from the conditional capital.
2)
Used as partial purchase price for the acquisition of the Unitron Group (see also Note 28) and as partial purchase price prepayment for the
acquisition of Hansaton (see also Note 20).
Definition of the different categories of shareholders’ equity recognized in the Phonak Group:
• Share capital is the share capital of the parent company Phonak Holding Ltd.
• Capital reserves represent the share premiums arising out of the capital increases of Phonak Holding Ltd.
• Retained earnings comprise the undistributed profits of group companies and all other reserves including
adjustments arising on consolidation.
• Treasury shares comprise the repurchased shares of Phonak Holding Ltd. at their respective acquisition
costs.

Notes to the Consolidated Financial Statements at March 31, 2001
1. Corporate information
The Phonak Group (the “Group”) is involved in the development, manufacture and distribution of hearing
systems and related products for the hard of hearing. The Group operates world-wide and distributes its
products through its own distribution network in the major industrial countries and through independent
representatives in over 60 other countries. The ultimate parent company is Phonak Holding Ltd., a limited
liability company incorporated in Switzerland. Phonak Holding Ltd.’s registered office is located at
Laubisrütistrasse 28, CH-8712 Stäfa, Switzerland.
2. Basis of the consolidated financial statements
The consolidated financial statements of the Phonak Group are based on the financial statements at March 31
of the individual Group companies prepared in accordance with uniform policies. The consolidated financial
statements have been prepared on a historical cost basis except for the measurement at market value of
short-term securities and comply with International Accounting Standards (IAS). The consolidated financial
statements were approved by the Board of Directors of Phonak Holding Ltd. on June 7, 2001. During the year,
the following Standards have been adopted for the first time:
• IAS 10 (revised 1999) Events After the Balance Sheet Date
• IAS 22 (revised 1998) Business Combinations
• IAS 36 Impairment of Assets
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets
• IAS 38 Intangible Assets.
The preparation of financial statements requires management to make estimates and assumptions that affect
the amounts reported for assets and liabilities and contingent assets and liabilities at the date of the financial
statements as well as revenue and expenses reported for the period. Actual results could differ from these
estimates.
2.1 Basis of consolidation
The consolidated financial statements include the financial statements of Phonak Holding Ltd. as well as the
domestic and foreign subsidiaries in which Phonak Holding Ltd. holds directly or indirectly more than 50 % of
the share capital. These companies have been fully consolidated in the consolidated financial statements.
Minority investments in associated companies (generally investments between 20 % and 50 %) are consolidated
using the equity method. Investments of below 20 % are recorded at acquisition cost less any necessary
write-downs. A list of the significant consolidated companies is given in Note 37.
2.2 Principles of consolidation
Under the full consolidation method, 100 % of assets, liabilities, income and expenses are included. The interests
of minority shareholders in equity and net profit are shown separately in the balance sheet and income
statement. The Group’s share of equity in those companies consolidated using the equity method is shown in
the balance sheet as “Investments in associates”, and its share in the net profit or loss for the year is shown in
the income statement as “Share of profit or loss of unconsolidated associates”.
Group companies acquired during the year are included in the consolidation from the date of acquisition, and
companies disposed of excluded as of the date of disposal.
32

33
Consolidated Financial Statements
Intercompany receivables, liabilities, expenses and income are eliminated. Unrealised profit on intercompany
inventories is eliminated.
2.3 Goodwill
The assets and liabilities of newly acquired Group companies are revalued at the estimated market values at the
date of acquisition. The difference between the purchase price and the revalued net assets represents goodwill.
Goodwill is capitalised and amortised on a straight line basis over its expected economic useful life, not exceeding
a maximum of 20 years. Goodwill denominated in foreign currencies is translated into Swiss francs at the
exchange rate applicable at year-end.
2.4 Currency translation
The consolidated financial statements are expressed in Swiss francs (“CHF”). The functional currency of each
group company is the applicable local currency.
Monetary assets and liabilities of Group companies which are denominated in foreign currencies are translated
using year-end exchange rates. Transactions in foreign currencies are accounted for at the rates prevailing at
the dates of the transactions. The resulting exchange differences are recorded in the local income statements of
the Group companies and included in net profit.
When translating foreign currency financial statements into Swiss francs, year-end exchange rates are applied
to assets and liabilities, while average annual rates are applied to income statement accounts. Translation
differences arising from this process are recorded in a separate component of shareholders’ equity.
2.5 Accounting and valuation principles
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, postal checking and bank account balances, time deposits
with a maturity of 3 months or less, and securities. The securities are quoted, easily realisable and valued at
market values. Adjustments to reflect market value are recorded as a component of net profit.
Trade receivables
Trade receivables are recorded at nominal value. Provision is made for doubtful accounts.
Inventories
Purchased raw materials, components and finished goods are valued at the lower of cost (usually average) or
market value. Manufactured finished goods and work-in-process are valued at the lower of production cost or
market value. The main elements of production cost are materials, direct labour, and an allocation of production
overhead expense.
Tangible fixed assets
Tangible fixed assets (land, buildings, plant and equipment) are valued at purchase or manufacturing cost less
accumulated depreciation. Depreciation is calculated on a straight line basis over the expected useful lives of the
individual assets or asset categories. The applicable useful lives are 25–40 years for buildings, and 3–10 years for
production facilities, machinery, equipment and vehicles. Land is not depreciated.
Leased assets (financial leasing) are capitalized and depreciated over their estimated useful life, as defined above.
The corresponding liabilities are classified as “short-term debts” or “other long-term debts”, depending on whether
they are payable within or after 12 months.
Expenditures for repair and maintenance which do not increase the estimated useful lives of the related assets are
recognized as an expense in the period in which they are incurred.

Intangible assets
Intangible assets are comprised solely of goodwill arising on acquisitions. Goodwill is amortised on a straight line
basis over the expected useful life, not exceeding 20 years (see also Note 2.3).
Short-term debts
Short-term debts consist of short-term bank debts and all other interest bearing debts with a maturity of
12 months or less.
Income taxes
Full provision is made for taxes which are to be paid on taxable profits of the individual Group companies.
Deferred tax is provided on the valuation differences (timing differences) between the tax bases of assets and
liabilities and their carrying values in the consolidated balance sheet. Deferred tax assets relating to tax loss
carry-forwards are recognised only to the extent that it is probable that taxable income will be available against
which the tax losses can be offset.
Provision is made for non-recoverable withholding taxes only on anticipated dividend distributions from subsidiaries.
No provision is made in respect of possible future dividend distributions from undistributed earnings, as
these are generally reinvested.
Employee benefits
Pension plans
Certain Group companies have additional pension plans in addition to the mandatory local statutory social security
plans. Such plans are defined contribution plans (future benefits are determined by reference to the amount
of contributions paid) and are generally administered by autonomous pension plans or independent insurance
companies. The pension plans are financed through employer and employee contributions. The employer’s
contributions are charged to income and amounted to CHF 4.1 million during the current year (previous year
CHF 3.4 million).
Phonak Holding Ltd.’s pension fund, in which the Swiss Group companies Phonak Ltd., Phonak Switzerland Ltd.
and Phonak Marketing International Ltd. participate, has been treated up until now as a defined contribution
plan. Subsequent to a detailed evaluation made by the Swiss IAS Forum and the Audit Commission of the Swiss
Institute of Accountants, and as a result of the special features of the Swiss employee benefit system, it will be
treated in the future as a defined benefit plan. The new valuation and treatment will become effective as of
April 1, 2001.
Other long-term benefits
Other long-term benefits comprise mainly length of service compensation which certain subsidiary companies are
required to provide in accordance with legal requirements in the respective countries. These benefits are accrued,
and the corresponding liabilities are included under “Provisions for severance allowances” in the balance sheet
position “Other long-term provisions” (see also Note 26).
Employee share option plan
No costs are recognised in the consolidated financial statements for options granted to employees, as the
strike price normally equals the average market value during the three months prior to the date of grant
(see also Note 31).
Revenue recognition
Consolidated sales represent invoiced sales to third parties excluding sales taxes and net of returns. Revenue
from long-term service contracts is recognised on a pro rata basis over the contract period.
34

Research and development costs
All research and development costs are expensed as incurred. The R&D costs for 2000/01 amounted to
CHF 33.4 million (previous year CHF 25.3 million). In addition to the internal costs (direct personnel and
other operating costs, depreciation on R&D equipment and allocated occupancy costs), total costs also
include externally contracted R&D work amounting to CHF 12.0 million (previous year CHF 7.5 million).
Financial instruments
Financial instruments comprise cash and bank balances, securities, trade receivables, trade payables, mortgage
liabilities and other long-term debts. The carrying amounts of cash and bank balances, securities, trade receivables
and trade payables approximate their market values. Mortgages and other long-term debts subject to
floating interest rates are based on normal market conditions, and these balances are adjusted to reflect changes
in interest rates. Interest rates on fixed mortgages approximate current market interest rates or, in some
instances, tend to be lower. Therefore, no detailed calculation of market values was made, as no significant
deviations from the carrying values of these liablities are to be expected. Information concerning the balances,
base currencies and interest rates of mortgages and other long-term debts is disclosed in Notes 24 and 25.
Interest rate risk
Interest rate risk relates primarily to the long-term interest bearing liabilities. The Group’s mortgages as well as
a portion of the other long-term debts represent long-term fixed-rate contracts, which minimizes the risk of
changing interest rates. The remainder of the long-term debts (entered into during the business year 2000/01)
are currently subject to money market rates. The interest situation and hedging possibilities are continuously
monitored. Derivative instruments are not currently being used to hedge against changes in interest rates.
Exchange rate risk
The Group buys and sells products in foreign currencies and is therefore exposed to exchange rate risks. To
hedge against foreign currency exchange risks, in particular relating to intercompany sales and the settlement
of intercompany loans, forward currency contracts are entered into. The unsettled contracts at March 31,
2001, have a nominal book value of CHF 3.5 million (previous year CHF 6.1 million) and a fair value of
CHF 3.6 million (previous year CHF 6.4 million). Unrealized exchange losses on forward currency contracts,
to the extent that these are not offset by unrealized gains on the corresponding hedged transactions, are
recognized and charged fully against net profit. No other financial instruments (e.g. derivative instruments)
have been entered into.
Concentration risk
Financial instruments which could expose the Group to a potential concentration risk are principally cash and
bank balances and trade receivables. Banking relations are maintained only with first class financial institutions.
The Group performs continuous credit checks on its customers and is not exposed to any significant
concentration risks.
Impairment of assets
At each balance sheet date, the carrying values of assets are reviewed for any indication of impairment. If such
indication exists, the recoverable amount of the asset is estimated. The recoverable value is the higher of an
asset’s net selling price and its value in use. The value in use is the present value of estimated future cash
flows expected to arise from the continuing use of the asset. If the recoverable amount is less than the carrying
value, the carrying value of the asset is reduced to the recoverable amount and the amount of the reduction
recognized as an impairment loss. Any indication that a previously recognised impairment loss no longer
exists or has decreased will give rise to a reversal of an impairment loss and will be recognised in income.
35
Consolidated Financial Statements

Related Parties
Related parties are defined to include the main shareholders and members of the Board of Directors of
Phonak Holding Ltd. and Group management. All transactions with related parties are conducted on armslength
bases.
4. Segment information
The Group is active in only one segment: the development, production, distribution and service of hearing
instruments and related products. The primary segment information is presented according to geographical
regions, which also correspond to the organisational structure. Transactions between segments are generally
conducted at market rates.
36
Europe North America
1,000 CHF 2000/01 1999/00 2000/01 1999/00
Sales
Third parties 225,914 167,675 217,371 131,392
Intersegment sales 188,984 123,356 0 179
Total sales 414,898 291,031 217,371 131,571
Segment result 109,295 52,549 14,118 14,786
Share of loss of unconsolidated associates (185) (203) 0 0
Operating profit (EBIT) 109,110 52,346 14,118 14,786
Financial expense, net
Profit before taxes and minority interests
Taxes
Minority interests in net profit
Consolidated net profit
Segment assets 774,332 421,654 310,451 57,354
Investments in associates 0 185 0 0
Total assets 774,332 421,839 310,451 57,354
Total liabilities 420,782 232,160 226,120 39,584
Other information:
Investments in tangible and intangible fixed assets 31,429 14,201 183,622 2,734
Depreciation on tangible fixed assets 10,928 8,943 2,026 854
Depreciation on intangible assets
and write-offs of other investments 2,402 1,994 2,290 32

Australasia Eliminations / Total
Other
2000/01 1999/00 2000/01 1999/00 2000/01 1999/00
16,867 15,214 0 0 460,152 314,281
14,159 15,316 (203,143) (138,851) 0 0
31,026 30,530 (203,143) (138,851) 460,152 314,281
5,313 4,687 (33,231) (23,016) 95,495 49,006
0 0 0 0 (185) (203)
5,313 4,687 (33,231) (23,016) 95,310 48,803
(3,158) (2,091)
92,152 46,712
(26,102) (12,587)
(333) (92)
65,717 34,033
14,457 16,285 (394,742) (149,205) 704,498 346,088
0 0 0 0 0 185
14,457 16,285 (394,742) (149,205) 704,498 346,273
8,609 7,772 (275,166) (116,578) 380,345 162,938
583 491 0 0 215,634 17,426
291 291 0 0 13,245 10,088
8 8 0 0 4,700 2,034
37
Consolidated Financial Statements
3. Changes in Group structure
During the 2000/01 business year, the following companies were included in the consolidation for the first
time:
• Phonak Laem SA, Madrid, Spain (resulting from the merger of Phonak España SA, Madrid, and Indo Laem
Audiologia SA, Alicante, in which a 100% interest was acquired in September 2000)
• Auris Holding ApS and its wholly owned subsidiary Auris A/S, Middelfart, Denmark (100% interest acquired
as of April 1, 2000 and included in Phonak Danmark A/S following the merger of these companies)
• Phonak Switzerland Ltd., Bubikon, Switzerland (founded in August 2000)
• Phonak Middle East FZE, Dubai, United Arabian Emirates (founded in December 2000)
• Unitron Group, Kitchener, Ontario, Canada (100% interest purchased as of January 1, 2001)

5. Sales related costs
These consist of expenditures which relate directly to sales revenue, such as cash discounts, year-end rebates,
third party sales commissions, outward freight costs, bad debts, and the cost of warranty work.
6. Own work capitalized
Own work capitalized includes material and personnel costs and allocated production overhead expense in
connection with the production of self-constructed fixed assets, particularly production equipment and tools.
7. Other operating expenses
Other operating expenses are comprised of the following items:
2000/01 1999/00
1,000 CHF 1,000 CHF
Energy, small materials, tools 13,364 7,731
External R & D costs 12,047 7,521
Maintenance, other third party services 6,183 4,907
Rent and leasing costs 5,204 3,628
Office and professional expenses 15,215 9,568
Travel and car expenses 8,878 6,516
Advertising and PR expenses 30,205 24,086
Other operating expenses 6,037 3,899
Total 97,133 67,856
The notable increase in office and professional expenses as well as in other operating expenses is attributable
among others to the transaction costs in connection with purchases of subsidiaries made during the year.
8. Depreciation and amortization
2000/01 1999/00
1,000 CHF 1,000 CHF
Depreciation on tangible fixed assets
Buildings 1,918 1,855
Plant and equipment 11,327 8,233
Total 13,245 10,088
Amortization of goodwill 4,480 1,814
Write-down of other investments 220 220
Total 17,945 12,122
38

9. Other income/(expenses), net
2000/01 1999/00
1,000 CHF 1,000 CHF
Loss on disposal of fixed assets, net (227) (201)
Income from non-consolidated investments 0 900
Other income 1,664 1,247
Other expenses (385) (2,650)
Total 1,052 (704)
Other income/(expenses) comprise non-recurring items which are incurred in the ordinary course of business.
The most significant amount included in Other income for the 2000/01 business year was a one-time
compensation that the Belgium subsidiary Lapperre BHAC NV received in connection with the termination of
an exclusive distribution agreement for surgical instruments. During the prior year, the main component of
Other income was a one-time payment of CHF 0.8 million received from the grant of employee options on
Phonak Holding shares, and in Other expenses it was a one-time penalty which had to be paid to the previous
insurer of the Phonak Ltd. pension scheme as a result of Phonak Ltd.’s early termination of the contract
(CHF 2.6 million).
10. Financial expense, net
2000/01 1999/00
1,000 CHF 1,000 CHF
Mortgage interest (1,840) (1,932)
Leasing interest (finance leasing) (4) (6)
Other interest expense (2,796) (1,360)
Total interest expense (4,640) (3,298)
Interest income 1,328 821
Securities income 154 386
Total financial expense, net (3,158) (2,091)
39
Consolidated Financial Statements

11. Taxes
2000/01 1999/00
1,000 CHF 1,000 CHF
Income taxes 32,275 14,619
Change in deferred taxes (6,173) (2,032)
Total 26,102 12,587
Reconciliation of tax expense
Net profit before taxes 92,152 46,712
Weighted average expected tax rate 1)
25.55 % 26.63 %
Tax at weighted average rate
+/- effects of
23,541 12,438
non tax deductible expenses 1,832 649
non capitalized tax loss carry forwards and current year losses (net) (45) 50
tax concessions 2)
(579) (346)
change in tax rates on deferred tax balances 14 (82)
prior year expense and other items 3)
1,339 (122)
Total tax expense 26,102 12,587
as a % of consolidated net profit before taxes 28.3 % 26.9 %
1)
The expected Group tax rate is the aggregate obtained by applying the currently effective rate for each individual jurisdiction to its respective
profit before taxes.
2)
In connection with an economic incentive program, one subsidiary company is subject to a reduced tax rate for a limited time period.
3) “Prior year expense and other items” includes non-refundable foreign withholding taxes of 1,113 (prior year 709).
Composition of deferred tax assets and liabilities
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Assets Liabilities Assets Liabilities
Tax loss carry forwards 9,599 0 1,227 0
Allowance for doubtful receivables 1,990 292 482 293
Prepayments 0 775 0 782
Inventories 9,976 2,563 5,206 2,220
Tangible fixed assets 152 9,514 169 7,755
Intangible assets 314 457 107 381
Leasing liabilities 15 2 35 0
Short-term provisions 9,039 98 3,758 0
Long-term provisions 2,524 3,906 1,867 2,278
Other items 194 0 0 0
Deferred taxes 33,803 17,607 12,851 13,709
The tax loss carry forwards on which deferred taxes have been calculated amount to 37,187
(previous year 3,253) and expire between 2005 and 2019.
40

41
Consolidated Financial Statements
12. Earnings per share
The basic earnings per share are calculated by dividing the consolidated net profit by the weighted average
number of shares outstanding (net of treasury shares) during the period. For the current business year, the
weighted average number of shares outstanding amounted to 632,574 shares (previous year 628,885 shares).
The diluted earnings per share considers the dilutive effect which could arise upon the possible exercise of all
outstanding options. The weighted average number of shares thus used to determine the diluted earnings per
share was 640,452 shares (previous year 632,484 shares).
13. Dividend per share
The Board of Directors of Phonak Holding Ltd. proposes to the General Meeting to be held on July 5, 2001 that
a repayment reducing the nominal value of shares by CHF 15.00 each be made instead of a dividend distribution
(previous year dividend of CHF 12.00 per share).
14. Cash and cash equivalents
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Cash on hand 191 77
Postal checking and current bank accounts 53,923 25,421
Time deposits 31,275 11,486
Quoted securities 10,711 10,981
Payments in transit 8 0
Total 96,108 47,965
15. Trade receivables
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Accounts receivable 100,734 68,882
Provision for doubtful debts (8,118) (2,453)
Total 92,616 66,429
16. Other receivables and prepayments
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Other receivables 9,098 7,782
Prepayments 6,556 5,000
Total 15,654 12,782
The largest individual items included in other receivables are recoverable withholding taxes on interest and dividend
income, recoverable value added taxes, and advances to suppliers. Prepayments comprise mainly prepaid
operating expenses. The by far most significant component relates to pension and other insurance premiums of
CHF 4.2 million (previous year CHF 4.2 million).

17. Inventories
31.3.2001 31.3.2000
1’000 CHF 1’000 CHF
Raw materials and components 35,204 20,932
Work-in-process 13,753 12,899
Finished products (incl. purchased goods) 49,640 40,294
Allowances (13,042) (6,011)
Total 85,555 68,114
18. Tangible fixed assets
Total Total
land & Plant & fixed assets
1,000 CHF Land Buildings buildings equipment 31.3.2001 31.3.2000
Cost
Balance April 1 8,874 72,535 81,409 78,422 159,831 145,724
Change in Group companies 1,023 4,060 5,083 19,614 24,697 533
Additions 0 334 334 21,508 21,842 17,426
Disposals 0 0 0 (4,253) (4,253) (4,419)
Exchange differences (107) (97) (204) (708) (912) 567
Balance March 31 9,790 76,832 86,622 114,583 201,205 159,831
Accumulated depreciation
Balance April 1 0 13,331 13,331 42,172 55,503 48,603
Change in Group companies 0 1,374 1,374 15,542 16,916 360
Depreciation for the year 0 1,918 1,918 11,327 13,245 10,088
Disposals 0 0 0 (3,126) (3,126) (3,879)
Exchange differences 0 (86) (86) (654) (740) 331
Balance March 31 0 16,537 16,537 65,261 81,798 55,503
Net book value
Balance April 1 8,874 59,204 68,078 36,250 104,328 97,121
Balance March 31 9,790 60,295 70,085 49,322 119,407 104,328
The additions to plant and equipment comprise CHF 7.7 million (previous year CHF 8.0 million) for production facilities
and machines, CHF 12.2 million (previous year CHF 8.3 million) for tools and office equipment, and CHF 1.6 million
(previous year CHF 1.1 million) for motor vehicles. The tangible fixed assets (buildings, plant and equipment)
are insured against fire at a value of CHF 177 million (previous year CHF 116 million). Plant and equipment includes
assets held under financial leases with the following values:
• cost value CHF 2.1 million (previous year CHF 0.1 million)
• net book value CHF 0.8 million (previous year CHF 0.1 million)
The corresponding leasing liabilities amount to CHF 0.8 million (previous year CHF 0.1 million).
The Group has commitments for the purchase of fixed assets totalling CHF 0.7 million (previous year 0).
42

43
Consolidated Financial Statements
19. Investments in associates
Investments in associates relate to a 25% investment in the software development company HIMSA A/S
(a joint-venture with the three Danish hearing instrument manufacturers). The company closed its fiscal year
2000 with a loss. The Group’s pro-rata share in that loss of CHF 0.5 million exceeded the book value of the
investment, which has therefore been reduced to zero and the use of the equity method of accounting discontinued.
The Group’s share in losses which was therefore not recognized was CHF 0.3 million at March 31, 2001.
20. Other investments
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Other investments 5,527 3,382
Prepayment of purchase price for subsidiary 40,075 0
Other long-term loans 1,975 300
Total 47,577 3,682
The other investments consist mainly of a minority interest in the Danish patent holding company K/S HIMPP
(Hearing Instrument Manufacturers Patent Partnership), in which Phonak and Unitron have invested together
with other leading hearing instrument manufacturers.
The prepayment of purchase price for subsidiary relates to the acquisition of a 100% interest in
Hansaton Audiologische Geräte GmbH (Salzburg, Austria). Of the purchase price, CHF 16.2 million was paid in
Phonak Holding shares and CHF 23.9 million was paid in cash. As Phonak assumed control over this company
on April 1, 2001, it is not yet consolidated at March 31, 2001 (see also Note 35, “Events after the balance
sheet date”).
The other long-term loans concern a loan arising from the sale of an investment of the Unitron Group during
1999. As of March 31, 2001, the balance outstanding was CHF 0.4 million, which bears interest at the rate of
8% and is scheduled for repayment in annual instalments until the year 2004. This line item also includes a
non-interest bearing loan receivable from a supplier which is due by December 31, 2006.
21. Intangible assets (Goodwill)
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Cost
Balance April 1 36,489 35,445
Additions 186,011 883
Exchange differences 2,220 161
Balance March 31
Accumulated depreciation
224,720 36,489
Balance April 1 6,552 4,729
Amortization for the year 4,480 1,814
Exchange differences (90) 9
Balance March 31
Net book value
10,942 6,552
Balance April 1 29,937 30,716
Balance March 31
Goodwill is being amortized over 20 years.
213,778 29,937

22. Short-term debts
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Bank debts 2,040 8,262
Current maturities of long-term debts 30,647 4,711
Total 32,687 12,973
The current maturities of long-term debts consist of amounts falling due in the next 12 months in respect
of mortgage repayments of CHF 2.7 million (previous year CHF 2.7 million) and other long-term debts of
CHF 27.9 million (previous year CHF 2.0 million).
23. Other payables and accruals
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Other payables 9,231 5,024
Accruals 60,350 31,687
Deferred income 2,406 1,665
Total 71,987 38,376
Other payables include principally amounts to be remitted in respect of sales taxes, value added taxes, social
security payments, employees’ income taxes deducted at source and customer prepayments. Accruals include,
among other items, provisions for vacation entitlement, salaries and bonuses payable, customer sales rebates,
and other short-term expenditures for which the amount is not precisely determinable. The substantial increase
compared with the previous year is due partially to new Group companies acquired as well as to the large
increase in customer sales rebates. Deferred income represents the deferred portion of long-term service
contract revenue.
24. Mortgages
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Analysis by currency
Swiss Francs 40,700 43,000
German Marks 1,053 1,335
Danish Crowns 508 0
French Francs 169 321
Canadian Dollars 74 0
Total 42,504 44,656
Of which maturing in beyond 5 years 28,184 29,175
The above-mentioned mortgages are all secured by lien on the related real estate. Principal amounts bear
interest at the following rates per annum: CHF 16.5 million at 3.0 %, CHF 12.0 million at 4.0 %, CHF 4.8 million
at 4.2 %, CHF 2.4 million at 4.25 %, CHF 5.0 million at 5.25 % and the remainder at 5.0 % to 10.0 %. The
major portion of the Swiss franc mortgages are repaid in annual instalments representing 5 % of the principal
amount. The mortgages expressed in German marks and French francs are also repayable in annual instalments
and mature within a maximum of 5 years. The mortgages denominated in Danish crowns are repayable on a
quarterly basis and mature over the next 6 to 19 years.
44

25. Other long-term debts
31. 3.2001 31. 3.2000
1,000 CHF 1,000 CHF
Bank loans 156,776 18,102
Loans from supplier 1,690 0
Other 1,797 164
Total 160,263 18,266
Analysis by currency
Swiss Francs 141,400 0
Belgian Francs 15,376 18,102
Canadian Dollars 2,487 0
Spanish Pesetas 438 0
Danish Crowns 409 0
French Francs 79 116
Australian Dollars 72 42
New Zealand Dollars 2 6
Total 160,263 18,266
Of which maturing in beyond 5 years 54,380 9,809
Long-term debts denominated in Swiss francs relate to a bank loan obtained to finance the purchase of the
Unitron and Hansaton subsidiaries. This loan bears interest at LIBOR +0.9 % (currently 4.34667 %) and is
scheduled for repayment semi-annually over seven years (until December 31, 2007).
The debt in Belgian francs relates to two long-term bank credits which are repayable in annual instalments
with a final maturity date of 2008 (for the purchase of Lapperre BHAC NV during the 1996/97 business year)
and in monthly instalments through the year 2018 (for the purchase of the hearing instrument sales facilities
during the 1997/98 business year). Of these loans, the equivalent of CHF 5.8 million bear interest at the shortterm
money market rate (currently 3.60 %) and CHF 9.6 million at the long-term capital market rates (fixed
rates for 5 years and 10 years of 5.955 % and 5.56 % respectively).
Long-term debts denominated in Canadian dollars represent largely a non-interest bearing loan from a
supplier which will mature by December 31, 2006.
The other long-term debts relate to remaining purchase prices payable for acquisitions of subsidiaries made
during 2000/01: CHF 0.4 million for Auris Holding ApS, Denmark, which was acquired as of April 1, 2000 (noninterest
bearing, maturing in May 2002), and also CHF 0.4 million for Laem Audiologia SA, Spain, which was
taken over as of October 1, 2000 (subject to 6.2 % annual interest and maturing in September 2003). In addition,
this line item contains leasing liabilities with a maturity in excess of one year and up to five years
maximum.
45
Consolidated Financial Statements

26. Other long-term provisions
Provisions Provisions Provisions Others Total
for product for employee for severance provisions
warranties benefits allowances
Balance April 1, 2000 3,143 209 214 801 4,367
Changes in Group companies 998 0 0 0 998
Amounts used (186) (20) (136) (67) (409)
Reversals 0 (241) 0 (767) (1,008)
Increases 895 261 21 234 1,411
Exchange differences 12 (17) 0 (72) (77)
Balance March 31, 2001 4,862 192 99 129 5,282
In general, Phonak grants a 15 month warranty period on its products. During this period, products will be repaired
or replaced free of charge. The provision is based on turnover and past experience of warranty claims.
27. Movements in share capital
Issued shares
(each share has a nominal value of CHF 20)
Issued shares Treasury Outstanding
shares 2)
shares
Balance April 1, 1999
Issue of new shares
628,872 (868) 628,004
from conditional capital 1)
2,003 0 2,003
Purchase of treasury shares 0 (24) (24)
Balance March 31, 2000
Issue of new shares
630,875 (892) 629,983
from conditional capital 1)
2,911 0 2,911
from authorized capital 13,078 0 13,078
Purchase of treasury shares 0 (495) (495)
Balance March 31, 2001 646,864 (1,387) 645,477
Nominal value of share capital
Share capital Treasury Outstanding
1,000 CHF shares 2)
share capital
Balance April 1, 1999
Issue of new shares
12,577 (17) 12,560
from conditional capital 1)
41 0 41
Purchase of treasury shares 0 (1) (1)
Balance March 31, 2000
Issue of new shares
12,618 (18) 12,600
from conditional capital 1)
58 0 58
from authorized capital 261 0 261
Purchase of treasury shares 0 (10) (10)
Balance March 31, 2001
1)
Created for the purpose of the employee share option plan.
12,937 (28) 12,909
2)
The treasury shares, which are not entitled to dividends, were purchased on the open market. Other than 115 shares which are reserved for
an option plan for the Phonak Cycling Team, treasury shares are at the company’s disposal.
46

At March 31, 2001, the authorized share capital amounted to CHF 14.4 million (previous year CHF 13.0 million),
representing 720,000 (previous year 650,000) registered shares of CHF 20 par value. During the annual
shareholders’ meeting on July 13, 2000, the conditional share capital was increased from a maximum of
50,000 shares to a maximum of 69,125 shares. As of March 31, 2001, 66,214 shares thereof had not yet been
issued. These shares are reserved for use in the Key People program (employee share option plan for key employees
of the Phonak Group). In addition, the shareholders approved an authorized share capital consisting
of a maximum of 20,000 shares during their extraordinary meeting on December 7, 2000. Of these shares,
13,078 had been issued as of March 31, 2001 and used to cover a portion of the purchase price for Unitron
and Hansaton. The remaining maximum 6,922 shares are available for use to carry out further acquisitions
until December 7, 2002.
28. Acquisition of subsidiaries
The Phonak Group acquired 100 % interests in the following subsidiaries during the year: Auris Holding ApS (DK)
as of April 1, 2000, Indo Laem Audiologia SA (E) as of October 1, 2000, and the Unitron Group as of
January 1, 2001. These acquisitions were accounted for using the purchase method of accounting. Operating
losses related to Unitron amounting to CHF 3.3 million (after deduction of the goodwill amortization of
CHF 2.3 million) are included in the consolidated income statement. Because both of the other newly acquired
subsidiaries were integrated in the previously existing national companies (see also Note 3 “Changes in Group
structure”), their operating results cannot be determined.
2000/01 1999/00
1,000 CHF 1,000 CHF
Acquisition Acquisition
Cash and cash equivalents 6,208 6
Trade receivables 15,865 1,387
Other receivables and prepayments 1,428 44
Inventories 14,067 1,275
Tangible fixed assets 8,158 147
Investments and loans 4,005 0
Deferred tax assets 9,076 20
Short-term debts (15,743) (425)
Trade payables (9,698) (567)
Other payables and accruals (12,956) (214)
Tax payable (256) 0
Mortgages (566) 0
Other long-term debts (22,842) 0
Deferred tax liabilities (134) 0
Other long-term provisions (2,149) (59)
Total net assets (5,537) 1,614
Of which 100% (prior year 81%) acquired (5,537) 1,307
Goodwill 185,594 570
Purchase price 180,057 1,877
For which Phonak Holding shares were given in consideration (64,577) 0
Cash consideration 115,480 1,877
Less cash and cash equivalents acquired (6,208) (6)
Cash flow on acquisition, net of cash acquired 109,272 1,871
47
Consolidated Financial Statements

Details regarding the acquisitions made during the year:
Interest Purchase price Goodwill
held 1,000 CHF 1,000 CHF
Auris Holding ApS (DK) 100 % 3,633 3,216
Indo Laem Audiologia SA (E) 100 % 11,827 9,888
Unitron Group (CDN) 100 % 164,597 172,490
180,057 185,594
29. Acquisition of minority interests
During the current year, the Phonak Group acquired the remaining 9 % minority interest in Phonak Italia,
already a consolidated subsidiary, for a cash consideration of TCHF 632, of which TCHF 417 represents goodwill.
As a result, the total equity share of the Phonak Group in the company now amounts to 100 %.
30. Related party transactions
The total remuneration of the Board of Directors and Group executive management of Phonak Holding Ltd. for
the current business year amounted to CHF 2.6 million (previous year CHF 2.4 million). The loan of CHF 0.8
million which had been granted to a member of Group executive management during the previous year in
connection with options granted was paid back according to the terms of the contract in 2000/01.
31. Employee share option plan
In accordance with the “Key People program” established in 1997, members of the Board of Directors of
Phonak Holding Ltd., Group executive management as well as management and senior employees of other
Group companies receive annually a certain number of options on the shares of Phonak Holding Ltd.; this is
basically on the condition that the respective employees have been employed by the Phonak Group for a period
of at least two years. The options are granted for no consideration and each option entitles the holder to one
Phonak Holding Ltd. share after a lock-up period of at least two years at a pre-defined exercise price. The
exercise price corresponds as a rule to the average market price over the last three months immediately prior
to the month of the grant. Also, in accordance with special agreements, key people of the Phonak Group are
granted options, partially with and partially without consideration. The shares required for the share option
plan are issued from the conditional share capital which was created by resolutions of the 1994 and 2000
general meetings in accordance with Article 3a of Phonak Holding Ltd.’s articles of incorporation.
48

Changes in outstanding options:
2000/01 1999/00
Weighted Weighted
Number of average Number of average
options exercise price options exercise price
CHF CHF
Outstanding options at April 1 12,375 1,886 6,075 1,242
Granted 11,121 4,715 8,353 2,180
Exercised 1)
(2,911) 1,470 (2,003) 1,178
Expired (525) 3,761 (50) 1,100
Outstanding options at March 31 20,060 3,466 12,375 1,886
Exercisable at March 31 850 1,350 300 1,100
1)
Total consideration from exercise of options amounted to TCHF 4,275 (previous year TCHF 2,359)
Summary of outstanding and exercisable options at March 31, 2001:
Outstanding options Exercisable options
Exercise Number Average Weighted Number Weighted
price range remaining life average average
(years) exercise price exercise price
CHF CHF CHF
800 200 2.8 800 0 0
1,350 1,225 1.3 1,350 850 1,350
1,850 5,775 1.6 1,850 0 0
2,650–3,360 2,225 4.3 3,107 0 0
4,050 5,510 2.6 4,050 0 0
5,423 5,125 2.3 5,423 0 0
800–5,423 20,060 2.3 3,466 850 1,350
32. Contingent liabilities
(sureties, guarantees and pledges)
At March 31, 2001 and 2000, there were no pledges given to third parties. As in the previous year, guarantees
given to third parties amounted to CHF 0.4 million. There were no recourse liabilities in respect of discounted
bills of exchange at March 31, 2001 and 2000.
49
Consolidated Financial Statements

33. Leasing liabilities
At March 31, 2001 the following minimum leasing liabilities existed:
Business Year Operating Financial
Leasing Leasing
1,000 CHF 1,000 CHF
2001/02 5,101 453
2002/03 4,864 414
2003/04 4,613 19
2004/05 4,086 0
2005/06 3,872 0
2006/07 3,545 0
thereafter 25,960 0
Total 52,041 886
Less interest component (74)
Total (excl. interest) 812
Previous year 30,826 65
Less interest component (8)
Previous year (excl. interest) 57
The operating lease liabilities relate primarily to long-term rental agreements for office premises which are, in
general, renewable.
34. Number of employees
At March 31, 2001, the Phonak Group employed 2,122 persons (previous year 1,279). They were engaged in the
following regions and activities:
By region 31.3.2001 31.3.2000
Switzerland 617 511
Europe (excl. Switzerland) 515 393
North America 889 278
Australasia 101 97
Total 2,122 1,279
By activity 31.3.2001 31.3.2000
Research & development 142 90
Production 985 545
Marketing/sales and administration 995 644
Total 2,122 1,279
The average number of employees of the Phonak Group for the year was 1,583 (previous year 1,239).
50

51
Consolidated Financial Statements
35. Events after the balance sheet date
Effective April 1, 2001, a 100% interest in Hansaton Akustische Geräte GmbH (Salzburg, Austria) was acquired.
This acquisition will be accounted for using the purchase method in the 2001/02 consolidated financial statements.
The purchase price was CHF 40.1 million and was paid partially in cash and partially in Phonak shares
(see also Note 20). The revaluation of net assets acquired is currently in progress; therefore, the amount of
related goodwill cannot yet be specified.
36. Exchange rates
The following exchange rates were used for currency translation:
Year-end rates Ave. rates for year
Balance sheet Income statement
31. 3. 2001 31. 3. 2000 2000/01 1999/00
AED 1 47.06 – 46.26 –
AUD 1 0.85 1.01 0.94 1.00
BEF 100 3.78 3.94 3.82 3.97
CAD 1 1.10 1.15 1.13 1.07
DEM 100 78.01 81.35 78.89 81.88
DKK 100 20.45 21.37 20.69 21.53
EUR 1 1.53 1.59 1.54 1.60
FRF 100 23.26 24.25 23.52 24.42
GBP 1 2.47 2.66 2.52 2.52
ITL 100 0.0788 0.0822 0.0797 0.0827
NLG 100 69.23 72.20 70.02 72.66
NOK 100 19.04 19.69 18.99 19.58
NZD 1 0.71 0.82 0.75 0.81
SEK 100 16.64 19.19 17.98 18.50
USD 1 1.73 1.67 1.70 1.57

37. List of significant consolidated companies
Company Domicile Sales Share capital Share held by
name 2000/01 Phonak Holding
million CHF Local curr. 1,000
Switzerland
Phonak Holding Ltd. Stäfa 0 CHF 12,937 0
Phonak Ltd. Stäfa 237.5 CHF 2,500 99.3 %
Phonak Communications Ltd. Courgevaux-Murten 20.8 CHF 500 100 %
Phonak Marketing
International Ltd. Courgevaux-Murten 0 CHF 100 100 %
Phonak Switzerland Ltd. Bubikon 8.4 CHF 250 100%
Europe (excluding Switzerland)
Phonak GmbH Stuttgart (D) 56.3 EUR 153 100 %
Phonak France SA Bron-Lyon (F) 23.2 EUR 305 100%
Phonak Italia Srl Milan (I) 12.3 EUR 1,033 100%
Phonak Laem SA Madrid (E) 6.2 EUR 7,000 100%
Phonak Belgium SA Brussels (B) 0 EUR 793 100 %
Lapperre BHAC NV Groot-Bijgaarden (B) 34.4 EUR 124 100 %
Phonak B.V. Nieuwegein (NL) 7.7 EUR 227 100 %
Phonak Danmark A/S Copenhagen (DK) 9.9 DKK 9,000 100%
Phonak AB Stockholm (S) 4.1 SEK 200 100 %
Phonak AS Oslo (N) 7.9 NOK 900 100 %
Phonak UK Ltd. Warrington (GB) 13.6 GBP 150 100 %
HIMSA – Hearing Instruments
Manufacturers Software Ass. 1) Copenhagen (DK) 1.7 DKK 1,000 25 %
North America
Phonak Inc. Warrenville (USA) 173.4 USD 1,250 100 %
Phonak Canada Ltd. Mississauga (CDN) 20.4 CAD 550 100 %
Unitron Group Kitchener (CDN) 23.6 CAD 62,793 100 %
Australasia
Phonak Pty Limited Blacktown-Sydney (AUS) 23.1 AUD 750 100 %
Phonak New Zealand Ltd. Auckland (NZ) 8.0 NZD 250 100 %
Phonak Middle East FZE Dubai (AE) 0.3 AED 1,000 100 %
1) Consolidated using the equity method
52

Report of the Group Auditors
to the General Meeting of
Phonak Holding Ltd., Stäfa
As auditors of the Group, we have audited the accompanying consolidated financial statements (income statement, balance sheet,
statement of cash flows, summary of changes in shareholders’ equity and notes) of Phonak Holding Ltd. for the year ended March 31,
2001.
These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional
qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession as well as International
Standards on Auditing issued by the International Federation of Accountants, which require that an audit be planned and performed
to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have
examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also
assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and
the cash flows in accordance with International Accounting Standards and comply with Swiss law.
We recommend that the consolidated financial statements submitted to you be approved.
53
Zurich, June 7, 2001
Ernst & Young Ltd.
K. McCabe Y. Vontobel
Chartered Accountant Certified Accountant
(in charge of the audit)

56 Balance Sheet
57 Income Statement
58 Notes to the Financial Statements
62 Appropriation of Available Earnings
62 Report of the Auditors
55
Financial Statements of Phonak Holding Ltd.

Balance Sheet at March 31, 2001
Assets
31. 3.2001 31. 3.2000
Notes 1,000 CHF 1,000 CHF
Current assets
Cash and cash equivalents 32,924 7,408
Marketable securities 3.1 14,680 12,179
Amounts due from Group companies 1,419 901
Other receivables 3.2 954 2,372
Prepayments 163 80
Total current assets
Non-current assets
Investments and loans
50,140 22,940
Loans to Group companies 3.3 196,574 67,787
Loan to associated company 799 0
Allowance on loan to associated company (409) 0
Investments 3.4 153,642 31,603
Total non-current assets 350,606 99,390
Total assets 400,746 122,330
Liabilities and shareholders’ equity
31.3.2001 31.3.2000
Notes 1,000 CHF 1,000 CHF
Liabilities
Trade payables to third parties 158 65
Bank debt
Other payables
3.5 165,000 0
Third parties 5 7
Group companies 2,778 52
Accruals 1,278 320
Provision for taxes 1,700 1,220
Total liabilities
Shareholders’ equity
170,919 1,664
Share capital
Legal reserve
12,937 12,618
General legal reserve 121,458 36,748
Reserve for treasury shares 3.6 3,969 1,198
Free reserves
Retained earnings
54,000 32,000
Brought forward 5,770 7,267
Net profit for the year 31,693 30,835
37,463 38,102
Total shareholders’ equity 3.7 229,827 120,666
Total liabilities and shareholders’ equity 400,746 122,330
56

Income Statement 2000/01
57
Financial Statements of Phonak Holding Ltd.
2000/01 1999/00
Notes 1,000 CHF 1,000 CHF
Income
Management and license fees 7,443 6,004
Investment income 4.1 25,031 21,643
Interest income 7,181 3,605
Marketable securities income 0 386
Exchange gains (net) 0 792
Other income 0 791
Total income
Expenses
39,655 33,221
Office and professional expenses 1,511 1,027
Advertising and PR expenses 459 67
Interest expense 1,705 3
Unrealized losses on marketable securities 154 0
Other operating expenses 1,856 65
Exchange losses (net) 767 0
Taxes 4.2 1,510 1,224
Total expenses 7,962 2,386
Net profit for the year 31,693 30,835

Notes to the Financial Statements at March 31, 2001
1. General
The financial statements of Phonak Holding Ltd. are prepared in accordance with the principles of Swiss
corporate law.
2. Disclosure required by Swiss corporate law
2.1 Sureties, guarantees and pledges given on behalf of third parties
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Guarantees given to banks in respect of credit arrangements
of foreign subsidiary companies 26,705 24,057
2.2 Contingent liabilities
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Guarantees given in respect of rental obligations
of Group companies 41,858 24,109
2.3 Conditional capital
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Conditional capital at year-end
(Increase by a maximum of CHF 1 million, representing a maximum
of 50,000 shares at CHF 20 nominal value each, as approved by
the shareholders during their annual meeting on July 13, 2000)
1,324 383
2.4 Authorized capital
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Authorized capital at year-end
(Authorized capital was created by a decision made by the
shareholders during the extraordinary meeting held on December 7,
2000: maximum total CHF 400,000, representing a maximum of
20,000 shares at CHF 20 nominal value each, of which 13,078 shares
had been issued as of March 31, 2001)
138 0
2.5 Significant shareholders
At year-end, the following shareholders were listed in the shareholder
register with shareholdings in excess of 5 % of the issued share capital:
31.3.2001 31.3.2000
– Hans-Ueli Rihs 15.6 % 18.1 %
– Andreas Rihs 14.9 % 15.3 %
– Beda Diethelm 13.0 % 13.3 %
58

3. Notes to the balance sheet
59
Financial Statements of Phonak Holding Ltd.
3.1 Marketable securities
Marketable securities include, among other items, 1,387 treasury shares (previous year 892) purchased for a
total consideration of CHF 3,968,816 (previous year CHF 1,198,203). At March 31, 2001, these shares had a
market value of CHF 7,170,790 (previous year CHF 3,434,200). Thereof, 115 shares are reserved for an option
plan for the Phonak Cycling Team and the remainder are at the company’s disposal.
3.2 Other receivables
Included are, in particular, amounts due from the Swiss Federal Tax Authority in respect of recoverable withholding
taxes on dividend and interest income, as well as accrued interest receivable.
3.3 Loans to Group companies
Of total loans, 71 % are denominated in Canadian dollars, 21 % in Swiss francs, 4 % in Euros, and 1 % each in
Australian dollars, Norwegian crowns, Danish crowns and British pounds.

3.4 Investments
At March 31, 2001 Phonak Holding Ltd. controlled the following significant investments:
Company name Domicile Share capital Share held by
(Local curr. 1,000) Phonak Holding
Phonak Ltd. Stäfa (CH) CHF 2,500 99,3 %
Phonak Communications Ltd. Courgevaux-
Murten (CH) CHF 500 100 %
Phonak Marketing Courgevaux-
International Ltd. Murten (CH) CHF 100 100 %
Phonak Switzerland Ltd. Bubikon (CH) CHF 250 100 %
Foreign companies
Phonak GmbH Stuttgart (D) EUR 153 100 %
Phonak France SA Bron-Lyon (F) EUR 305 100 %
Phonak Italia Srl Milan (I) EUR 1,033 100 %
Phonak Laem SA Madrid (E) EUR 7,000 100 %
Phonak Belgium SA Brussels (B) EUR 793 100 %
Lapperre BHAC NV Groot-Bijgaarden (B) EUR 124 100 %
Phonak B. V. Nieuwegein (NL) EUR 227 100 %
Phonak Danmark A/S Copenhagen (DK) DKK 9,000 100 %
Phonak AB Stockholm (S) SEK 200 100 %
Phonak AS Oslo (N) NOK 900 100 %
Phonak UK Ltd. Warrington (GB) GBP 150 100 %
Phonak Inc. Warrenville (USA) USD 1,250 100 %
Phonak Canada Ltd. Mississauga (CDN) CAD 550 100 %
Unitron Group Kitchener (CDN) CAD 62,793 100 %
Phonak Pty Limited Blacktown-
Sydney (AUS) AUD 750 100 %
Phonak New Zealand Ltd. Auckland (NZ) NZD 250 100 %
Phonak Middle East FZE Dubai (AE) AED 1,000 100 %
The investments are reported at acquisition cost. The share of Phonak Holding Ltd. in the equity of the above
companies amounted to CHF 180 million at March 31, 2001 (previous year CHF 95.7 million).
3.5 Bank debt
The bank debt was incurred in connection with the purchase of the Unitron and Hansaton subsidiaries and
bears interest at LIBOR +0.9 % (currently 4.34667 %). The debt is repayable in semi-annual instalments over
7 years (until December 31, 2007).
3.6 Reserve for treasury shares
At March 31, 2001 the reserve for treasury shares amounted to CHF 3,968,816 (previous year CHF 1,198,203),
equal to the total cost price of shares acquired (see Note 3.1). The increase during the year of CHF 2,770,613
was created through an allocation from retained earnings.
60

61
Financial Statements of Phonak Holding Ltd.
3.7 Summary of changes in shareholders’ equity
Share General Free Treasury Retained Total
capital legal reserve share earnings shareholders
1,000 CHF reserve reserve equity
Balance April 1, 2000 12,618 36,748 32,000 1,198 38,102 120,666
Dividend paid (7,561) (7,561)
Capital increases
(incl. share premium)
from conditional capital 58 4,181 4,239
from authorized capital 261 80,529 80,790
Allocation to free reserve 22,000 (22,000) 0
Allocation to reserve
for treasury shares 2,771 (2,771) 0
Net profit for the year 31,693 31,693
Balance March 31, 2001 12,937 121,458 54,000 3,969 37,463 229,827
During the business year 2000/01, an additional 2,911 registered shares with a par value of CHF 20 each, or
a total par value of CHF 58,220, were issued from the conditional capital (which was created for the purpose
of an equity participation plan for key employees of the Phonak Group) for a total net consideration of
CHF 4,239,318. As a result, as at March 31, 2001 a total of 13,786 registered shares with a par value of
CHF 20 each had been issued from the conditional capital, thereby reducing the conditional capital (as determined
by the shareholders in their meetings on November 18, 1994 and July 13, 2000) from the maximum of
CHF 1,600,000 comprising 80,000 registered shares of CHF 20 par value, to a maximum of CHF 1,324,280,
representing 66,214 registered shares of CHF 20 par value.
As of March 31, 2001 a total of 20,060 (previous year 12,375) employee call options were outstanding, which
can be exercised through July 2007 against one registered share each from the remaining conditional capital.
In addition, an authorized capital amounting to a maximum of CHF 400,000 – representing a maximum of
20,000 shares at CHF 20 par value – was created during the extraordinary shareholders’ meeting on December
7, 2000. As of March 31, 2001, 13,078 shares thereof had been issued and used as a portion of the purchase
price for subsidiaries acquired. The remaining maximum 6,922 shares are available for additional acquisitions
until December 7, 2002.

4. Notes to the income statement
4.1 Investment income
This comprises dividends received from Group companies and other investments.
4.2 Taxes
The tax expense consists, on the one hand, of the non-recoverable withholding tax on dividends and interest
payments from foreign subsidiaries, and, on the other hand, of Swiss federal taxes on non-investment income.
(The company is exempt from income taxes in the canton of Zurich and only pays a reduced capital tax.).
Appropriation of Available Earnings
As proposed by the Board of Directors to the General Meeting of July 5, 2001
31.3.2001 31.3.2000
1,000 CHF 1,000 CHF
Carry forward from previous year 8,541 7,350
Allocation to reserve for treasury shares (2,771) (83)
Net profit for the year 31,693 30,835
Available earnings 37,463 38,102
Allocation to free reserves (22,000) (22,000)
Dividend distribution 0 1) (7,561)
Balance to be carried forward 15,463 8,541
1)
Instead of a dividend distribution, the Board of Directors proposes that the outstanding share capital be decreased by a reduction of the
nominal value per share from CHF 20 to CHF 5, and that the reduction of CHF 15 per share be paid out to shareholders.
62
Report of the Statutory Auditors
to the General Meeting of
Phonak Holding Ltd., Stäfa
As statutory auditors, we have audited the accounting records and the accompanying financial statements (balance sheet, income
statement and notes) of Phonak Holding Ltd. for the year ended March 31, 2001.
These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial
statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and
independence.
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit
be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement.
We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have
also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with
Swiss law and the company’s articles of incorporation.
We recommend that the financial statements submitted to you be approved.
Zurich, June 7, 2001
Ernst & Young Ltd.
K. McCabe Y. Vontobel
Chartered Accountant Certified Accountant
(in charge of the audit)

64 Information for the investor
67 Addresses
69 Claro product overview
63

Information for the investor
1. Capital structure
As of March 31 the capital of Phonak Holding Ltd.
was made up as follows:
Number of registered shares 2001 2000
(CHF 20 par value)
Total share capital 646,864 630,875
Conditional capital 66,214 19,175
Authorized capital 6,922 –
Notes:
• Phonak Holding Ltd. registered shares have been
quoted on the Swiss stock exchange since
December 1, 1994. The Phonak Holding Ltd. general
meeting of September 25, 1997 approved the
creation of standard registered shares. As a result,
the A and B registered shares were abolished and
converted into standard registered shares.
• The conditional capital was created with the purpose
of offering Phonak shares to key employees
of the Phonak group. By decision of the ordinary
general meeting of July 13, 2000, the conditional
capital was increased by a maximum of 50,000
registered shares of CHF 20 par value each to a
maximum of 69,125 shares. In the financial year
2000/01, a further 2,911 registered shares were
issued to key employees of the Phonak Group,
thereby reducing the conditional capital to a
maximum of 66,214 shares as of March 31, 2001.
At that date, a total of 20,060 (previous year
12,375) options were outstanding, each giving the
right to purchase one registered share out of the
conditional capital. These options are exercisable
from now until July 2007.
• At the extraordinary general meeting held on
December 7, 2000, shareholders approved the
creation of an authorized capital for the first time.
This allows the Board of Directors to increase the
company's share capital by a maximum of 20,000
registered shares of CHF 20 par value at any time
up to December 7, 2002. The Board of Directors
has already made use of this right: In connection
with the purchase of the Unitron and Hansaton
subsidiaries, it issued a total of 13,078 registered
64
shares out of the authorized capital, thereby reducing
the authorized capital to 6,922 registered
shares as of March 31, 2001.
2. Shareholders
As of March 31 the shareholders of Phonak Holding
Ltd. were the following:
Outstanding shares 2001 2000
Number in % in %
Old shareholders 283,983 43.9 47.9
Public shareholders 362,881 56.1 52.1
Total share capital 646,864 100 100
• The old shareholders are those who were already
shareholders before the Initial Public Offering of
November 1994, namely Hans-Ueli Rihs, Andreas
E. Rihs, Beda Diethelm as well as Indelec Holding
Limited, a subsidiary of UBS Ltd. Their shares in
the capital and voting rights of the company
(with the exception of Indelec Holding, whose
share fell to under 5 %) are shown on page 58 of
this report.
• The members of the Board of Directors represent
directly and indirectly a total of 44.1 % (previous
year 48.3 %) of the outstanding shares.
• No public shareholder owns more than 2.5 %
(previous year 2.3 %) of the outstanding shares.
• As of March 31, 2001, a total of 6,728 (previous
year 4,892) shareholders were entered in the
share register of Phonak Holding Ltd., of these
385 (previous year 350) were non-Swiss nationals
who held a total of 11.4 % (previous year 9.3 %)
of the outstanding shares.

3. Restriction on transferability
The registration in the share register as a shareholder
with voting rights is limited to 5 % of
the share capital (Art. 6 par 2 of the Articles of
Association).
4. Restriction on voting rights
In exercising their voting rights, no shareholder may
unite – own and represented shares together – more
than 10 % of the shares of the company (Art. 12
par. 2 of the Articles of Association).
This restriction on the voting rights does not apply
to the old shareholders.
5. Public purchase offer
A purchaser of shares is obliged to make a public
purchase offer, when he has more than 49 % of
the voting rights at his disposal (“opting up”, as
per Art. 8 of the Articles of Association).
65
Information for the investor
Price trend of Phonak registered share since December 1, 1994
(Compared with the Swiss Performance Index, SPI) 30/5/2001
8000
7600
7200
6800
6400
6000
5600
5200
4800
4400
4000
3600
3200
2800
2400
2000
1600
1200
800
400
1995 1996 1997 1998 1999 2000 2001
Phonak share price ACTUAL in CHF
Phonak share price, if it had moved in line with the SPI Source: DATASTREAM
8000
7600
7200
6800
6400
6000
5600
5200
4800
4400
4000
3600
3200
2800
2400
2000
1600
1200
800
400
6. Stock exchange information
2000/01 1999/00
Share prices of Phonak
registered share in CHF
high 7,060 3,980
low 3,600 1,740
At March 31 5,170 3,850
Market valuation
as of March 31
in million CHF 3,344 2,429
in % of shareholders’
equity 1,033 % 1,324 %
Price/earnings ratio
as of March 31 49.8x 71.1x
“Ticker” symbols
Valoren-Nr. 306503
Bloomberg PHBN SW
Reuters PHNZn. S
Telekurs (Investdata) PHBN
Datastream S: PHBN

7. Investor Relations Calendar
July 5, 2001, 3 p.m. General Meeting of Phonak Holding Ltd.
(held at sports and multipurpose hall Frohberg in Stäfa)
November 2001 Semi-annual accounts per September 30, 2001
April 2002 Shareholder Letter with provisional sales and outlook
June 6, 2002 Media conference; presentation to financial analysts
June 6, 2002 Mailing of Annual Report
June 27, 2002 General Meeting of Phonak Holding Ltd.
8. Names and addresses
Phonak Holding Ltd.
Investor Relations
Laubisrütistrasse 28
CH-8712 Stäfa
Switzerland
Phone: ++41 1 928 01 01
Fax: ++41 1 928 03 90
E-Mail: ir@phonak.ch
Internet: www.phonak.com
Responsible for investor relations:
Dr. Michael Düringer
Delivery of documents, mailing list, etc.:
Karin Haggenmüller
66
Share register:
ShareCommService AG
Margitta Christe
Kanalstrasse 29
CH-8152 Glattbrugg
Switzerland
Phone: ++41 1 809 58 53
Fax: ++41 1 809 58 59

Companies
in Switzerland
Phonak Holding Ltd.
Laubisrütistrasse 28
CH-8712 Stäfa
Phone ++41 1 928 01 01
Fax ++41 1 928 03 90
E-Mail: contact@phonak.ch
Phonak Ltd.
Laubisrütistrasse 28
CH-8712 Stäfa
Phone ++41 1 928 01 01
Fax ++41 1 928 07 07
E-Mail: contact@phonak.ch
Phonak Switzerland Ltd.
TechCenter Schwarz
Tannägertenstrasse 2
CH-8608 Bubikon
Phone ++41 55 253 80 00
Fax ++41 55 253 80 11
E-Mail: info@phonak.ch
Phonak Communications Ltd.
Länggasse 17
CH-3280 Murten
Phone ++41 26 672 96 76
Fax ++41 26 672 96 77
E-Mail: info@phonakcom.ch
Phonak Marketing
International Ltd.
Länggasse 17
CH-3280 Murten
Phone ++41 26 672 35 20
Fax : ++41 26 672 35 29
E-Mail: link@phonak.ch
67
Companies
in Europe
Phonak GmbH
Postfach 1725, Max-Eyth-Str. 20
D-70707 Fellbach-Oeffingen
(Stuttgart)
Phone ++49 711 51 07 00
Fax ++49 711 51 070 70
E-Mail: info@phonak.de
Unitron Industries GmbH
Stoppelweide 2
D-28307 Bremen
Phone ++49 421 43 87 90
Telefax ++49 421 48 81 56
E-Mail: info@unitron-de.com
Hansaton
Akustische Geräte GmbH
Itzlinger Hauptstrasse 33
A–5020 Salzburg
Phone ++43 662 451 26 20
Fax ++43 662 453 967
E-Mail: office@hansaton.com
Phonak France SA
5, rue Maryse Bastié
F-69500 Bron (Lyon)
Phone ++33 4 72 14 50 00
Fax ++33 4 78 26 98 97
E-Mail: info@phonak.fr
Lapperre BHAC NV
Stationsstraat 22
B-1702 Groot-Bijgaarden
(Brussels)
Phone ++32 2 466 91 00
Fax ++32 2 466 93 63
E-Mail: info@lapperre.be
Phonak Italia Srl
Via Jacopo Dal Verme, 7
I-20159 Milan
Phone ++39 02 69 00 81 82
Fax ++39 02 69 00 87 84
E-Mail: info@phonak.it
Phonak B.V.
Archimedesbaan 19
NL-3439 ME Nieuwegein
(Utrecht)
Phone ++31 30 600 88 50
Fax ++31 30 600 88 51
E-Mail: info@phonak.nl
Phonak UK Ltd.
Cygnet Court
Lakeside Drive
GB-Warrington WA1 1PP
Phone ++44 1925 62 36 00
Fax ++44 1925 24 57 00
E-Mail: info@phonak.co.uk
Addresses
Phonak Laem SA
Urbanizacion El Palmeral
Bloque 9, no. 15-21
E-03008 Alicante
Phone ++34 965 10 91 68
Fax ++34 965 11 16 72
E-Mail: contact@phonak.es
Phonak Danmark A/S
Multi Medie Huset
Nitivej 10, P.O. Box 223
DK-2000 Frederiksberg-
Copenhagen
Phone ++45 38 10 85 86
Fax ++45 38 10 46 86
E-Mail: info@phonak.dk
Phonak AB
Hornsbruksgatan 28
S-117 34 Stockholm
Phone ++46 8 442 46 60
Fax ++46 8 429 89 80
E-Mail: info@phonak.se
Phonak AS
Akersgt. 8
Boks 525 Sentrum
N-0105 Oslo
Phone ++47 22 41 66 30
Fax ++47 22 41 66 44
E-Mail: info@phonak.no

Companies
in North America
Phonak Inc.
4520 Weaver Parkway
Warrenville, Illinois 60555-3927
(USA)
Phone ++1 630 821 5000
Fax ++1 630 393 7400
E-Mail: info@phonak.com
Unitron Industries Inc.
(Lori/Unitron)
1000 Boone Avenue North
Suite 400
Golden Valley, Minnesota 55427
(USA)
Phone ++1 763 525 1995
Toll Free ++1 800 888 8882
Fax ++1 763 525 8795
E-Mail: info@lori-unitron.com
Unitron Industries Inc.
(Argosy)
10300 West 70th Street
Eden Prairie, Minnesota 55459
(USA)
Phone ++1 952 942 9232
Toll Free ++1 800 328 6105
Fax ++1 952 942 0503
E-Mail: info@argosyhearing.com
New address for Lori/Unitron/
Argosy, from August 1, 2001:
Unitron Industries Inc.
(Lori/Unitron/Argosy)
2300 Berkshire Lane North
Plymouth, Minnesota 55441
(USA)
68
Phonak Canada Ltd.
7895 Tranmere Drive
Suite 207
Mississauga, Ontario L5S 1 V9
(Canada)
Phone ++1 905 677 1167
Fax ++1 905 677 7536
E-Mail: info@phonak.on.ca
Unitron Industries Ltd.
20 Beasley Drive
P.O. Box 9017
Kitchener, Ontario N2G 4X1
(Canada)
Phone ++1 519 895 0100
Toll Free ++1 800 265 8255
Fax ++1 519 895 0108
E-Mail: marketing@unitron.com
Companies
in Australasia
Phonak Pty Limited
17 Patrick Street
Westpoint Tower, Suite 1 Level 6
Blacktown NSW (Australien)
(PO Box 973 Blacktown NSW 2148)
Phone ++61 2 9831 2666
Fax ++61 2 9831 3029
E-Mail: info@phonak.com.au
Phonak New Zealand Ltd.
1st Floor AC Nielsen Centre
129-155 Hurstmere Road
PO Box 33-349 Takapuna
Auckland 9 (Neuseeland)
Phone ++64 9 486 1849
Fax ++64 9 486 1895
E-Mail: info@phonak.co.nz
Phonak Middle East FZE
Dubai Airport Free Zone
Building #B9
P.O. Box 54302
Dubai (UAE)
Phone ++971 4 299 6060
Fax ++971 4 299 6161
E-Mail: info@phonak.co.ae

Phonak Holding Ltd.
Laubisrütistrasse 28
CH-8712 Stäfa (Switzerland)
Phone: ++41 1 928 01 01
Fax: ++41 1 928 03 90
Internet: www.phonak.com
E-Mail: ir@phonak.ch
Dieser Geschäftsbericht ist auch in deutscher Sprache erhältlich.
Ce rapport annuel est aussi disponible en français. 025-0200-02