Accounting policies General The annual accounts and the consolidated accounts have been prepared in accordance with the Danish Company Accounts Act, current Danish accounting standards and the requirements otherwise imposed by the Copenhagen Stock Exchange on the presentation of accounts for listed companies. International accounting standards As from 1997 the annual accounts and the consolidated accounts will also be prepared in accordance with the international accounting standards (IAS) issued by the International Accounting Standards Committee. The accounts will be presented in accordance with the standards applicable to the financial year 1997 and IAS 1 (revised 1997) and IAS 12 (revised 1996), which will enter into force on 1 July 1998 and 1 January 1998, respectively. To facilitate the reading of the accounts, some of the information required by the IAS has been included in the accounting report and in the section on financial comments, which in this context is regarded as an integral part of the annual accounts and the consolidated accounts. Changes in accounting policies Due to the presentation of the accounts prepared in accordance with IAS as from 1997 the accounting policies have been changed in the following areas: Indirect production costs are included in the valuation of stocks. They used to be charged to the profit and loss account in the year in which they were incurred. Indirect costs incurred in connection with the erection and commissioning of tangible fixed assets are included. They used to be charged to the profit and loss account in the year in which they were incurred. Rights acquired from a third party are capitalised and amortised. They used to be charged to the profit and loss account in the year in which they were incurred. The profit and loss accounts of foreign subsidiaries are translated at the average foreign exchange rates ruling during the year. Translation used to be made at the rates ruling at the balance sheet date. Exchange rate differences relating to the translation of accounts of foreign entities are included in the profit and loss account. They used to be taken directly to capital and reserves. State development loans with a forgivable clause are recognised as income as the costs relating to the project are incurred and charged to the profit and loss account. Any repayments including interest are charged to the profit and loss account as the income is recognised. Development loans and the corresponding research and development costs are thus no longer included in the balance sheet. Employee bonus is charged to the profit and loss account. Bonus used to be dealt with under distribution of profit. The aggregate effect of the above policy changes is a reduction in the profit for the year before tax of DKK 2.6 million (1996: improvement of DKK 30.8 million) and after tax a reduction of DKK 3.0 million (1996: improvement of DKK 18.5 million). The effect on capital and reserves is an increase of DKK 105.6 million at 31 December 1997 (31 December 1996: increase of DKK 104.9 million). The effects of the individual policy changes and the aggregate effect are mentioned in the accounting report. In addition to the above changes, the following changes have been made in the presentation of the profit and loss account, the balance sheet and the statement of sources and application of funds. The changes have no effect on the profit or loss for the year or the capital and reserves: Exchange rate adjustments relating to sale of goods and production costs are included as financial items. They used to be included in net turnover and production costs, respectively. Liabilities are divided into short-term and long-term debt. They used to be divided into interest-bearing and non-interest bearing debt. The statement of sources and application of funds is shown divided into the main groups of operating activities, investment activities and financing activities. Previously it also showed movements in interest-bearing net cash. The movements in capital and reserves, which used to be shown only in a note, are shown as a separate statement. Deferred tax assets are shown as independent assets. They used to be set off against deferred taxes shown under liabilities. Buildings are valued at cost. The revaluation of DKK 14.7 million previously made is regarded as cost. The comparative figures of both the accounts and the five-year summary have been restated to reflect the new accounting policy. The comparative figures are therefore comparable with the figures for the year. Some of the figures restated for previous years involve a certain amount of estimation either because the information was not available or because the resources required to find it would have been unreasonable considering the use that the readers could make of it. Other comments on accounting policies Otherwise the accounting policies applied are consistent with those of last year. The description of the accounting policies has been adapted to reflect the above changes, and the language has been adjusted accordingly. Consolidation The consolidated accounts comprise H. Lundbeck A/S (the parent company) and companies (subsidiaries) controlled by the parent company. Control is achieved where the parent company directly or indirectly holds more than 50% of the voting rights or is otherwise able to exercise or actually exercises a controlling influence. A list of the subsidiaries is shown in note 8. 50 Contents Supervisory Board and Board of Management A clear vision The way forward A continuously dev Supervisory Board Arne V. Jensen (Chairman) Jørgen Fakstorp (Vice-Chairman) Lars Bruhn Henrik He Board of Management Erik Sprunk-Jansen President Eva Steiness Executive Vice President Research an Georgios Peros, Abstract, 1990 A clear vision Lundbeck has a clear vision. We intend to become one The way forward Strategy is planning - the ability to see where we are, where we are going and how A visionary goal Our goal is to become one of the worlds leading companies in the treatment of psych A continuously developing organisation Lundbeck is a continuously developing company. Growing inter Group structure The Lundbeck Foundation H. Lundbeck A/S Synthesis factories Region Scandinavia &am The pharmaceutical industry Market conditions in the pharmaceutical industry In 1996, the global ph K. Nathanael, Sunset, 1997 Sales and marketing The sales figure for 1997 places Lundbeck as one of Lundbecks products Lundbecks research and development activities are concentrated on developing new Koprianos, Town, 1996 Lastly, Lundbeck has a promising substance under development for treatment of The Supervisory Boards Report Net turnover (DKKm) 3,000 2,662 Net turnover 2,500 2,000 1,500 1,000 During the last few years, the pharmaceutical industry has undergone marked changes, resulting in a The Supervisory Boards Report Average number of employees 2,500 Subsidiaries Parent companies 2,000 At the annual general meeting on 16 May 1997, the employee bonus/profit distribution scheme that had The Supervisory Boards Report Lundbeck International Psychiatric Institute As a specialist in psych Spyros Loukidis, Windows, 1995 17 Environmental Report The Managements Declaration Lundbeck regards openness about the companys healt Environmental Report 1997 In 1997, Lundbeck continued developing a health, safety and environmental Environmental Report Lundbeck - general Lundbeck has its headquarters, with its management, adminis K. Fyra, Abstract, 1994 The first steps in the process are often carried out in Seal Sands, while t Environmental Report Summary of the Groups environmental status Below a short summary is given of t the waste water, while the remaining approx. 1,200 tonnes are sent to a special chemical waste dispo The Lundbeck International Psychiatric Institute The Lundbeck International Psychiatric Institute Ex ment, education of patients and their families, and Quality Management within psychiatric treatment. Art can overcome prejudices In Greece, as in many other countries, the general attitude to psychiat Giannis Papadakis, Abstract, 1997 Strengthening local collaboration The exhibitions are held in col PsychiatryLink an Internet introduction http://www.psychiatrylink.com will give you the possibility Lundbeck presents http://www.psychiatrylink.com The development of the first version of Lundbecks ne EPOS EPOS: European Post-marketing Observational Serdolect®/Serlect® project: increasing our unders Giannis Pachis, Excommunication, 1997 Unlike controlled clinical trials, the EPOS project has been My dream changes from colour to black and white Depression is about the worst thing anyone can exper The pieces fall into place That was the start of a life with changing psychopharmacological drugs, a Lundbeck worldwide Parent company H. Lundbeck A/S Ottiliavej 9 DK-2500 Copenhagen - Valby Tel: +45 Slovenia Lundbeck Pharma AS Presernova 1 (2. nadstropje) SLO-2000 Maribor Tel/Fax: +386 62 221 943 R The Lundbeck Foundation Award for Outstanding Research The Lundbeck Foundation, which makes substant V. Kafivas, Garden, 1996 Accounts 37 Summary for the Group 1993-1997 Profit and loss account (DKKm) Net turnover Profit before R&D c Key figures Average number of employees Average number of shares (million)*) Earnings per share (DKK Comments on the accounts Profit for the year In 1997, profit developed positively. Profit for the y The limited effect of the policy changes in 1997 is due to the movement in the size and composition Comments on the accounts Under the changed accounting policies, the results of foreign subsidiaries At the end of 1997, Lundbecks new antipsychotic drug, Serdolect®/Serlect®, had been launched in 10 E Comments on the accounts Other operating income, net Other operating income, net, amounted to DKK 8 In 1997, capital investments totalled DKK 188 million against DKK 224 million in 1996. As in 1996, t Financial comments General In 1997, the Lundbeck Groups financial income and expenses were affected The Groups loans on mortgage credit-like terms at 31 December 1997 Outstanding debt CIBOR-based loan Financial comments At the present moment it is very likely that Italy, Spain and Portugal will also Lundbecks exchange rate index (1988 = 100) 104 102 100 98 96 94 92 90 88 (Jan.) 89 90 91 92 93 94 95 Accounting policies General The annual accounts and the consolidated accounts have been prepared in The consolidated accounts are prepared on the basis of the accounts of the parent company and the su Accounting policies Provision is made in the balance sheet for the present value of plans which are The cost of new buildings and erection by the company of its own technical installations and machine Profit and loss account for the year ended 31 December 1997 Parent company 1996 DKKm 1,411.1 503.6 Per share ratios (DKKm) 150 137 Net asset values Cash flow 125 100 80 82 114 Earnings per share Balance sheetat Assets Parent company 1996 DKKm 18.0 9.6 27.6 386.1 140.4 101.5 146.6 774.6 95.4 5. Balance sheetat Liabilities Parent company 1996 DKKm 110.0 56.1 1,086.2 1,252.3 1997 DKKm 110.0 77. Statement of sources and application of funds for the year ended 31 December 1997 Group Notes Oper Signatures Copenhagen, 12 March 1998 The Supervisory Board and the Board of Management have today c Notes to the profit and loss account 1 Net turnover Parent company 1996 DKKm 263.0 874.7 176.9 96.5 Production, distribution, administration, and research and development costs incl. depreciation etc. Notes to the profit and loss account 4 Other operating income Parent company 1996 DKKm 3.1 3.1 1997 6 Tax on the profit for the year Parent company 1996 DKKm 1.3 0.8 1997 DKKm 49.7 - 0.1 Tax due on th Notes to the balance sheet 7 Intangible and tangible fixed assets Group: Research and development c Land and buildings DKKm Technical plant and machinery DKKm Other fixtures and fittings, tools and Notes to the balance sheet 8 Shares in subsidiaries Total DKKm Book value at 1.1.1997 Adjustment du 8 Shares in subsidiaries - continued Net asset value at 31.12.1997 DKKm H. Lundbeck A/S, Norway H. L Notes to the accounts 9 Other shareholdings and other receivables Parent company Other shareholding 11 Capital and reserves Group 1996: Share capital DKKm Capital and reserves at 1.1.1996 Adjustment d Notes to the accounts 11 Capital and reserves - continued Parent company 1996: Share capital Revalu 12 Provisions for pensions Group: The Group operates with two types of pension plans: defined contri Notes to the accounts 13 Provisions for deferred tax Group: Temporary differences between calculati 13 Provisions for deferred tax - continued Parent company: Temporary differences between calculation Notes to the accounts 15 Contractual obligations Rentals and leasing obligations Lundbeck has commi Notes to statement of sources and applicational funds 17 Adjustments Group: 1997 DKKm Depreciation e Michalis Manolopoulos, Landscape, 1997 Lundbecks new logo Lundbeck has introduced a new logo that clearly expresses our identity, vision an