ACCOUNTING POLICIES GENERAL The annual accounts and the consolidated accounts have been prepared in accordance with the Danish Company Accounts Act and good accounting practice as well as generally accepted Danish accounting standards. The profit and loss account items for foreign subsidiaries are translated at the exchange rates ruling at the balance sheet date in accordance with the policy of previous years; translation at the exchange rates ruling at the transaction date appears from note 6. The accounting policies for 1996 have been changed in the following areas: - Securities are stated at the price ruling at the balance sheet date. - Outstanding forward exchange contracts are stated at the price ruling at the balance sheet date. - Mortgage debt and other interestbearing debt are stated at the price ruling at the balance sheet date; thus capital losses arising from the raising of mortgage loans are no longer capitalised. All value adjustments are, therefore, included in the profit and loss account under financial items. The accumulated effect of the changes is taken to capital and reserves and the comparative figures have been restated in accordance with this new policy. The significance of the changes to the accounting figures is described in further detail in the comments on the accounts. Otherwise, the accounting policies applied are consistent with those of the previous year. In the consolidated accounts, the book value of the parent companys shareholdings in the subsidiaries has been set off against the parent companys share of the subsidiaries capital and reserves as calculated at the time when the Group relationship was established (past-equity method). In the consolidated accounts the difference arising from the set-off has been allocated to the assets and liabilities whose value, at the establishment of the Group relationship and in accordance with the Groups accounting policies, was higher or lower than the one at which they were recorded in the accounts of the subsidiaries. So far no other differences (goodwill) have been ascertained. Newly acquired subsidiaries are included in the profit and loss account from the date of acquisition. Subsidiaries sold or wound up are included up to the time of sale or winding up. cial focus on the cash flow from operations and investments. Furthermore, the statement of sources and application of funds shows the years change in interest-bearing net cash as well as the Groups liquidity position at year-end. PROFIT AND LOSS ACCOUNT NET TURNOVER Net turnover comprises invoiced sales for the year less VAT, return goods and price reductions directly connected with sales. Moreover, net turnover includes fees and licence income as well as nonrefundable down payments received during the year. Large down payments received which represent an obligation to pay future costs are recorded on an accruals basis. TRANSLATION OF FOREIGN CURRENCIES Receivables and debt denominated in foreign currencies are translated into Danish kroner at the rates of exchange ruling at the balance sheet date. Both realised and unrealised exchange adjustments are included in the profit and loss account. Forward contracts outstanding at the balance sheet date are stated at the forward rate ruling at the balance sheet date, and exchange adjustments in relation to the contracted forward rates are included in the profit and loss account. The profit and loss accounts and balance sheets of foreign subsidiaries are translated into Danish kroner at the rates of exchange ruling at the balance sheet date. A translation of the main items of the profit and loss account to the rates of the transaction date is given in note 6. The exchange-rate difference relating to the net assets of these subsidiaries at the beginning of the financial year is taken directly to capital and reserves. RESEARCH AND DEVELOPMENT COSTS Research and development costs comprise costs attributable to the Groups research and development activities. As a principal rule, the Group charges research and development costs to the profit and loss account as they are incurred. Research and development costs linked to product-related development loans are capitalised. INCOME FROM SHAREHOLDINGS The parent companys profit and loss account includes the parent companys proportional share of the subsidiaries results after deduction of the years change in unrealised intercompany profits. Shares of the net result recognised as income are transferred to the reserve for net revaluation according to the equity method to the extent that they exceed dividend received from the subsidiaries. CONSOLIDATION PRINCIPLES The consolidated accounts comprise H. Lundbeck A/S (the parent company) and companies in which the parent company holds more than 50% of the voting rights or otherwise exercises a controlling influence. A Group overview is given in note 8. Intercompany income and expenses, shareholdings, balances and dividends as well as unrealised intercompany profits on stocks are eliminated. TAX Tax on the profit or loss for the year comprises current tax, the years adjustment of deferred tax and tax relating to income from shareholdings in subsidiaries. The provision for deferred tax is the computed tax effect of the accumulated timing differences between amounts as stated in the accounts and as computed for taxation purposes. STATEMENT OF SOURCES AND APPLICATION OF FUNDS The statement of sources and application of funds is prepared according to the indirect method based on the profit for the year before tax. The statement of sources and application of funds shows the Groups cash flow with spe- 38 CONTENTS Supervisory Board and Board of Management . . . . . . . . . . . . . . . . . . . . 4 The Sup SPECIALISTS IN PSYCHIATRY PIONEERS IN NEUROLOGY As a specialist, one must constantly seek knowledge 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 and 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Net turnover (DKKm) 1,853 2,326 THE SUPERVISORY BOARDS REPORT DEVELOPMENT OF STRATEGY The rules of play for pharmaceutical companies 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Average number of employees Outs THE SUPERVISORY BOARDS REPORT The development of Serdolect®/Serlect® for the American market has tak ART OR THERAPY In 1988 a group of Dutch psychiatrists formed the Art & Psychiatry Foundation arr Art & Psychiatry Foundation is therefore to question the concept art and serve as a mediator bet THE VALUE OF CREATIVE THERAPY In spite of the lack of scientific studies of creative therapy, both p and the methods we employ. For me it is important to keep wondering, says Dr. de Groot. In this way, A STEP IN THE RIGHT DIRECTION Professor Norman Sartorius, President of the World Psychiatric Associa opment of a part of the national mental health programme in which Lundbeck and Grenlandsaksjonen wil NATURAL CONSIDERATIONS We have a major responsibility for the internal and external environment in c changes without taking the necessary precautions, and the knowledge that a defective filter or an ov FOCUS ON PARKINSONS DISEASE Lundbeck works in two main areas. For this reason we describe ourselves refers to various theories about heredity, environmental impacts, head trauma, side-effects of drugs A PRODUCT WITH POTENTIAL There is broad agreement that the development of specific serotonin-reuptak and on their family and social relations. In fact, the quality of life of patients with phobias is j ITS ALL ABOUT PREVENTION In 1993, Lundbeck, working in close cooperation with some of the worlds lea Preclinical tests show that preparations like Serdolect®/Serlect® do not affect the part of the brai LUNDBECKS PRODUCTS Lundbeck specialises in the development of new and better drugs for the treatment In April 1997, we sold the rights to Ketogan® and Ketodur® to Searle Scandinavia (a division of Mons LUNDBECK WORLDWIDE Lundbecks head office is situated in Valby, near the centre of Copenhagen. It hou Norway H. Lundbeck A/S P.O. Box 361 Lysaker torg 10, N-1324 Lysaker Tel: +47 6753 5372 Fax: +47 6753 THE LUNDBECK FOUNDATION AWARD FOR OUTSTANDING RESEARCH H. Lundbeck A/S is fully owned by the Lundbec ACCOUNTS SUMMARY FOR THE GROUP 1987-1996 Profit and loss account (DKKm) Net turnover Profit before R&D co Key figures Average number of employees Net profit ratio before R&D costs (%) Net profit ratio ( COMMENTS ON THE ACCOUNTS CHANGES IN ACCOUNTING POLICIES With effect from the annual accounts for 199 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Turnover (DKKm) Cipramil®/Sero COMMENTS ON THE ACCOUNTS 100% 90% 80% 70% 60% 18 26 20 22 23 36 35 34 33 Cost structure (%) 28 Pro 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 Cash flow (DKKm) 281 282 231 191 203 164 145 98 FINANCIAL COMMENTS GENERAL The Lundbeck Groups financial income and expenses in 1996 were influenced Lundbecks cash flows in foreign currencies in 1996 were concentrated around SEK, FRF, FIM and DEM bl ACCOUNTING POLICIES GENERAL The annual accounts and the consolidated accounts have been prepared in THE BALANCE SHEET INTANGIBLE FIXED ASSETS Intangible fixed assets are stated at cost less accumulate Win Van Niel, Daoux Rex, bronze, 35 x 25 x 8 cm. 40 PROFIT AND LOSS ACCOUNT PARENT COMPANY 1995 DKKm 1,042.8 469.1 157.3 160.8 255.6 221.2 12.7 5.9 41.2 BALANCE SHEET AT 31 DECEMBER ASSETS PARENT COMPANY 1995 DKKm 21.0 11.0 32.0 312.3 97.2 112.2 114.0 6 BALANCE SHEET AT 31 DECEMBER LIABILITIES PARENT COMPANY 1995 DKKm 110.0 14.7 25.5 785.1 935.3 1996 D STATEMENT OF SOURCES AND APPLICATION OF FUNDS GROUP 1996 DKKm 310.8 5.0 84.3 400.1 -47.2 -78.4 78.0 SIGNATURES Copenhagen, 24 April 1997 THE Erik Sprunk-Jansen President BOARD OF MANAGEMENT Ib D. NOTES 1 NET TURNOVER PARENT COMPANY 1995 DKKm 282.2 760.6 1,042.8 1996 DKKm 263.0 1,150.7 1,413.7 De Production, distribution, administration, and research and development costs include depreciation et NOTES 4 FINANCIAL ITEMS, NET PARENT COMPANY 1995 DKKm 44.4 1.4 30.4 2.8 79.0 43.4 5.5 8.8 57.7 21.3 6 FOREIGN CURRENCY TRANSLATION OF SUBSIDIARIES PROFIT AND LOSS ACCOUNTS AT THE EXCHANGE RATE RULING NOTES 7 INTANGIBLE AND TANGIBLE FIXED ASSETS GROUP: Research and Leasehold INTANGIBLE development im 7 INTANGIBLE AND TANGIBLE FIXED ASSETS - CONTINUED PARENT COMPANY: Research and Leasehold INTANGIBLE NOTES 8 SHARES IN SUBSIDIARIES Total Purchase price 84.8 4.1 -115.5 145.8 88.9 56.1 -3.2 39.5 -18.7 8 SHARES IN SUBSIDIARIES - CONTINUED Specified as follows: Equity value at 31.12.1996 DKKm 1.6 57.0 NOTES 9 OTHER SHAREHOLDINGS AND OTHER RECEIVABLES PARENT COMPANY Other shareholdings 4.5 1.6 -0.7 5. 11 PROVISIONS FOR DEFERRED TAX Timing differences between amounts as stated in the accounts and as c NOTES 13 DEBT PARENT COMPANY 1995 DKKm 378.2 27.7 141.7 547.6 10.3 11.7 22.0 569.6 18.2 84.5 0.0 50. 14 CHANGE IN INTEREST-BEARING DEBT GROUP 1996 DKKm Proceeds in connection with the raising of intere Marjanne Voolstra, Eerste berg, acrylic paint on paper, 100 x 70 cm. 58 INTEGRATED THERAPY When disease strikes, it is not just a case of a fault in the works that has to b The story of Lundbecks logo is rather unusual. It goes back to the 1930s and Paris, where Grete Lund