2013 Annual Report

LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECK-FOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES| LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VEN-TURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKGRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKGRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUND-BECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | LUNDBECK | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUNDBECKFOND VENTURES | LUNDBECKFOND INVEST | LUNDBECK FOUNDATION | ALK | FALCK | LUNDBECKFOND GRANTS | THE BRAIN PRIZE | LUNDBECKFOND EMERGE | LUN-

2013 ANNUAL REPORT

CONTENTS

Lundbeck Foundation – an active industrial foundation 1

2013 – A year of value creation 2

Overview of the Lundbeck Foundation 4

Lundbeck Foundation Grants 6 - Regular grants 8 - Personal grants 10 - Strategic grants 16 - Teaching and communicating science and research 18 - Lundbeck Foundation Lectures 20

Lundbeckfond Emerge 22

Lundbeckfond Ventures 24

Lundbeckfond Invest 27

Lundbeck 30 ALK 32 Falck 33

Governance, CSR and Risks 34

Financial statements Lundbeck Foundation Group 37 Financial statements Parent Foundation 99Board and employees 108

LUNDBECK FOUNDATION 2013 ANNUAL REPORT

Hans Lundbeck founded the company Lundbeck in 1915. In 1954, his widow, Grete Lundbeck, established the Lundbeck Foundation and transferred her shares in Lundbeck to the Foundation as the couple had no heirs. The objective of the Foundation is to (i) secure and develop the activities of the Lundbeck Group and (ii) make grants for the purpose of making a significant difference to human health and life.

The Lundbeck company focused early on the development and sale of pharmaceuticals, in particular antipsychotics. Today, Lundbeck is a world leader in the development and sale of drugs for the treat-ment of a broad array of brain disorders. Lundbeck was listed on the Copenhagen Stock Exchange in 1999, and today the Foundation owns 70% of the company.

In 1989, the Lundbeck Foundation acquired its second subsidiary, and today owns 42% of ALK, a global leader in allergy vaccines. In 2011, the Lundbeck Foundation acquired 57% of its third sub-sidiary, Falck, a leading international rescue and assistance company.

In addition to the three subsidiaries, the Foundation owns and manages a portfolio of securities worth approx. DKK 12 billion via Lundbeckfond Invest, as well as a portfolio of 14 biotech investments managed by Lundbeckfond Ventures. Finally, Lundbeckfond Emerge works to accelerate the commer-cialization of early stage scientific projects by way of investment and active project participation.

The Foundation makes annual grants of DKK 400-500 million to support medical research of the highest international quality in order to make a significant difference to human health and life.

LUNDBECK FOUNDATION – AN ACTIVE INDUSTRIAL FOUNDATION

In November 2013, the Lundbeck Foundation moved into its new domicile at Scherfigsvej 7, Copenhagen

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ALK continued to streamline its organization, productionand portfolio in order to optimize the company and release resources to capture market shares in existing markets, while also expanding into new markets.

FalckFalck continued its positive growth in 2013. The improvement was based primarily on strong results in Emergency, but Falck also reported growth in Healthcare and Safety Services. Falck continued to strengthen its international profile moving into eight new countries and one new continent.

Falck’s growth comes both via acquisitions in countries such as the US, Germany, Australia, Mexico and Angola and via a strong focus on organic growth initiatives.

Falck has confirmed its ambitious growth targets, and in 2013 the company continued the work on strategic initiatives to ensure that it will reach its goal of lifting revenue to DKK 20 billion over the course of the next five to eight years.

Lundbeckfond Invest and Lundbeckfond VenturesIn 2013, Lundbeckfond Invest continued to execute on its strategy from 2011 of establishing active in-house manage-ment of the portfolio combined with cost-efficient index mandates. The efforts again produced encouraging results with positive returns in all asset classes, both absolute and relative to benchmark.

The return was driven both by growing global markets and strong results in in-house managed equity and credit, which again significantly outperformed benchmark. In-house managed equities generated a return of 31% (by comparison the global equity benchmark rose by 17%) and in-house managed credit generated a return of 13% (by comparison the global credit benchmark rose by 5%).

Lundbeckfond Invest’s return for the year amounted to DKK 1,206 million, against DKK 1,286 million in 2012. This translates into a total time-weighted return of 11.3%, which is highly satis-factory. At the end of the year, Lundbeckfond Invest had a portfolio of approximately DKK 12 billion under management.

In 2013, Lundbeckfond Ventures invested in three new compa-nies with activities in (i) programs targeting the treatment of rare diseases with clear unmet medical needs, (ii) the mapping

Commercial activities

Lundbeck2013 was a significant year for Lundbeck. Three new products were approved: Brintellix® against depression became avail-able in the US and was approved in Europe, Abilify Maintena® against schizophrenia was launched in the US and approved in Europe and finally Selincro® against alcohol addiction was launched in Europe.

Also the development of the pipeline was successful with positive data on Lu AE58054 for the treatment of Alzheimer’s disease and the related decision to initiate clinical phase III studies. Furthermore, the development of Brexpiprazole for the treatment of schizophrenia and depression and Desmote-plase for the treatment of acute ischaemic stroke continued according to plan.

Lundbeck is also continuing the restructuring and optimiza-tion of its operations to improve performance and to support innovation. An efficiency program is being implemented and will help free up further resources for investments, in the pro-duct pipeline and in geographical expansion.

Lundbeck continued to deliver strong results and acceptable profits in 2013 despite it being the first full year without revenue from Lexapro in the US, the patent expiry of Ebixa® and an unexpected fine from the European Commission.

ALK2013 was characterised by challenging European markets, and a significant step forward for ALK in the US. Although several European countries saw low or negative market growth, ALK succeeded in increasing its overall market share and grew overall European product sales as a consequence of increased tablet sales and the recently launched adrenaline autoinjector Jext®. Due to production issues, affected Jext® batches was recalled in early November and production, marketing and sales was suspended.

In North America, ALK saw significant progress towards the approval of the first two SLIT-tablets. ALK has partnered with Merck in North America, who is responsible for sales and marketing. Besides North America, ALK also increased sales in China and in a number of emerging markets.

2013 – A YEAR OF VALUE CREATION

2013 was a year of significant value creation in all areas of the Lundbeck Foundation. Lundbeck introduced three new products and continued the successful development of its pipeline, ALK obtained approval of its tablet vaccine in the US and Falck continued its international expan-sion. Lundbeckfond Invest's in-house managed portfolio substantially outperformed the market and Lundbeckfond Ventures invested in three new companies. In total, wealth of more than DKK 11 billion was created. Finally, the Foundation maintained its ambition to annually grant DKK 400-500 million to scientific research of the highest international quality in order to make a significant difference to human health and life.

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for activities related to the improvement of people’s lives and well being, especially as it relates to brain diseases.

In accordance with the statutes of the Foundation, Professor Mikael Rørth will step down at the AGM in 2014 after having served on the Board for 12 years. Mr. Rørth has made particu-larly valuable contributions as chairman of the Foundation from 2011-2012 and as chairman of the Research and the Bio-medical Science Comittees for many years. Mr. Rørth has been a great driving force in the Foundation's development, focusing especially on transparency in the decision-making process, the establishment of international peer review and evaluation committees as well as the personal evaluation of grants. Mr. Rørth is highly respected and very well-liked due to his professional and unique interpersonal skills. Professor, MD., DM Sc. Susanne Krüger Kjær will be recommended as a new board member of the Lundbeck Foundation.

Professors Anders Björklund, Lund University, Ole Petter Ottersen, University of Oslo, and Ole William Petersen, Uni-versity of Copenhagen stepped down as members of the Biomedical Science Committee at the end of 2013. For a number of years, the three professors have made a signifi-cant contribution to the Foundation. At the turn of the year, professors Alastair Compston, University of Cambridge, Hans Erik Bøttker, Aarhus University, and Jan G. Bjaalie, University of Oslo, were elected as members of the Biomedical Sciences Committee.

We would like to express a warm thank you to the retiring board and committee members for their long-standing and important contribution to the Foundation. On behalf of the Foundation, we also thank all participants on assessment committees and our partners at universities and at the mini-stries for the successful co-operation in 2013. We look forward to an equally good and eventful 2014.

of cancerous and pre-cancerous lesions in women undergoing examination to identify and diagnose cervical cancer and (iii) the design and development of novel domain antibodies for oral treatment of gastro intestinal immune mediated diseases with none or limited systemic side effects. Lundbeckfond Ven-tures also made its first two exits with satisfactory returns.

At the end of 2013, the portfolio included a total of 14 com-panies, and Lundbeckfond Ventures continues to support and work actively with these to secure a positive return.

Grants

The Lundbeck Foundation each year makes grants of DKK 400-500 million to medical research of the highest interna-tional quality. In 2013 the Foundation decided to expand its focus areas to include the support of research and projects aiming at enhancing the quality of teaching and the commu-nication of science and research. Projects within this area must be evaluated according to equally stringent criteria as other research projects. Therefore, a new peer review commit-tee, focusing on the support for projects aimed at raising the interest in and awareness of science and biomedicine through research, teaching and communication was established.

Young researchers continue to be a particular priority for the Foundation. The Lundbeck Foundation aims to motivate, inspire and acknowledge research talents, for example by awarding personal grants and honorary prizes in the form of Lundbeck Foundation Fellowships, The Research Prize for a Young Scientist and Talent Prizes.

One of the Foundation’s strategic grants focuses on increa-sing our understanding of the blood-brain barrier (BBB). It will be lead by five researchers from four different universities all working within different areas and brought together by the Foundation. By establishing a cross-functional collabora-tive effort combining different areas of research it is the hope that it will become possible to engineer molecules that can be safely transported across the BBB into specific brain regions.

Finally, as part of the Foundation’s strategy to support and acknowledge excellent researchers, The Grete Lundbeck European Brain Research Foundation again awarded The Brain Prize and Professor Eske Willerslev of Copenhagen University’s Centre for GeoGenetics was appointed the first new Lundbeck Foundation Professor. Eske Willerslev is an interna-tionally recognised researcher in the fields of ancient DNA, ancient genomics, DNA degradation and evolutionary biology. His research often receives significant public attention and he frequently publishes in the most quoted magazines, such as Science and Nature.

The foundation’s operations

During the past years The Foundation has been expanding its’ activities with increased grants and new initiatives like Lund-beckfond Ventures and Lundbeckfond Emerge. Consequently, more office space was needed and the Foundation bought and renovated a building just outside the centre of Copen-hagen. The Lundbeck Institute is a tenant in the building and it is the Foundation’s hope that the building will become a place

Jørgen Huno RasmussenChairman of the Board

Christian Dyvig and Jørgen Huno Rasmussen

Christian DyvigChief Executive Officer


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OVERVIEW OF THE LUNDBECK FOUNDATION

Group key figures

Financial highlights (DKK million) 2013 2012 2011 2010 2009

Revenue 30,092 28,675 23,602 16,927 15,594 Operating profit before special items 3,465 2,842 4,172 3,513 2,877 Lundbeck Foundation's share of profit before special items 2,807 2,292 1,819 2,880 2,756 Lundbeck Foundation's share of profit 2,074 2,115 1,618 2,880 2,756

Grants awarded 376 482 504 384 340 Dividends from subsidiaries 295 499 537 441 355 Investments in acquisitions 593 437 4,537 178 5,133 Investments in property, plant, equipment and intangible assets 2,454 2,426 1,563 989 1,471 Equity 29,357 27,928 26,332 25,967 22,399 Lundbeck Foundation's share of equity 25,437 24,033 22,551 21,396 18,574 Total assets 54,121 50,232 47,459 34,732 32,109 Net wealth 37,642 26,893 28,736 28,519 26,138 Key figures

Revenue growth 5.0% 21.5% 39.4% 8.5% 16.5%Operating profit margin 11.5% 9.9% 17.7% 20.8% 18.4%Return on equity before special items 11.3% 9.8% 8.3% 14.4% 15.8%Average number of employees 29,798 28,049 15,875 7,314 7,048

Note: Lundbeck Foundation owns 42% of the share capital and 69% of the votes in ALK after the deduction of treasury shares.

Annual grants of DKK 400-500 million for research of the highest

international standard

From invention to commercialisation

2 portfolio companies

Investment in life science companies

14 portfolio companies

Portfolio investments in shares, bonds, etc.

Value: DKK 11,922 million

70%

42%(69%)

57%

Global leader in brain disorders

Revenue DKK 15,258 million

Global leader in allergy vaccines


International leader in assistance and

emergency



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Activities and results for the year The Lundbeck Foundation Group’s revenue rose by 5% (21%)to DKK 30,092 million (28,675) in 2013. Lundbeck and ALK continued to make significant investments in R&D as well as new product launches. In spite of that the Group's R&D costs fell marginally to DKK 3,344 million. Sales and distributions cost fell by DKK 599 million to DKK 5,694 million, as a direct consequence of recent year’s efficiency programs. As a result the Group's operating profit grew by 22% to DKK 3,465 mil-lion.

Lundbeckfond Invest realized a return that outperformed benchmark. The return amounted to DKK 1,206 million (1,286). This translates into a total time weighted return of 11.3% (13.1%), which is highly satisfactory. Lundbeckfond Ven-tures recorded a profit of DKK 181 million in 2013 (-78). The improved financial performance was principally due to the increased share price of Veloxis. In 2013, Lundbeckfond Ventures invested in three new companies and sold two.

The Lundbeck Foundation Group had tax expenses of DKK 707 million (627), equal to an effective tax rate of 22% (19%).

The Lundbeck Foundation's share of net profit after tax and before special items rose by 22% to DKK 2,807 million in 2013. Special items amounted to DKK 733 million (177) after tax in 2013 and relates to the fine from European Commission of approximately DKK 699 million, which has been appealed, and Falck's amortisation of intangible assets and costs associated with acquisitions.

The Foundation's operating expenses totalled DKK 59 million (54) excluding the gain on sale of the Foundation’s former domicile. The increase was due to a generally higher level of activity in the Foundation, including greater involvement in the strategic grants, active in-house asset management and a small increase in the employee headcount.

DKK 376 million (482) was awarded in grants in 2013 equal to 18% (23%) of the Foundation’s profit for the year.

Equity and net wealthAs a combined effect of the development in the Group’s operations, the Foundation’s share of consolidated equity rose to DKK 25,437 million (24,033) after grants. The Foundation’s net wealth calculated at fair value increased to DKK 37,642 million (26,893) in 2013, primarily because of the increase in Lundbeck’s share price, but all areas contributed and added value with ALK contributing most in percentage terms.

OutlookThe financial performance of the Lundbeck Foundation Group is correlated with developments in the commercial activities of Lundbeck, ALK and Falck and the return of Lundbeckfond Invest and Lundbeckfond Ventures which, in turn, depend on trends in the financial markets. For a detailed description of the outlook for the subsidiaries, go to www.lundbeck.com, www.alk-abello.com and www.falck.com.

All the commercial activities of the Lundbeck Foundation Group have performed very well in 2013. The three subsidiaries as well as investments by Lundbeckfond Invest and Lundbeck-fond Ventures have generated positive results and increases in net wealth.

Value (DKK million) Change in net wealth 1/1-31/12 2013

Lundbeck 18,817 7,706

ALK 2,505 938

Falck 4,533 1,119

Invest 11,922 1,195

Ventures and Emerge 742 168

Grants, Admin, etc. -877 -377

Net wealth 37,642 10,749

Net wealth

Lundbeck 49%

ALK 6%

Falck 12%

Invest 31%

Distribution of net wealth

Ventures and Emerge 2%

Young researchers are a particular priority, but the Founda-tion still seeks to support particularly outstanding researchers throughout their careers. The Lundbeck Foundation aims to motivate, inspire and acknowledge research talents, for example by awarding personal grants and honorary prizes.

The Foundation also supports activities designed to promote the interest in and awareness of research into biomedicine and natural sciences, both within the educational system and among the general population.

Finally, Lundbeckfond Emerge supports early commercialisa-tion of new research from Danish universities and Brain Prize Awardees.

Grants 2013

The total sum awarded in 2013 was DKK 376 million, and only lower than DKK 400 million for timing reasons.

A very large proportion of the funds that the Lundbeck Foun-dation grants for research covers the salaries of researchers at different stages of their careers. The grants awarded in 2013 covered wages equivalent to 621 researchers at all stages of their careers, from scholarships to senior researchers, as well as technical staff.

Regular grants Regular grants included biomedical and natural science pro-jects, as well as projects focusing on education and science communication.

Regular grants accounted for DKK 160 million, of which DKK 128 million went to biomedical research projects: 80 % in basic research and 20 % in clinical research. DKK 20 million

Focus areas

The Foundation supports high-quality Danish related research projects within all biomedical research fields, but if of similar quality the Foundation prioritizes high-quality projects in neuroscience, psychiatry, and allergology/immune modulation as well as pre-hospital treatment.

The internationalization of Danish research is promoted via the funding of partnerships and exchange programmes invol-ving leading Danish and international research teams.

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The Lundbeck Foundation annually grants DKK 400-500 million to make a significant difference to people’s health and lives. In 2013, the Foundation has supported outstanding researchers in the biomedical and natural sciences to strengthen Danish related research of the highest international quality. Furthermore, the Foundation supports research and projects aiming at enhancing the quality of teaching and communicating science and research.

Anne-Marie Engel, Director of Research

203

30

95

190

50

100

16

120

123

223160

126

82

8

230

80

74

228

72

204

Lundbeckfond EmergeStrategicPersonalRegular

600

500

400

300

200

100

0

Grants by category since 2008

DKK million

2008 2009 2010 2011 2012 2013

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was granted for natural science research projects and DKK 12 million for projects that focus on teaching and communicating science.

Teaching and communicating science and researchThe first celebration of Denmark’s best teachers took place in May 2013. The project is a collaboration between the news-paper Politiken and the Foundation. Readers were invited to nominate the best school teacher in Denmark. More than a thousand nominations were submitted, and the six winning teachers or teacher-teams were identified by expert panels.

The Ph.d. Cup was transmitted on TV for the first time in col-laboration between the newspaper Information, the Founda-tion and Danish Broadcasting Corporation. Eight finalists had been chosen based on written abstracts. They gave oral presentations of their ph.d. projects televised on stage, and the winner was chosen by a panel consisting of two scientists and a TV-host representing the non-scientific audience.

Personal grants and prizesIn this category, the Foundation has awarded Lundbeck Foundation Fellowships, Lundbeck Foundation’s Research Prize for Young Scientists and Talent Prizes as well as the Brain Prize. It also comprises international under- and post-graduate Research Fellowships, Visiting Professorships, as well as pregraduate Scholarships, travel- and study grants.

The Grete Lundbeck European Brain Research Foundation awarded the Brain Prize for the third time. Six outstanding re-searchers collectively received the award for their pioneering work to develop the method of optogenetics.

Lundbeck Foundation Fellowships have been awarded since 2007. These personal grants of DKK 10 million each are given to outstanding young researchers who are ready to establish or expand their own research group at a Danish university or university hospital. In 2013, seven such fellowships were awarded to promising young researchers from the biomedical and natural sciences.

Strategic grantsStrategic grants are awarded on the basis of suggestions from research communities, discussions with universities and research councils as well as internal deliberations. Such grants often go to groups of researchers who set up large projects that shed light on relevant issues from a multi-disciplinary perspective. These projects are defined in close co-operation with the Foundation’s management and undergo peer review by international ad hoc expert panels.

In 2013, three strategic projects were funded; one was an extension of one of the Foundation’s centres of excellence focused on the diagnosis and treatment of subtypes of schizophrenia, founded in 2008 by Professor Birte Glenthøj. The second was a collaboration between psychiatrist profes-sor Per Fink and epidemiologist professor Torben Jørgensen on functional disorders. The third was a new collaboration between five Danish researchers from different fields, headed by Professor Martin Lauritzen, who will work with the func-tions of the blood-brain-barrier, and the challenges it poses to the administration of medication to the brain, and how to overcome these challenges using nanotechnology.

Revised grant strategy

Regular and personal grantsIn 2013, it was decided to rethink the application process for the Foundation’s regular and personal grants. Starting from December 2013, applications must be submitted to dedicated rounds for either ph.d. stipends, national or international post-doc stipends, or running costs. Grants for ph.d. or postdoc stipends include a sum for running costs.

As part of the Foundation’s strategy to support and acknow-ledge excellent researchers, Professor Eske Willerslev of Co-penhagen University’s Centre for GeoGenetics was appointed the first new Lundbeck Foundation Professor.

Starting in 2014, the Foundation will also award clinical profes-sorships and positions as clinical research associate profes-sors.

Research areas eligible for supportThe committee for natural sciences project support was closed after the 2013 grants were decided. In the near future, support for natural sciences projects will be limited to projects with a clear biomedical component, and such applications will be evaluated by the Biomedical Science Committee.

Teaching and communicating science and research must be evaluated according to equally stringent criteria as research projects. Therefore, a new committee, focusing on grants to projects aimed at raising interest and awareness of science and biomedicine through research, teaching and communica-tion, was established and had its first meeting in 2013.

In the following you will find descriptions of some of the projects and people who have received regular, personal and strategic grants, as well projects that focus on teaching and communicating science.

Research Full-time Equivalents in 2013

400

350

300

250

200

150

100

50

0

Number

Technical staff

Scholar-ships

Ph.d. Other academic staff

Postdoc.

Total 621

249197

3972 64

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Regular grants

In 2013, the Biomedical and Natural Science Committees assessed a total of 1051 applications, and grants were awarded to 117 projects. The projects vary greatly in terms of subject, scope and duration, and their results will have an impact on future research and other processes in many different ways. Common to all projects supported by the Foundation, in addition to being of the highest international quality, is that they involve fascinating narratives, one or more questions that meticulous researchers are eager to answer, and hypotheses that must be confirmed or rejected. Below are three examples of research projects that the Foundation fully or partially funded via regular project grants in 2013.

Applications submitted to evaluation committees Number of applications Number of grants Success rate

Biomedical sciences 961 100 10%

Natural sciences 90 17 19%

Total 1,051 117 11%

ADHD in Mouse and Man – a Role for Sortilin-Receptors?

Simon Glerup, Associate Professor, Institute of Biomedicine, Aarhus University

ADHD (Attention Deficit Hyperactivity Disorder) is a psychi-atric condition which affects approximately 5% of all children, and which can cause substantial problems for both the chil-dren and their families. Characteristics of ADHD are hyper-activity, impulsive behavior and difficulties in concentrating and keeping focus. Another characteristic is the paradoxical effect of amphetamine-like drugs, which relieve the symptoms in patients rather than cause the arousal and hyperactivity seen in non-ADHD-individuals when they use amphetamine. The biological background for ADHD is still not clear, but increasing amounts of research results indicate a substantial hereditary component. In spite of this, attempts to identify the genes responsible for the heritability of the disorder have so far been disappointing. In this project, Simon Glerup and his research team will work further on a discovery they have made during their work on Sortilins – a family of membrane receptors found mainly in nerve cells, where they are particu-larly important for the regulation of neuronal function and viability. Simon Glerup and his research team have found that when mice lack a certain Sortilin-receptor-coding gene, their behavior becomes ADHD-like. When they are treated with amphetamine-like drugs, their behavior normalizes. Based on this, the group will work on the hypothesis that dysfunctional Sortilin-related receptors are involved in the development of ADHD, and thus try to shed new light on the genetic back-ground for the disorder.

Normalmouse

Untreated Amphetamine-treated

Sortilinreceptordeficientmouse

Normal mice and sortilin-receptor deficient mice treated with amphetamine. The pattern of lines in each square are direct recordings of the movement-patterns of the two types of mice after treatment with either saline (place-bo) or amphetamine. While amphetamine induces a marked hyperactivity in normal mice, it has a paradoxical calming effect on receptor deficient mice, reminiscent of how humans with ADHD respond to treatment.

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Seaweed as Food for Humans

Professor, Ole G. Mouritsen, Department of Physics, University of Southern Denmark

The Sea is one of the last resorts for mankind to exploit for obtaining more food to feed the world. The marine macroal-gae or so-called seaweeds are an almost unexploited resource for primary foodstuffs in the Western world, whereas it is an essential part of the daily diet in the East. Seaweeds are in many ways optimal for human nutrition because they contain a bounty of important minerals, trace elements, vitamins, proteins, iodine, and healthy poly-unsaturated fatty acids. Moreover, seaweeds have plenty of dietary fibres and hence contain few calories. Their contents of poly-unsaturated fatty acids and the perfect balance between omega-3 and omega-6 fatty acids are particularly beneficial for our health. Seaweeds will thus probably become a larger part of our daily diet in the future. However, in the West and in Europe in particular, we mostly exploit seaweeds as extracts for additives and stabili-zers in processed food. In this project, professor Ole Mouritsen and his team will assess the physical and chemical properties of Nordic seaweeds, both harvested in the wild and farmed. As seaweed materials are virtually unexplored scientifically by physical experimentation and methodologies, there is an urgent need for fundamental research in the physical and chemical properties of seaweeds in order to optimize their use as whole foodstuffs, functional food, as well as novel additives to food.

How Does Bacteria Become Resistant To Antibiotics?

Morten Sommer, Professor, Institute for Systems Biology, Technical University of Denmark

Bacterial resistance to antibiotics is a problem of increasing proportions. Millions of people die every year as a result of infections with treatment-resistant bacteria. This develop-ment is expected to continue, as only few new antibiotics are being introduced to the market. At the Technical University of Denmark, Professor Morten Sommer and his research team are focusing on the mechanisms that make bacteria resistant to treatment with the antibiotics we already have. They have discovered that bacteria become resistant by taking up resis-tance-genes, not from other multi-resistant strains of bacteria, but rather from non-pathogenic bacteria. The team therefore believes that there must be reservoirs of such bacteria, func-tioning as donors of resistance-genes to pathogenic bacteria, in our surroundings. Morten Sommer and his research team will use DNA-sequencing to identify such populations of resis-tant bacteria, and they will further work on how the horizontal exchange of genes between pathogenic and non-pathogenic bacteria takes place. Finally, the project focuses on how the use of antibiotics influences the risk of transfer of resistance from normal bacteria, e.g. in our gut, to pathogenic bacteria. An increase in our knowledge of how resistance spreads to pathogenic bacteria should enable us to use antibiotics in a more appropriate way and thereby to delay the development of even more multi-resistant strains of pathogenic bacteria.

One of the world's largest macroalgae bull kelp (Nereocystis leutkeana) that is also one of the most delicious. Its biology reflects on some very special physico-chemical properties of its cellular structure and composition which determine its flavour, among other things. (Photo: S. R. Claubuesch).

Nonpathogenic bacteria can be resistant to antibiotics (round and blue). This is not a problem in itself, but the resistance may be transferred to otherwise non-resistant pathogenic bacteria (oblong and blue), resulting in infections that cannot be cured with the antibiotics we have today. This transfer of resistance between non-pathogenic and pathogenic bacteria may take place in different environments, one of them the human gut.

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Personal grants

The Foundation awards personal grants and prizes to support and encourage outstanding researchers at different stages of their careers.

The Brain Prize

A personal prize of EUR 1 million, awarded by the Grete Lundbeck European Research Foundation to one or more scientists who have achieved distinction through outstanding contributions to European brain research.

On 2 May 2013, The Brain Prize was awarded for the third year running at a ceremony in the Danish Royal Library’s Black Diamond building. The prize was presented by His Royal High-ness Crown Prince Frederik.

The prize was shared equally between professors Ernst Bam-berg, Germany, Edward Boyden, USA, Karl Deisseroth, USA, Peter Hegemann, Germany, Gero Miesenböck, England and Georg Nagel, Germany.

Together, these six scientists laid the foundation for and de-veloped the 'optogenetic method', which is regarded as one of the greatest neuroscientific breakthroughs of the past 50 years. Put simply, optogenetics allows researchers to switch the function of certain brain-neurons on and off, greatly im-proving the ability to investigate conditions such as Parkin-son's disease, Alzheimer's disease, epilepsy, pain, schizophre-nia, ADHD and addiction.

The largest single activity of the Foundation's outreach programme - The 2013 Brain Prize Meeting - took place in October. All six prize winners as well as a number of invited speakers attended the meeting together with a great many participants from both Denmark and the rest of Europe.

During the year, the Foundation entered into an agreement to arrange the 'Brain Conferences' in partnership with the Federation of European Neuroscience Societies. These are in-ternational, specialist conferences that will be held in Denmark twice a year for the next five years, beginning in the spring of 2014.

This partnership is expected to further strengthen the Foun-dation's international network and to highlight Denmark as a country that focuses on brain research. It is also expected to help develop and consolidate the Foundation's successful cooperation with the three large Danish universities and the Danish Society for Neuroscience.

Presentation of The Brain Prize 2013.From left: Professors Ernst Bamberg, Ed Boyden, Karl Deisseroth, Peter Hegemann, Gero Miesenböck, Georg Nagel, HRH Crown Prince Frederik and Chairman of the Board Nils Axelsen

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Lundbeck Foundation Professor – Eske Willerslev

The forty-two year old Professor, Eske Willerslev, from the University of Copenhagen has been awar-ded the first new Lundbeck Foundation Professorship as an acknowledgment of his groundbreaking research in genetics and evolution – particularly human evolution and demography, and of his dedi-cated work with sharing the results of his research, not only with his peers, but also with students and the general public.

Eske Willerslev is internationally recognised for his ground-breaking science. He has published 166 scientific papers in high profile international journals of which 29 are in Nature and Science - 20 as first or last author.

The Lundbeck Foundation has granted Eske Willerslev DKK 25 million for the next five years of research. The money provides a crucial economical foundation for the continuation of his revolutionary work on human evolution and dispersals across the globe.

Following a life as explorer and fur trapper in northeastern Siberia, Eske Willerslev returned to Denmark in 1994 dedica-ted to pursue a scientific career. Shortly after having defended his ph.d.-thesis, at the age of 33, he became the youngest professor in Denmark at the time.

Eske Willerslev has spent 1½ years as Independent Welcome Trust Fellow at University of Oxford where he later became visiting professor. He was recently awarded the title of hono-rary doctor at University of Oslo and the prestigious Miller Visiting Professorship at UC Berkeley. He has received a large number of prizes and awards for his research including the Lundbeck Foundation Young Researcher Award and the Rosenkjær Award - the latter for his ability to communicate his research to the public. Twice, his research has been nomi-nated among the journal Science breakthroughs of the year.

In 2009 Eske Willerslev established Centre of Excellence in GeoGenetics at University of Copenhagen with a grant from the Danish National Research Foundation. Today the centre hosts 70 scientists and is among the world’s leading institu-tions in ancient DNA and evolutionary research.

The collaboration between the Foundation and Eske Willerslev dates back to 2010, where the first grant was given to support his research. Over the years, this has resulted in a number of scientific breakthroughs. In 2010, a tuft of hair was used for the first full-genome sequencing of a 4,000-year-old individu-al from an extinct Greenlandic culture. In 2011, the sequencing of a tuft of hair from an aborigine from Australia helped document that present day aborigines in Australia are direct descendents of the first humans to populate the continent 50,000 years ago. In 2013, a 24,000 year-old siberian skeleton showed that North American Indians share their evolutionary history with present day Europeans.

On several occasions, Eske Willerslev has shared his research results and exciting stories of how he obtained them with audiences attending Lundbeck Foundation Lectures.

The Lundbeck Foundation Professorship grant will be used to continue and develop his research on human origins and dispersal.

Lundbeck Foundation Professor Eske Willerslev. Lundbeck Foundation Professor Eske Willerslev takes out sediment samples to be used for DNA-analysis,

Peary Land, 2006.

Photo: Mikael Schlosser

Photo: Svend Funder, SNM

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3-D models of transporters in cell membranesA cell is an amazing and complex machinery in itself. Each of our approximately 70,000 billion cells only function normally if its internal machinery is in order, and the same goes for its communication with cells around it. Proteins in the cell membrane are responsible for the transportation in and out of cells of communication signals, nutrients and waste products. Pontus Gourdon and his research group will focus on three well known, but not thoroughly characterised families of transport-proteins specialised in moving substances from one side of cells’ membranes to the other. He believes that detailed knowledge of the 3-dimensional structure of these proteins, obtained by X-ray crystallography, may well hold the key to a better understanding of diseases caused by dysfunc-tions in such proteins, because the structures provide insight into the function of the proteins.

Tracking the biological effects of FantasyGHB (gamma Hydroxybutyric acid) has powerful effects on the central nervous system. As a drug, it has been used for dif-ferent medical purposes. As a party drug, GHB is known under a variety of names, among them Fantasy and date-rape drug. If taken in high doses, GHB can be lethal. Petrine Wellen-dorph’s research has already resulted in the identification of the molecule in the brain that binds GHB. It turned out to be a family member of a large class of GABA-receptors, known for many years as the target for GABA – an important neurotrans-mitter in the brain. Now she focuses her research to learn even more about the interaction between GHB and its target with the aim of eventually designing novel GHB-like thera-peutic drugs or even an antidote for treatment of people who have had an overdose of the drug. Another branch of Petrine Wellendorph’s research focuses on mapping the natural ef-fects of GHB, and whether it works through other receptors apart from the GABA-receptor.

The world’s coldest crystalAt the University of Aarhus, Jacob Friis Sherson and his team are working on clouds of atoms at temperatures very close to absolute zero (equivalent to −273.15 °C). At this temperature, everything stops. By overlapping several laser beams under these extreme conditions, the researchers have created the world’s coldest crystal. In time and after many more experi-ments this crystal can form the basis of a quantum computer. To simulate the best way of moving the cold atoms and exploiting the shifts in their energy that form the basis of the quantum computer, a lot of different combinations have to be tried out. Jacob Friis Sherson and his colleagues, therefore, created an on-line computer game, where players at the same time as they are challenging themselves – also contribute to a mass experiment in the basic science of quantum computing.

Can dry and cracked skin be the start of allergic disease?Filaggrin is the name of a protein that keeps the cells in the upper layer of our skin hydrated, thereby ensuring that physi-cal elements from our environment do not penetrate the skin barrier. Jacob P. Thyssen is working to test his hypothesis that mutations in the gene coding for filaggrin, leading to dry and cracked skin, is associated with an increased risk for eczema, asthma and hay fever. He believes that the lack of normally functioning filaggrin literally leads to cracks in the surface of patients, allowing for the passage of chemicals and allergens from e.g. plants or animals across the skin barrier. Over time, these allergens will be processed by the body’s immune system, and may – after having entered the body through a completely different route, end up causing allergic reactions such as asthma and hay fever in the mucosa lining patient's airways following secondary airway exposure.

Lundbeck Foundation FellowPontus Gourdon Postdoc, ph.d. Department of Molecular Biology and Genetics Aarhus University

Lundbeck Foundation FellowPetrine Wellendorph Associate professor, ph.d. Department of Drug Design and Pharmacology University of Copenhagen

Lundbeck Foundation FellowJacob ShersonAssociate Professor, ph.d.Department of Physics and AstronomyAarhus University

Lundbeck Foundation Fellowships

Lundbeck Foundation Fellowships are personal grants of DKK 10 million for five years of research. They are awarded to young researchers who are ready to start or expand their own research groups in strong Danish research environments.

Lundbeck Foundation FellowJacob Pontoppidan Thyssen MD, ph.d. Department of Dermatology and AllergologyGentofte University Hospital University of Copenhagen

Photo: Lars Kruse, AU Kommunikation

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Hopes for better ways to relieve painStephan Pless' area of expertise is membrane receptors. There is one receptor in particular, which Stephan Pless wants to work with. It is called P2X receptor, and it has been identified to play a role in the generation of pain. The receptor consists of three proteins that change configuration depending on how they are stimulated. This change makes the receptor open or close a so-called ion channel in the cell membrane, and research has demonstrated an association between the chan-nel being constantly open and a state of chronic pain. Stephan Pless and his team insert artificial fluorescent amino acids into the receptor proteins. The light intensity of the amino acids changes in accordance with the conformation of the receptor and thus the channel. The more is known about the properties of the receptor, the more precisely researchers will be able to design drugs in the future, which can block the receptor and thus hopefully relieve the suffering of many patients with diseases that cause chronic pain.

Lundbeck Foundation Fellows 2013

Unravelling the secrets of photosynthesisThorsten Hansen is hoping that with a background in both theoretical chemistry and physics, he is well suited to reveal what happens when green plants absorb the light of the sun during photosynthesis. Nature actually exploits the energy from the sun much more efficiently than the best man-made solar cells. Certain mega-proteins that are active during photosynthesis are instrumental in producing oxygen. The energy-transfer that takes place during this process should be studied in more detail according to Thorsten Hansen. He will use quantum mechanical equations to create cartoon-like descriptions of the behaviour of electrons during oxygen production in photosynthesis. The theoretical models from Thorsten Hansen’s equations will subsequently be tested in laser experiments.

Sound interpretation in the brainTania Barkat’s research is focused on the development and function of the parts of the brain that process and interpret sound. The identity and development of the neuronal circuits that are responsible for the brain’s interpretation of sound are largely unknown. Tania Barkat’s research at Harvard University has shed some light on this. She was able to identify certain circuits in the brains of young mice, crucial to the develop-ment of normal sound-interpretation. She also detected that the brains of the mice had to meet the sounds from their en-vironment during a particular period (age 12-15 days) for their sense of sound to develop normally. Tania Barkat’s research will shed new light on how the brain processes different sound features during development, and may have practical implica-tions, for instance by defining when it is best – from the point of the developing brain – to expose a person to a second language in order to acquire it most easily.

Lundbeck Foundation FellowTania Rinaldi Barkat Assistant Professor, ph.d.Department of Neuroscience and PharmacologyUniversity of Copenhagen

Lundbeck Foundation FellowStephan PlessAssociate Professor, ph.d.Department of Drug Design and PharmacologyUniversity of Copenhagen

Lundbeck Foundation FellowThorsten Hansen Associate Professor, ph.d. Department of Cheminstry University of Copenhagen

Six Lundbeck Foundation Fellows at the award ceremony. From left Jacob Sherson, Thorsten Hansen, Petrine Wellendorph, Stephan Pless, Pontus Gourdon and Tania Rinaldi Barkat. Unfortunately Jacob Thyssen was not able to attend the ceremony.

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Inconsistent effect of aspirin in the prevention of heart attacks Morten Würtz began his research career while he was still a medical student in Aarhus. After having obtained the medi-cal degree, he now continues his research as a ph.d.-student with a very ambitious project, which has already resulted in publications in high-ranking journals and has earned him a number of national and international awards. His research focuses on the prevention of heart attacks and other clinical consequences of thrombosis. The main focus is aspirin, which is an antithrombotic agent that prevents the formation of blood clots by hindering the aggregation of blood platelets. Morten Würtz’ studies have shown that aspirin treatment is not equally effective in all patients at risk, and patients with a reduced effect of aspirin seem to have a particularly high risk of future heart attacks.

The physical chemistry of glassMorten Mattrup Smedskjær has already published 57 articles in peer-reviewed journals, and submitted seven patent ap-plications. He recently returned to Aalborg University after having spent time in a research based US-company working with high-tech glass materials. Morten Mattrup Smedskjær has chosen to continue his research career in the academic world, where his research will be focusing on the physical chemistry of glass. He has already established a large international net-work of collaborators, and is now building a research group at Aalborg University, where he will continue to work on some of his earlier discoveries, among them a way of ‘quantum-cut-ting’ glass – a procedure that can help increase the efficiency of energy transfer in solar cells.

New Groundbreaking methods for measuring cosmic distancesOriginally from Ireland, Darach Watson joined the Niels Bohr Institute in 2003 and played a pivotal role in the establishment and development of the Dark Cosmology Centre there. He is a leading expert in X-ray astronomy and is notable in that field for the discovery and characterisation of the most distant X-ray sources, including the detection of the most distant ob-jects known in the universe. He is highly prolific and his scien-tific work is frequently cited. With an inventive and original research style, he brings together an eclectic mix of tech-niques and ideas to create new insights. He and his colleagues describe a new method for measuring cosmic distances. In-stead of using measurements based on supernova explosions, which can only be observed for a few weeks, they base their new method on the observation of active super-massive black holes at the centres of galaxies, known as quasars. Quasars are persistent and far brighter sources of light for astronomers to work with. Being able to measure and calculate cosmic dis-tances is of the utmost importance for research in astronomy and cosmology, particularly for calculating the amount of dark energy in the Universe. Dark energy is responsible for accele-rating the speed of the expansion of the universe and ac-counts for 70% of the universe's energy density; yet it remains almost entirely undescribed and is regarded as the biggest question confronting modern physics. By introducing the new measuring technique, Darach Watson and his colleagues have added the ability to measure distances much further than ever before, thereby allowing astronomers to measure dark energy in the early history of the universe.

Darach WatsonAssociate Professor, ph.d.Dark Cosmology CenterNiels Bohr InstituteUniversity of Copenhagen

Morten WürtzMD, ph.d.-studentInstitute of Clinical Medicine, Aarhus University andDepartment of Cardiology Aarhus University Hospital

Every galaxy has a supermassive black hole at its heart, millions to billions of times the mass of the Sun. When these dark hearts of galaxies actively accrete matter they become incredibly bright. These are quasars, and they outshine almost everything else in the universe. Shown here is the galaxy NGC4051 with an active black hole at its centre, one of the objects used to estimate cosmologi-cal distances.

Lundbeck Foundation’s Research Prize for Young Scientists and Talent Prizes

Morten Mattrup SmedskjærAssociate Professor, ph.d.Dept. of Biotechnology, Chemistry and Environmental EngineeringAalborg University

Photo: Klaus Holsting

Lundbeck Foundation’s Research Prize for Young Scientists is awarded to one researcher under the age of 40, and the Foundation’s five Talent Prizes to researchers under the age of 30.

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The healing of damaged cartilageCasper Foldager has always had a particular interest in sport, and how the body copes with physical challenges. Injuries to joints very often include injuries to the cartilage that caps the ends of our bones, and normally sees to it that a joint can move smoothly. As opposed to many other tissues in the body, the regeneration power of cartilage is very weak, and this means that even very young athletes who have suffered injuries to their joints can experience the onset of arthrosis. This is both a painful condition and something that may put an early end to an otherwise promising sports-career. In his research, Casper Foldager, who also works as an orthopaedic surgeon, focuses on understanding the molecular processes and intercellular signals that underlie the healing of damaged cartilage in humans, and particularly at how the limited rege-neration potential of human cartilage can be improved. He is seeking inspiration for future therapies in the study of sala-manders, which have remarkable regenerative capacities, and he hopes that in the future, new knowledge from these studies will help provide healing therapies for damaged cartilage, e.g. by the use of dedicated stem cells or gene therapy.

Improving mathematical models for air pollutionJeremy Silver came to Denmark from Australia in 2008 with an educational background in mathematics and philosophy of science. He first worked with biostatistics in Copenhagen, and later joined the University of Aarhus to work with mathematical/physical modelling. He has published scientific articles within biostatistics, atmospheric modelling and health effects of air pollution, and his cross-disciplinary approach has already set new standards within the area of calculating and modelling air pollution, as well as winning prizes for his univer-sity studies and for his research in Denmark. He is particularly interested in improving computer models for air particulate pollution. Jeremy Silver focuses his research on identifying weaknesses in currently used models as well as improving the calculations that underlie the predictive models, and thereby the accuracy of future models for air pollution.

The use of ultrasound to detect early signs of cardiac diseaseTor Biering-Sørensen got his medical degree just two years ago, but he has already obtained remarkable results in his research in the use of ultrasound of the heart to prevent car-diac disease. Tor uses echocardiography to identify patients with a particular kind of asymptomatic cardiac arrhythmia – atrial fibrillation. This condition can go unnoticed for a long time, and by the time it is diagnosed, the patient’s heart may already have begun to build up a blood clot which can later be transported with the bloodstream to the brain and cause a stroke. Tor Biering-Sørensen’s research has showed that examinations with advanced ultrasound technology can iden-tify high-risk patients by revealing early asymptomatic cases of atrial fibrillation. This makes it possible for doctors to start stroke-preventive treatment early.

Jeremy David Silver B.A./B.Sc.(Hons.), ph.d. Department of Environmental Science - Atmospheric Modeling Aarhus University

Tor Biering Sørensen MD., ph.d. Department of Cardiology Gentofte University HospitalUniversity of Copenhagen

Casper Foldager Assistant Professor, MD, ph.d.Dept. of Clinical MedicineAarhus University

Both awards are given to exceptionally talented scientists for outstanding research based on recom-mendation from their peers and colleagues.

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The current research project has its primary focus on drug de-livery to the central nervous system, with the overarching aim to develop a drug delivery system that releases carried drugs by enzymatic activation in the brain. Steps on the way will be systematized characterization of the transport and fate of different sized nano-carriers in vitro BBB models and in animal models. The interplay in the neuro-vascular unit will be as-sessed by identification of communication pathways between the cellular constituents, to better understand their influence on the BBB permeability.

The Research Initiative on the Blood-Brain Barrier (BBB) and Drug Delivery to the brain is a large cross-functional project to which the Lundbeck Foundation donated DKK 40 million in 2013. The grant is for three years, with an option for extension of financing for further two years.

Martin Lauritzen, Professor of Clinical Neurophysiology and Translational Neurobiology at University of Copenhagen will lead the project. He will work in close collaboration with Thomas Andresen, Professor and Head of the Center for Nanomedicine and Theranostics, Technical University of Denmark, Torben Moos, Professor and Head of the Neuro-biology Research Group at Aalborg University, Morten S. Nielsen, Associate Professor and Head of the Receptor Trafficking group at Aarhus University, and Birger Brodin Larsen, Associate Professor and Head of the Drug Transpor-ters Research Group at University of Copenhagen.

The research will be done in collaboration with international experts from UK, US and Hungary, and will also aim at ex-changing young scientists between the collaborating groups.

The BBB is a physical barrier formed by tight junctions be-tween the cells lining the vessels of the brain. It regulates the entry of molecules into the brain, effectively separating the central nervous system from the blood circulation and pro-tecting the brain tissue from damaging molecules. The BBB has a very low permeability to most molecules and in addition there are active transporters in the BBB that rapidly expel the molecules, should they come across.

The need for treatments of brain diseases such as brain cancer and neurodegenerative diseases is increasing with the expansion of the aging population, and drug transport across the BBB and into the brain itself is still a major challenge. Hence, a strong focus on this area is needed. By establishing a cross-functional collaborative effort combining different areas of research, it is the hope that engineered molecules can be identified that can be safely transported across the BBB into specific brain regions.

The understanding of the BBB and its regulation has in-creased during the last decade as has the ability to design and engineer drug delivery systems for transport of drugs across tissue barriers. Research in nano-biomaterials has allowed for the development of nano-carriers that can target specific receptors in the tissues and at the same time carry encapsu-lated drugs designed to be released under certain conditions, e.g. in cancer tissue or during inflammatory processes.

Strategic grants

For a number of years, the Foundation has supported innovative research in strategic areas. In 2013, DKK 82 million was granted to strategic initiatives. The three major strategic grants represent a con-tinuation of the Foundation’s focus on psychiatric research and an extension of the aim of contributing further to the internationalization of Danish research.

Drug delivery to the brain and brain transport mechanisms

Five Investigators around a ladder: On top, Professor Thomas Andresen, DTU. Below him Professor Martin Lauritzen, KU, and in front, Associate Professor Birger Brodin, KU. To the left in the picture, Associate Professor Morten Nielsen, AU and to the right, Professor Torben Moos, AAU.

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Clinical Intervention and Neuropsychiatric Schizophrenia Research (CINS) is a major clinical research project aiming at characterizing brain structure and function in patients with first episode schizophrenia, and was established as a Lund-beck Foundation Center in 2009. The proposed plan for new clinical studies was found to be of significant scientific merit after external peer review, so the Lundbeck Foundation awarded CINS II DKK 30 million for the centre’s next 5-year period in 2013. Birte Yding Glenthøj, Professor at Glostrup Uni-versity Hospital will continue to lead the CINS research.

The overall aim of the CINS II project is to predict short-term outcome and treatment response for patients with newly diagnosed schizophrenia.

All newly diagnosed patients with schizophrenia will be thoroughly examined using complex clinical tests. Further-more, three signaling systems and their receptors will be as-sessed in the brain. The patients will be treated medically and followed both in the short and long term.

The very large datasets from tests and examinations will be combined with data from the first five years of CINS research. In collaboration with Professor Lars Kai Hansen of Department of Applied Mathematics and Computer Science, Technical Uni-versity of Denmark, the data will be used for machine learning. Here, patterns in data indicating for instance good outcome of patient’s disease episodes will be identified. These studies are expected to allow for the identification of objective biological measures that can be used as predictors of disease outcome and be useful in the selection of therapy.

The research team also enrolls individuals at ultra-high risk for developing psychosis, applying the same multimodal approach and machine learning analyses as described above. Patients will have brain scans, and their genetic profile will be examined. This research may allow the identification of bio-markers that can identify the individuals at the highest risk for developing psychosis. This group of patients is also enrolled in a randomized trial testing the effects of cognitive remediation.

The Lundbeck Foundation has donated DKK 11.5 million for a 5-year continuation of the project Danish Functional Disorders (DanFunD). Professor Torben Jørgensen from the Research Centre for Prevention and Health, Glostrup University Hospital leads the project together with Professor Per Fink from the Research Clinic for Functional and Psychosomatic Disorders, Aarhus University Hospital.

This project has its main focus on Functional Somatic Syn-dromes (FSS), and will, by use of a large population cohort of 10,000 men and women aged 18-69 years drawn from the general population in the western part of the Greater Copen-hagen area, establish new knowledge on the prevalence and characteristics of the symptoms and syndromes in the general population.

FSS is a major health issue. It covers a spectrum of syndromes, and each medical area has at least one syndrome, where appropriate medical assessment cannot explain patients’ symptoms and disabilities by a biomedical mechanism. These include irritable bowel syndrome (gastroenterology), chronic pelvic pain (gynaecology), fibromyalgia (rheumatology), non-cardiac chest pain (cardiology), tension headache (neu-rology), and chronic fatigue syndrome (infectious disease).

FSS range from vague symptoms to severe, disabling condi-tions. About 5 % of the Danish population suffers from FSS accounting for 10-20 % of the health care expenses. However, these numbers are uncertain, and the DanFunD epidemiologic project will perform a standardized symptom collection of all participants enrolled. They will go through detailed physical and metabolic examinations, tests of both pain perception and autonomic nervous system function. Information is collected about chronic infections, immunological factors, genes, bio-markers, personality, life style and psychosocial factors. The purpose is to evaluate the course of the syndromes and their relatedness to other diseases, as well as their socio-economic consequences by linking to the Danish health registries.

Overall, it is expected that the project will lead to more trans-parent and evidence based definitions of FSS, and give a bet-ter understanding of occurrence, risk factors and implications for treatment and prevention.

Professor Birte Yding GlenthøjProfessor Per Fink and Professor Torben Jørgensen

Clinical Intervention and Neuro-psychiatric Schizophrenia Research

DanFunD – an epidemiologic study of Functional Somatic Syndromes

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Teaching and communicating science and researchOver the last decade, the Foundation has increased its support to projects focusing on research into and development of science teaching, as well as science communication to a broader audience. Furthermore, the Foundation wishes to promote the dissemination of research results to the general public including through Lundbeck Foundation Lectures.

In order to strengthen our work to i.e. increase the educatio-nal level of science pupils in Denmark, the Foundation has established an evaluation Committee for Science Teaching and Communication, which started its work in 2013. In the future, there will be two annual deadlines for applicants who wish to apply for grants within this area, and the committee will work to ensure that the best projects with the broadest outreach will receive support from the Foundation.

Throughout 2013 the Foundation has supported several activi-ties and initiatives on teaching and communicating science e.g. the first national Danish conference for science teachers ‘Big Bang’, a science-marathon with the participation of 33,000 pupils, and the Danish participation in the Interna-tional Biology Olympiad for highschool students under the age of 20.

Young Scientists“Young Scientists” is a Danish national talent-competition for pupils in elementary and secondary school with an interest in science and technology, organised by Danish Science Factory. The Foundation has been one of the main sponsors of the event for a number of years, supporting its aim of nurturing scientific talent and strengthening a feeling of a common ‘science-identity’ among the contestants. With the increasing

focus on the importance of communicating science, it was decided in 2013 for the first time to grant a new communica-tion price for the best projects from junior and senior contes-tants respectively. Apart from the main prizes, the winners of different categories get to participate in international science shows and competitions, and to visit international research based companies working within science and technology.

Euroscience Open Forum (ESOF)ESOF is Europe’s largest, general science meeting, held biannually in a leading European city. June 21-26 2014, the meeting will be held in Copenhagen. The Foundation is one of the key sponsors for ESOF 2014 with its sponsorship of conference-track “Learning in the 21st Century”, focusing on the future skills and knowledge to keep the European citizens well-educated and knowledgeable. The Foundation will also award a communication prize to the best presenter at this conference-track.

HRH Prince Joachim discusses with Johan Henrik Reeh his prize winning project on insulation and heat loss.Photo: Carsten Andersen

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Ph.d. Cup

In 2013 the Foundation partnered with the daily newspaper Information, Universities of Denmark and the Danish Broad-casting Corporation, DR, to scale up the Information’s Ph.d. Cup, develop its activities and bring the research and results from ph.d. students to a larger audience.

The Danish universities selected ph.d.-candidates to submit a short well-written abstract of their ph.d.-thesis for evalua-tion by a committee of top-researchers, who themselves were all winners of the Danish prize for Research Communication. Eight winners were chosen and they participated in a special newspaper on research and in the battle for knowledge that was distributed to universities and libraries. The winners were also invited to the TV-version of the Ph.d. Cup, where they had to battle each other in presenting their ph.d. project in front of a live audience. The minister of Science, Innovation and Higher Education, Morten Østergaard, celebrated the winner – and all the participants – on stage.

The show had more than 100,000 viewers.

Starting in 2013, the Foundation has sponsored a new initia-tive within the framework of the Ph.d. Cup - a Media School for young scientists. At the Media School editors, journalists, social media specialists, television professionals, actors and others train the participants to better understand and master their role when they participate in the public debate.

The best teacher

In 2013 the Foundation initiated a collaboration with the daily newspaper Politiken on a prize for teachers whose work had stood out and made a special impression. Candidates could be nominated by pupils, colleagues, headmasters or parents. The aim of the award is to contribute to the development of teaching practices in Danish primary and upper secondary schools as well as vocational schools, and help restore respect for the profession.

The teaching award received much attention and Politiken received an impressive 1084 nominations for the award. Altogether six prizes were given out: Three for teachers from primary schools, and three prizes for teachers from upper secondary schools and vocational schools.

A panel of expert judges reviewed the nominations – and the winners were announced at an event focusing on inspirational teaching and good teachers.

The award for best teacher in the primary school went to the two teachers Sofie Dirch Hermann and Iben Sass Büchert from Herstedlund School in Albertslund, who received the prize for their work in a second grade class in the subjects Danish, gymnastics, mathematics, science and technology. The award for best teacher in secondary school went to Rudi Laursen who is a history and gymnastics teacher at Sct. Knuds Gymna-sium in Odense.

Graphics: iBureauet Graphics: Claus Nørregaard

From left: The Finalists Ditte Marie From, Tea Torbenfeldt Bengtsson, Stine Lindahl Jacobsen, Maja Rosenstock (winner), Nina Overgaard Therkildsen, Camilla Stampe Jensen, Henrik Skov Midtiby, Minister of Science, Innovation and Higher Education Morten Østergaard, and host MD Peter Lund Madsen. Photo: DR

From left Sofie Dich Hermann, Rudi Lauridsen and Iben Sass Büchert.Photo: Simon Fals, Politiken

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Lundbeck Foundation Lectures

JANUARYDNA and man's great migrations

FEBRUARYStem cells – now and in the future

MARCHADHD – fashion

diagnosis or harsh reality

APRILAsthma and allergies

– the mysterious pandemics

JANUARYThe 100-year anniversary of Niels Bohr’s revolutionary atomic model

APRILIrregular heartbeat

– infatuation or illness?

In 2012 the Lundbeck Foundation, the science museum Experimentarium and the daily newspaper Information initiated a series of public lectures to provide an opportunity for anyone interested to meet scientists and learn about their front line research. The lectures are held by scientists and celebri-ties who provide interesting perspectives on new findings and discuss the opportunities they provide and the consequences.

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JUNIWhen alcohol takes over

OCTOBERStruggling with health anxiety

AUGUSTThe wild worldof atoms

OCTOBERThe mystery of

the Vikings

NOVEMBERAmong bears

and astronauts

The interest in these lectures proved to be overwhelming. Consequently, the Foundation in coopera-tion with Aarhus University and Folkeuniversitetet initiated a series of Lundbeck Foundation Lectures in Aarhus in early 2014.

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BackgroundSocieties acknowledge that healthcare is vital for economic growth. However, the cost of healthcare is growing and new innovative medical products are increasingly measured against cost efficiency and overall impact on public health care. This has raised the requirements to the innovation in healthcare that needs to be delivered. At the same time, commercialization of innovative research data can be a chal-lenging proposition. For the individual scientist or the small biotech company, the process may seem insurmountable, especially if he or she lacks experience and a network in the commercial field. It may often be difficult to source the ven-ture capital required to convert exciting research results into a focused research project with a commercial perspective. Funding sources are very restricted because such projects typically involve a high risk given the early development stage. In addition to funding, scientists also need commer-cial experience and sound-boarding partners, which can be difficult to find. These circumstances make conditions dif-ficult for scientists and their projects, to the disadvantage of themselves and society, which are unable to capitalize on the value of such innovation if the commercial applications are not investigated.

Lundbeckfond EmergeThe activity of Lundbeckfond Emerge complements the neighboring activities of the Foundation with the academic grant activity on the one side and the venture investments in mature life science companies on the other. With these elements, the Foundation has the instruments to support and invest in the development of original breakthrough scientific hypotheses from the academic setting to commercialization. The objective of Lundbeckfond Emerge is to contribute to

the growth and successful commercialization of new break-through research and innovation. The objective is achieved by investing in projects on commercial terms and by providing relevant support to businesses to help them build professional operations. We wish to identify high-quality research offe-ring strong commercial potential and where the framework conditions allow a clear plan of execution to be developed. The research projects build on constructive collaboration, between Lundbeckfond Emerge and the individual scientists, leveraging each party’s strengths. Lundbeckfond Emerge thus aims to be a proactive partner and to contribute to building new businesses and innovation, not only by investing but also through intellectual contributions and by making our experi-ence and network connections available to other investors and the industry. Each new business will benefit substantially from this approach, allowing it to pursue an optimized plan and gain access to the relevant industry players from the begin-ning.

Developments in 20132013 was a very active year for Lundbeckfond Emerge asses-sing potential new projects and actively pursuing the strategy of Lundbeckfond Emerge in the portfolio companies. Building on the financing of Insusense Therapeutics with DKK 15 million, the company had the financial strength to begin the commercial development and make the necessary invest-ments, in developing its key technology and lead candidates. In 2013 the company made substantial progress in forming the basis for uncovering the full potential of its therapeutics in the treatment of diabetes, which afflicts hundreds of mil-lions of people worldwide. Through investments the company solved some of the challenges of the project that would have

LUNDBECKFOND EMERGE invests in translation of life science innovation into new businesses. It is

our objective to act as a catalyst for the commercialization of breakthrough research and innovation.

Accordingly, Lundbeckfond Emerge invests in new research data, which we consider have substantial

commercial potential and where our experience and competences can add value to new companies or

projects.

Partner Christian E. Elling

23


precluded further progress of the technology, in an academic setting. This now allows the company to move the technology and lead candidates forward towards preclinical development, forming the basis for bringing the important new treatment principle towards the physicians and their patients.

EpiTherapeutics, is a biopharmaceutical company making in-novative pharmaceutical agents based on a leading scientific position in the field of epigenetics. Lundbeckfond Emerge participated in the financing raising EUR 5 million in a first closing of a Series A round, bringing the total financing raised to EUR 14,6 million, since the inception of Epitherapeutics in October 2008. The financing supports the further advance-ment of the company’s anti-cancer drug candidates toward clinical development. Epitherapeutics is building a pipeline of novel small-molecule inhibitors against selected epigenetic oncology targets. Epigenetic enzymes are considered to play a key role in numerous human diseases, including oncology.

Studies in primary myocytes (“muscle cells”) shows that the insulin receptor, which is key for controlling blood sugar, is expressed in clusters (left picture – clear green dots, blue color cell nucleus). However, when the gene for SorCS1 is removed, the insulin recep-tor is found in a dispersed distribution (right picture – dispersed green) resulting in a 50% reduction of insulin receptor at the cell surface, illustrating the substantial impact SorCS1 deficiency may have on the insulin receptor.

Crystal structure of the active catalytic site of the enzyme KDM2A histone demethylase. In total, there are 32 histone demethylases enzymes of which 30 belong to the group of Jumonji domain demethylases all sharing similar catalytic domains. Many of these are thought to be involved in the development of various types of cancers.

Denmark

Denmark

www.epitherapeutics.dk

Development of new pharmaceuticals for the treatment of diabetes based on interna-

tionally leading research in the role of the sortilin protein family.

Development of new pharmaceuticals for the treatment of cancer based on interna-

tionally leading research in epigenetics.

Portfolio 2013

24


Development in 20132013 was a very productive year with both new investments, substantial progress in the existing portfolio as well as exits. Lundbeckfond Ventures continues to expand its activities in the US and is well positioned to do so with an annual invest-ment frame of approximately DKK 300-400 million per year. Three new investments were completed in 2013 together with a number of follow on investments in the existing portfolio. At the end of the year the portfolio included 14 active invest-ments. All medtech companies have products in commercial launch phase while the pharmaceutical product portfolio spans from preclinical development over pivotal Phase III studies to products in regulatory approval process.

New InvestmentsCydan is an orphan drug accelerator with a small and highly experienced operational team focused on identifying and de-risking drug candidates and building a program portfolio of drug candidates with therapeutic potential for treatment of orphan diseases. Orphan drugs is a category of drugs targe-ting patient groups below 200,000 and 250,000 patients in the US and Europe, respectively. Drug candidates that get orphan drug status are granted commitment from the FDA and EMA of more rapid review and approval processes as well as advisory help in light of the serious unmet need and the wish to promote new medicines particularly focused on these patients.

DySIS Medical develops and markets the DySIS colposcope, which substantially improves the accuracy of detecting early stages of cervical cancer. The product is being marketed in the EU and the US. Cervical cancer is highly preventable if detected in the early stages of development. However, around 250,000 women die every year from the disease, demonstra-ting the difficulty of diagnosing the disease in its early stages using current methods. Extensive multi-centre clinical trials

have been conducted and have demonstrated that DySIS is substantially more effective than the traditional methods in use today. The most recent clinical publication showed that DySIS detected 97% of all cases of cervical cancer caused by the most prevalent form of the human papillomavirus. Accor-ding to the same clinical trial, traditional methods detect only 55% of early stage cancer.

Today, antibody therapeutics is provided as systemic treat-ments with effective reach of target organs but also systemic side effects. In certain diseases such as inflammatory intestinal disorders, restricted administration of a therapeutic antibody to the intestine would allow focused and long term treat-ment without the systemic side effects. UK based VHSquared has designed novel domain antibodies for oral treatment engineered to be stable in the gastrointestinal tract. Orally administered domain antibody products will provide localised treatment of gastro intestinal immune mediated diseases with none or limited systemic side effects.

Key portfolio developmentsLundbeckfond Ventures is a very active investor, supporting management in its portfolio companies. It has been a privi-lege for the team to work with so dedicated and experienced management teams and co-investors and see the continuous progress.

2013 was a very busy year for Acacia where a small and very effective team has progressed three clinical candidates. The company achieved positive results from its phase IIa proof-of-concept study investigating APD403 for the prevention of acute nausea & vomiting in cancer patients receiving chemo-therapy. Although a number of anti-emetics are available on the market, these are generally much better at controlling vomiting than nausea. Therefore, nausea remains the major unmet medical need for cancer patients receiving chemo-

Lundbeckfond Ventures is an international evergreen life science venture fund. The evergreen

structure allows for a flexible investment strategy with a long term investment perspective. Ventures

invests broadly in life science, primarily in the development of new medicines and medical technology.

It is essential that the programs address clear medical needs and are of high scientific quality.

Mette Kirstine Agger, Managing Partner

25


UKwww.acacia.com

Supportive care programs for post-surgical and cancer patients by using known molecules in a new way. Currently the company has two ongoing Phase III studies in Post-Operative Nausea and Vomiting and a Phase IIb study in Chemotherapy Induced Nausea and vomiting.

Portfolio 2013

UKwww.psioxus.com

Oncolytic virus to treat cancer with potential for systemic delivery thereby reaching both primary tumor and metastases. Phase I/II clinical trial ongoing.

Finlandwww.nexstim.com

Equipment that enables precise and targeted transcranial magnetic stimulation and mapping of the brain’s functional areas, currently being marketed for pre-surgical mapping of the brain with therapeutic potential, including stroke rehabilitation therapy.

Francewww.enterome.com

Diagnostic tests based on novel biomarkers showing abnormalities of bacterial com-position of the microbiome in the human intestine. First tests are being developed focusing on inflammatory diseases in the intestine.

technologiesdbv

Francewww.dbv-technologies.com

Desensitisation of food allergy with transdermal delivery using a proprietary patch carrying the relevant allergen. Peanut program is in Phase IIb in the US.

USAwww.celladon.net

Gene based therapy for treatment of heart failure that upregulates the SERCA2a enzyme in cardiomyocytes, to support heart beating without increasing the oxygen consumption. Ongoing comprehensive Phase II/III study in EU/US.

Swedenwww.bonesupport.com

Injectable bone replacement material CERAMENT™ that remodels to bone within months and can be eluted with antibiotics. Marketed in the EU and the US for use in particular trauma and in the EU also with Gentamicin for treatment of osteomylitis. Other antibiotic products are under development.

USAwww.allocure.com

Develops AC607, an off-the-shelf biologic, based on mesenchymal stem cell therapy for kidney repair. AC607 targets the site of injury via a chemokine receptor mediated process and acts via secretion of multiple paracrine factors. Phase II study ongoing in the US and Canada.

USAwww.asantesolutions.com

Easy-to-use insulin pump with a disposable pre-filled cartridge that enables up to seven day use. The product has CE mark, 510(k) clearance and is launched with a ‘pay as you go’-model in the US.

USA Biologic for treatment of the orphan eye disorder Graves Orbitopathy. The therapeu-tic approach has the potential to reduce both the inflammation and fibrosis causing the acute and long term irreversible changes around the eyes of these patients. Phase IIa placebo controlled study ongoing in US/EU.

River Vision LLC

USAwww.cydanco.com

Incubator vehicle focused on building a portfolio of programs targeting the treatment of rare diseases with clear unmet medical needs.

UKwww.dysismedical.com

Combines standard colposcopy with Dynamic Spectral Imaging for enhanced precision of mapping cancerous and pre-cancerous lesions in women undergoing examination to identify and diagnose cervical cancer. The product is being marketed in the EU and the US.

26


therapy. The company has rapidly progressed with APD403 and initiated a full Phase IIb study in chemotherapy induced nausea and vomiting.

In 2012, the company obtained very positive results with APD421 showing in a Phase II study that APD 421 reduced the incidence of nausea and vomiting compared to placebo in adult surgical patients at moderate-to-high risk of suffering Post Operative Nausea and Vomiting. Vomiting and especially nausea remain a major problem for patients after surgical operations, despite the availability of a number of approved anti-emetics. Based on these results, the company has in 2013 initiated two pivotal Phase III studies in post-operative nausea and vomiting.

Based on its 510(k) approval and with very positive patient user tests, Asante Solutions successfully launched SNAP, an easy-to-use insulin pump with a disposable pre-filled cartridge that enables up to seven day use.

BoneSupport that has developed and now markets CERAMENT™, a resorbable, ceramic, biphasic bone graft substitute which remodels into healthy native bone within six to twelve months has progressed with the next generation product of the CERAMENT™ family. The first, CERAMENT™|G, received CE-mark during the year. CERAMENT|G is the first injectable antibiotic eluting, osteoconductive, ceramic bone substitute to receive CE-mark and is now being launched in Europe.

DBV Technologies developing new treatments for food aller-gies with lead program targeting peanut allergy in phase IIb was listed on EuroNext Paris in March 2012. Lundbeckfond Ventures sold part of its equity holding during 2013 in a joint transaction with the company and brought its ownership posi-tion below 5%.

While progressing ColoAd1, and oncolytic virus for treatment of cancer with the potential for systemic delivery through Phase I/II clinical trial, PsiOxus has completed a Phase II trial of MT102 in wasting disease (cachexia) and demonstrated a significant greater weight gain when compared to placebo

in very progressed lung and colorectal cancer patients. The clinical study demonstrated MT-102’s ability to halt the vicious cycle of weight loss, weakness and fatigue of cachectic late stage cancer patients.

River Vision initiated a Phase IIa placebo controlled study of a novel biologic for treatment of the moderate to severe form of the orphan eye disorder Graves Orbitopathy, a very debili-tating condition that ultimatively can lead to blindness. The therapeutic approach has the potential to reduce both the inflammation and fibrosis causing the acute and long term irreversible changes around the eyes of these patients.

Syntaxin, with expertise in the field of botulinum toxins, was during the year sold to Ipsen, with which Syntaxin had two major strategic alliances. Ipsen paid DKK 210 million upfront with further contingent payments that could reach DKK 1,000 million or more depending on the achievement of develop-ment and commercial milestones.

Veloxis Pharmaceuticals has met all of its announced goals for 2013 and finished the year by filing the New Drug Appli-cation for its product, Envarsus®, with the FDA. Earlier in the year, Veloxis also submitted a European Marketing Authori-sation Application to the EMA. Veloxis is seeking approval to market Envarsus® for the prevention of organ rejection in kidney transplant patients based on two positive phase III tri-als in de novo kidney transplanted patients and stable kidney transplanted patients both meeting their primary efficacy and safety end points. Envarsus® is a once-daily formulation of tacrolimus, the standard of care therapeutic for prevention of organ rejection after kidney transplantation. The company also demonstrated the potential for Envarsus® to improve tacrolimus-induced tremors in stable kidney transplant patients.

ResultsSince its start, Lundbeckfond Ventures has invested a total of DKK 840 million primarily in private companies and today has a portfolio of 14 companies. The book value of the portfolio and returns from exits year end was DKK 789 million primarily as a result of the changes in share price in Veloxis A/S.

Portfolio 2013 (Continued)

Targeted Secretion Inhibitors

Targeted Secretion Inhibitors

UKwww.syntaxin.com

The company was sold to Ipsen in July.

DKwww.veloxis.com

Envarsus, a once daily tacrolimus formulation has successfully completed develop-ment for use in immunosuppression following kidney transplantation and is currently in regulatory approval process as both in the US and the EU. Envarsus has been granted orphan drug status by the FDA.

USAwww.vhsquared.com

Designs and develops novel domain antibodies for oral treatment engineered to be stable in the gastrointestinal tract. Orally administered domain antibody products will provide localised treatment of gastro intestinal immune mediated diseases with none or limited systemic side effects.

27


A good year2013 was a good year for Invest, both from a business deve-lopment and financial performance perspective. The return total was DKK 1,206 million (1,286) equaling 11.3% (13.1%), which is considered satisfactory given the market conditions with weak economic growth and rising interest rates.

In 2013, Invest continued to expand the investment strategy implemented in August 2011. The investment strategy included a revised asset allocation, which entailed increasing exposure to credit and equities at the expense of government bonds, mortgage bonds and cash, as well as a shift towards managing investments internally instead of using external managers.

The allocation to listed equities was increased from 44% to 49% during 2013. This increase was partly due to shifting more capital into the asset class and partly due to an increase in the value of the existing investments. Credit, which includes both corporate bonds and loans, was reduced from 24% at the end of 2012 to 22%. The reduction was due to profit taking on investments, in which the potential had been realized. The remaining asset classes experienced declining allocation.

The global economy and Europe in particular was during 2013 still affected by the repercussions of the economic and financial crisis that began in 2008. Europe was thus charac-terized by zero economic growth whilst growth globally was moderate. Despite this, financial markets developed positively and risk assets in particular delivered solid returns with rising share prices and falling credit spreads between corporate and government bonds. The developed markets, U.S. and Europe, delivered the best performance whilst Emerging Markets ge-nerally experienced negative returns. Long term interest rates rose and resulted in negative returns for bonds with longer maturities. The development reflects the fact that investors, in their search for returns, shifted towards riskier assets in the

developed markets due to the very low yields on low risk as-sets e.g. government bonds.

Invest's investment strategy was well positioned to this mar-ket environment, with large equity and credit positions and no long interest rate exposure.

Equity investments contributed strongly to the result as listed equities generated the highest return in 2013, equal to 22% (18%) before the equity hedge. Real estate had the second highest return with 19% (17%) followed by credit with 12% (20%). Unlisted equities (private equity) could not match listed equities and returned 10% (9%). A number of legacy biotech funds contributed negatively to the result.

Lundbeckfond Invest manages the Foundation’s portfolio investments, which consist of cash and

financial investments. Invest’s primary purpose is to generate a return and secure sufficient reserves

to support the grant-making activities and the subsidiaries. The Foundation’s strategy is that Invest’s

portfolio shall be diversified in terms of both asset classes and sectors.

Bertil From, CFO

Asset allocation 31.12.2013

Bonds and cash 20%

Credit – managed in-house 20%

Listed equities – managed in-house 24%

Listed equities – managed externally

25%

Unlisted equities and real estate 9%

Credit – managed externally 2%

28


The low, but rising interest rates led to a moderate return on the holdings of government and mortgage bonds. An interest rate swap that served to reduce the Foundation’s longer interest rate exposure experienced a gain in value, leaving the total return of the bonds and cash portfolio at 2% (3%).

In order to protect Invest against large losses the equity port-folio has been partially hedged during the year. The motiva-tion for this was a belief that the increasing share prices were driven by declining risk premiums and higher valuations due to the central banks’ expansive monetary policy rather than underlying earnings growth and that the transition in valua-tions post crisis could be volatile. The costs associated with this cautious strategy have reduced Invests return by three percentage points.

ManagementDuring 2013, the Foundation continued the expansion of in-ternal management at the expense of external managers. The purpose of increasing the internal management is to create greater value by being able to better match the investments with the Foundation’s longer investment horizon, react faster and utilize the special competences within the investment team.

The investments in equities and credit managed internally by Invest, delivered very satisfactory returns again in 2013. The combination of the investment selection and a strong sales discipline contributed to generate high returns. The sales discipline materialises through selling equities and credits which have experienced significant value increases and in turn are assessed as overvalued. Proceeds from divestments are reinvested in other opportunities. This was especially promi-nent in the credit portfolio, where a number of corporate bonds were sold.

All new investments in 2013 were made by Invest through internal management as no funds was allocated to external managers, and the number of external managers of listed equities and bonds was reduced from seven to four. The ambi-tion is to continue this development in 2014.

The investment philosophy of the Foundation is to have a de-tailed understanding of, and knowledge about, the companies in which investments are made. Upon identifying a company for investment the attention turns to the capital structure and how and where an investment shall be done. Hence, should the investment be in equity or debt (bonds or loans) and should the investment be further enhanced through financial

Summary of assets and return

Market value Return Time-weighted return

31.12 2013 31.12 2012 2013 2012 2013 2012

DKKm DKKm DKKm DKKm % %

Bonds and cash 2,339 2,278 42 74 2.0 3.1

Credit incl. distressed debt and mezzanine 2,656 2,605 279 411 11.7 20.3

Listed equities 5,829 4,776 723 669 15.2 17.1

Unlisted equities 735 847 81 63 9.9 7.8

Real estate 363 483 81 69 18.7 16.8

Lundbeckfond Invest total 11,922 10,989 1,206 1,286 11.3 13.1

Companies in which Lundbeckfond Invest had large investments

29


instruments e.g. options. As a result, the asset allocation derives from the individual investment choices. The asset allo-cation is monitored as a part of the general portfolio and risk management, and it is ensured that the allocations are within the limits established by the Board.

The experience thus far has been that the internal manage-ment contributes to a more dynamic asset allocation, where the allocation adapts more quickly to changing market condi-tions compared to previously, where funds had to be moved between external managers.

The focal point of selecting companies to invest in is that the companies must be solid, well-run and global market leaders or leaders in their relevant market. Invest searches for com-panies that through their technology, production efficiency or brand have established leadership and exposure to growth markets. Furthermore, the companies must have the ability to defend their leadership in the future and create value for investors. In addition, the companies must not act unethically or be in conflict with UN Global Compact. In each case the expectation to the company’s future earnings and cash flow are compared to the company’s current valuation, and only in the event that the company seems attractively valued is an investment made.

Invest’s investment process includes ongoing contact with the companies' Investor Relations department, and where possible, the companies' management, in order to maximize the understanding of the companies. To maintain a lean investment organization, Invest follows at any time a relatively small number of companies, resulting in a more concentrated portfolio. The increasing share prices resulted in a situation where a number of companies, in which investments had been made, reached unattractive valuations, which led to positions being sold. This included, among others, Google and Daimler. On the other hand, investments were made in other quality companies, which were viewed as attractively valued, e.g. Pan-dora and Samsung.

The valuation of Emerging Markets, and in particular China, was viewed as becoming increasingly attractive during 2013

due to decreasing share prices and increasing earnings. On the back of an analysis of investment opportunities in China, Invest initiated investments in Chinese companies during mid-2013. Specific companies within the consumer goods, health-care and internet industries with exposure to the growing Chinese middle-class were chosen. Thus far Invest has had good experiences from investing in China, with regard to obtaining further market insight and generating returns. To date the returns have been positive even though the Chinese market has been flat. Investments in Emerging Markets are expected to be expanded gradually to other countries and regions during 2014.

The credit markets were very strong in 2013 with many new issues and tightening credit spreads. The portfolio has been somewhat reorganized and shifted towards newly issued bonds and bonds with longer maturities. The combination of a weak dollar and higher interest rates in the U.S. has led to in-creased investments in US bonds instead of European bonds. Furthermore, Invest has with interest noted and played an ac-tive part in the development of a Danish market for corporate bonds and hopes that the market will further develop in the coming years.

OrganisationDuring 2013, the investment team was increased from two to three investment professionals supplying additional com-petencies and resources in order to manage the increased investment activity. Adjustments of the remaining Lundbeck-fond Invest organisation were also finalised.

The expense ratio for Invest including management fees was 0.15% (0.14%) of invested capital in 2013. This increase is partly due to the additional staff needed to implement the new investment strategy, where the investment team manages the assets internally, and partly due to increased performance-based compensation. The Foundation considers this an attrac-tive and low level.

Lundbeckfond Invest has through Obel-LFI Ejendomme rebuilt the properties on Guldbergsgade hosting Copenhagen School of Design and Technology.

Credit Equities

5%

13%

17%

31%

40%

35%

30%

25%

20%

15%

10%

5%

0%

In-house managed

Benchmark

Return on in-house managed assets

30


Pipeline progressAs well as launching new products, Lundbeck is continuously working to develop new innovative treatments to meet exis-ting unmet needs. The company’s late-stage pipeline shows great promise, and Lundbeck has a special focus on three new compounds: brexpiprazole, desmoteplase and Lu AE58054. It is our hope that these compounds will become effective future treatments for patients suffering from depression, schizophre-nia, stroke and Alzheimer’s disease.

Partner strategyLundbeck has a sophisticated partner strategy and is highly committed to seeing it succeed. The company has a strong alli-ance with Otsuka Pharmaceutical on a number of projects, such as the development and commercialization of Abilify Maintena, as well as brexpiprazole, Lu AE58054, Selincro in Japan and Lu AF20513.

Lundbeck is continuing to capture benefits from the partner-ship with Takeda Pharmaceutical on the development and commercialization of Brintellix, as well as the partnership with Mochida Pharmaceutical and Mitsubishi Tanabe Pharma Corpo-ration on the commercialization of Lexapro in Japan.

Internal efficiency In recent years, Lundbeck has made substantial efforts to reorganize the company to make it more flexible and effective. This enables the company to manage the successful transition of the European product portfolio, to mitigate the pressure from healthcare reforms, and to overcome challenges such as increased competition from generics, and uncertainty sur-

Business development2013 was a good year for Lundbeck. The company delivered strong results that met their financial guidance, the product pipeline showed a number of positive developments and se-veral new products were successfully launched.

Lundbeck is in the process of renewing its product portfolio and expanding its geographical reach. Some products are maturing, but the company is well on its way to replace them. Among the highlights of the year were the approvals and launches of Brintellix®, Abilify Maintena® and Selincro® in dif-ferent markets. Further, Lundbeck saw strong performance in most existing products, and is specifically seeing rapid growth in sales in the US and International Markets as the company’s new products start to take off around the world. Revenue from recently launched products increased 45% in 2013. New pro-ducts now contribute to 20% of total revenue – and this trend is expected to grow and accelerate in years to come as revenues from recently approved products come on-stream.

New productsIn 2013, Lundbeck reached a number of important milestones as part of its R&D efforts: Abilify Maintena (aripiprazole) for the treatment of schizophrenia and Brintellix (vortioxetine) for the treatment of MDD were approved by both the FDA in the US and the EMA in Europe. Lundbeck also received formal approval of Selincro (nalmefene) for the treatment of alcohol dependence from the EMA. All three products will in the years to come play an important role in the successful transition of Lundbeck’s product portfolio and the growing geographic diversification of the company’s revenue streams.

Lundbeck is a specialised pharmaceutical company engaged in developing new and innovative

treatments for brain diseases on the basis of in-house research and external partnerships. Lundbeck

has activities relating to a number of brain diseases such as depression, alcohol dependence, epilepsy

and schizophrenia as well as Alzheimer’s, Huntington’s and Parkinson’s diseases.

31


rounding pricing and reimbursement in Europe. The restructu-ring of the European commercial infrastructure started in 2012 and Lundbeck is already capturing benefits of this process. In 2013, Lundbeck began the optimization of their administrative processes through the Fit-for-the-Future programme, which is expected to benefit the company for years to come.

Results achieved in 2013Lundbeck’s financial performance in 2013, excluding the unex-pected fine from the European Commission, was better both in terms of revenue and for operating profit than in 2012 and forecasted in the guidance published in February 2013. The company continued to deliver strong results and good profits despite 2013 being the first full year without revenue from Lexapro in the US, and with the patent expiry of Ebixa® in Europe.

Total revenue for the year was DKK 15,258 million, an increase of 3% compared to 2012. The primary driver was the increased sales from new products and the growth in the US and Interna-tional Markets. Lundbeck reported growing sales of Cipralex® against depression (+2%), while the sales of Ebixa® for the treatment of Alzheimer's disease fell because of substantial generic competition (down 25%). Azilect® for Parkinson's disease (+14%), Xenazine® for Huntington's disease (+19%), Sabril® for infantile spasms (+41%) and Onfi® for Lennox-Gastaut Syndrome (+125%) were the primary growth drivers for Lund-beck in 2013. Treanda® for chronic lymphocytic leukemia, which was launched in Canada in 2012, grew beyond expectations throughout the year. Revenue was also lifted by a milestone

payment of DKK 166 million from Takeda related to the filing of Brintellix® and by a gain of DKK 567 million from the divestment of a mature product portfolio in the US to Recordati S.p.A.

Research and development costs amounted to DKK 2,872 mil-lion, corresponding to 19% of revenue, which is a decrease of one percentage point compared to 2012. Sales and distribution costs amounted to DKK 4,200 million, corresponding to 28% of revenue and a decrease of 13% relative to 2012. Administra-tive expenses amounted to DKK 2,549 million including the unexpected fine from the European Commission. Excluding the fine administrative expenses amounted to DKK 1,850 mio. corresponding to 12% of revenue and an increase compared to 2012 primarily due to one-off restructuring costs related to the Fit-for-the-Future programme.

Profit from operations before special items was DKK 1,599 mil-lion, which was 7% lower than in 2012. The EBIT margin was 11%, against 12% in 2012.

The effective tax rate in 2013 was 42% compared to 30% in 2012. The increased tax rate relates to the unexpected fine from the European Commission, which is not tax-deductible.

The Lundbeck Foundation's share of profit for the year was DKK 599 million in 2013, against DKK 816 million in 2012, and in 2014 the Foundation will receive DKK 380 million in dividends from H. Lundbeck related to the profit for 2013.

DKK MILLION 2013 2012 2011

Revenue 15,258 14,802 16,007

Research and development costs 2,872 2,919 3,319

Operating profit before special items 1,599 1,726 3,395

Profit for the year before special items 855 1,165 2,283

The Lundbeck Foundation's share of profit for the year before special items 599 816 1,598

Average number of employees 5,530 5,639 5,690

Net cash 3,718 1,912 2,036

Dividends for the year 543 392 685

The Lundbeck Foundation's share of dividends for the year 380 275 480

The figures are calculated using Lundbeck’s own accounting policies that do not acknowledge the fine from the EU Commission as a special item.

32


Merck. The first of these, for GRASTEK™, was reviewed by the Allergenic Products Advisory Committee of the US Food and Drug Administration (FDA) in December. The committee voted unanimously that the available data support the pro-duct’s efficacy and safety in patients aged five to 65 years.

The Allergenic Products Advisory Committee recommended approval of ALK’s ragweed sublingual allergy immunotherapy tablet (RAGWITEK™) on a meeting held in January 2014.

The US allergy immunotherapy market is currently dominated by injection-based SCIT treatments which are prepared by specialists for individual patients. If approved, the new tablet products would be the first in their class, representing an important advance for allergy immunotherapy treatment in the US.

Strategic developmentALK’s strategy plan, Focus 2016, was launched in 2012. Tangible results include progress in developing and commer-cialising the SLIT-tablet portfolio, early realisation of savings following the streamlining of ALK’s business structure and simplification of ALK’s product supply network. These are part of ALK’s strategy to simplify its business. In all, Simplify initiatives are expected to yield annual net savings of DKK 100 million in 2016.

Business development2013 was characterised by challenging European markets, but ALK succeeded in increasing its market shares and growing its European revenue. Product sales outside Europe also continued to grow. Significant progress was made towards the approval of the first two SLIT-tablets in the US (GRASTEK™ and RAGWITEK™), and the new SLIT-tablet – targeting house dust mite-induced allergic rhinitis and allergic asthma – is on course for a European filing in 2014.

Development in the base businessEuropean revenue accounted for 81% of ALK’s total revenue in 2013. Although several countries saw low or negative market growth, ALK succeeded in increasing its overall market share and grew overall European product sales as a consequence of increased AIT products sales in selected markets and the recently launched adrenaline autoinjector Jext®.

Throughout Europe, newer products such as SLIToneULTRA®, AVANZ®, Jext® and GRAZAX® increased their proportion of overall sales, an important factor in ALK’s move to simplify its portfolio by phasing out lower-volume products.

Partner progress in North America2013 saw important progress towards ALK’s goal of globalis-ing its SLIT-tablet portfolio, with two Biologic License Appli-cations (BLAs) submitted by ALK’s partner in North America,

ALK is a global research-driven pharmaceutical company focusing on allergy prevention, diagnosis

and treatment. ALK is the global leader in allergy vaccination (immunotherapy) where patients are

exposed to allergens in the form of allergy immunotherapy products. The unique treatment induces a

protective immune response which reduces and potentially halts the development of allergy, asthma

and allergic reactions. ALK offers allergy immunotherapy products as injections, sublingual drops and

tablets, the most recent, best documented and most convenient treatment. The product portfolio

includes an adrenaline auto-injector for the treatment of severe allergic reactions and diagnostic

products.

DKK MILLION 2013 2012 2011

Revenue 2,244 2,345 2,348

Research and development costs 463 511 455

Operating (EBIT) profit before special items 131 182 299

Profit for the year, continuing operations 61 54 200

The Lundbeck Foundation's share of profit for the year before special items 26 23 76

Average no. of employees 1,804 1,828 1,724

Net cash -15 145 420


The Lundbeck Foundation's share of dividends for the year 20 20 19

The figures are calculated using ALK’s own accounting policies that acknowledge restructuring costs as a special item.

33


Falck is a leading international supplier of pre-hospital services, healthcare, firefighting, roadside

assistance, safety and other contingency services, with operations on six continents and in 43 coun-

tries. Falck has four divisions: Emergency (ambulance and fire fighting service), Assistance (roadside,

personal and home assistance), Healthcare (medical clinics, healthcare employee assistance program-

mes for companies and pension funds and healthcare staff supply service) and Safety Services (off-

shore safety and emergency training). Falck’s activities are directed towards preventing accidents and

disease; providing assistance in situations of emergency, accidents and need; and helping people move

on with their lives after illness or accidents.

In the Healthcare division, the acquisition of Swedish-based Skandinavisk Hälsovård, which provides doctors and nurses on a temporary basis throughout the Nordic region, expanded Falcks network of doctors, nurses and social and healthcare assistants and strengthens Falck Healthcare’s position as an integral player in the healthcare system in the Nordic coun-tries. The acquisition ties in with Falck Healthcare’s strategy of expanding in the healthcare sector in all of Scandinavia and enhances the company’s position, also in terms of physi-cians, on the Swedish market, the largest market in the Nordic region.

The global safety services activities, which traditionally involve safety training of employees in the offshore sector, continued to grow in 2013. Falck entered the Canadian market via its ac-quisition of the Survival Systems Integrated Services, which is located in one of Canada’s major oil hubs Halifax, Nova Scotia. Falck grew organically through the opening of a new center in Mexico and the establishment of a company in Angola which will spearhead the introduction of Falck products and services into the country.

Business developmentFalck continued to expand its global presence in 2013 and is well on track to becoming a worldwide organisation that works to prevent accidents, diseases and emergency situa-tions; that rescues and assists people in an emergency quickly and competently; and that rehabilitates people after illness and injury. Organic growth for the year was 7.7%.

Development in the four business areasFalck Emergency continued its organic and acquisitive growth path in 2013. In Germany and the US, Falck expanded its existing network through acquisitions and also in Australia workers will now be assisted by Falck acquired HES that pro-vides medical emergency response and related services to the mining and oil & gas industries in remote areas of Australia. Furthermore, new projects were started around the world with fire fighting in Belgium, medical clinics in Russia and ambu-lance services in Finland.

Falck's Assistance activities are concentrated to the Nordic Region: Denmark, Norway, Sweden, Finland and Estonia. In all these countries, Falck continues to provide assistance to its subscribers with their vehicles and homes. For example, Falck helps people get their car started again if it has broken down, and assists homeowners with everything from water in the basement to snow on the roof. Moreover, both individuals and businesses can make use of Falck's assistance and service offering for buildings, healthcare and travel activities.

DKK MILLION 2013 2012 2011*

Revenue 12,534 11,504 10,193

Operating profit before special items 1,112 1,083 980

Profit for the year before special items 562 532 519

The Lundbeck Foundation's share of profit for the year before special items 357 311 236

Number of employees 32,009 28,005 25,262

Net interest-bearing debt 6,215 5,755 5,437


The Lundbeck Foundation's share of dividends for the year n.a. n.a. n.a.

*Proforma figures for 2011.The figures are calculated using Falck’s own accounting policies.

34


ties to grants from the Foundation. The applicable code of conduct is available on the Foundation’s website.

At least half of the shareholder-elected board members of the subsidiaries, usually including the chairman, are independent of the Foundation. The Foundation monitors the performance of the subsidiaries closely and seeks to act as a value-creating owner and partner for the boards and managements of the subsidiaries, and exerts its influence through board selection and representation on the company boards and at general meetings. The CEO of the Foundation normally sits on the boards of directors of the subsidiaries, typically as the vice-chairman, whereas the chairman of the Foundation is never a member of the board of directors of the subsidiaries.

The Board performs regular self-assessments facilitated by a third party. The self-assessments include a review of the strengths and weaknesses of the board work, of whether statutory requirements are met and of the collaboration between the Executive Management and the Board.

In 2013, a whistleblowing scheme was established providing the Foundation’s employees, employees in the Foundation's subsidiaries and people related to The Lundbeck Foundation with the option of confidentially reporting wrongdoing. The whistleblowing reporting function can be accessed on the Foundations website.

The Foundation wants to ensure transparency in respect of all its activities, which is done through a high level of information on the Foundation’s website and a detailed description of the activities of the year in the annual review and report.

Grant GovernanceThe Lundbeck Foundation’s general criteria for granting re-search funds are that the scientific content of the application, the qualifications of the applicant and the academic environ-ment of the host institution are of a high international standard, and that the research can make a difference to human health and live. The Foundation seeks to ensure uniform assessment of applications. Fundamentally, the Foundation would like for all applications to be subjected to peer review and for such re-view to be undertaken by a majority of experts independent of the Foundation. For assessing regular project applications, the Foundation has set up two permanent eva-luation committees with a majority of external and foreign experts. For assessing larger personal and strategic applications, ad hoc evaluation panels of international experts are set up. All assessments lead to a recommendation to the Board, which makes the final allo-cation of grants in accordance with statutory requirements. Assessment procedures for applications and recommendations are adjusted on an ongoing basis concurrently with develop-ments and implementation of new initiatives.

Corporate GovernanceThe Lundbeck Foundation is managed by a board comprising of six members elected according to its statutes and three employee-elected representatives of the subsidiaries. The Board defines the Foundation's strategy and makes decisions of major significance or of an unusual nature in addition to final decisions on the provision of grants. Furthermore, the Board supervises the organization and makes sure that the Foundation is managed appropriately and in accordance with applicable law and its statutes. The Board does not participate in the daily management of the Foundation, but it appoints the CEO, who is in charge of the daily operations.

There are a minimum of four board meetings each year and in addition a two-day seminar is held at which the Foundation's strategy is reviewed, discussed and refined. The Board has set up a research and an investment committee, which meets when required to conduct more detailed analyses and discuss issues relating to grants and investments, respectively. Major investment decisions are made by the Board, and all grants are approved by the Board.

The six members of the Board, all of whom are independent, are elected for terms of one year. The intention of one-year terms is to ensure that the members are regularly held accountable for their decisions. No member who has been a member of the Board for more than 12 years or who has turned 75 years of age can be elected or re-elected. The Board may deviate from this rule if necessary for the purpose of retaining a board member due to his or her particular com-petencies.

The Board is self-perpetuating and elects new members in accordance with the Foundation's statutes. The chairman and the vice-chairman nominates new members to the Founda-tion's Board, and there is therefore no nomination committee. Ordinary election of members takes place at the AGM. Board members elected by the employees are elected according to statutory procedures. The principle governing the composition of the Board is that the Board should be made up of mem-bers whose combined knowledge and expertise will enable the Board to fulfil the Foundation's objectives as set out in the statutes.

Members of the Board are remunerated by a fixed fee which does not depend on the financial results of neither the sub-sidiaries nor the portfolio or venture investments. Members of the research and investment committee receive a special fixed fee. The remuneration of each member is specified in the annual report.

A written code of conduct regarding investments and grants has been laid down, and rules have also been laid down gover-ning the access of board members, employees and third par-

GOVERNANCE, CSR AND RISKSThe Lundbeck Foundation's daily operations are based on a governance structure ensuring that the Foundation, in a transparent manner, meets its dual objective (i) of being an active, value-creating owner and investor and (ii) to support research of the highest international standard with the aim of making a difference to human health and live.

35


Portfolio investments. The investment policy in force states that the Foundation is not allowed to make investments in enterprises presumed to be acting unethically or not respec-ting the ten principles of the UN Global Compact. The invest-ment portfolios are periodically reviewed to make sure that major investments comply with the investment policy. The reviews conducted in 2013 did not reveal any significant non-compliance investments.

Lundbeckfond Ventures and Emerge. The Foundation makes investments within life science to enable the development of new pharmaceuticals and new methods of treatment and diagnostic testing for diseases for the purpose of improving people's quality of life.

Gender equality and diversity. The Lundbeck Foundation supports gender equality and diversity and aims to have both genders represented on the boards of the Lundbeck Foun-dation and its subsidiaries within the next four years and, in the long term, to have at least two members of both genders represented on the boards. Currently, one out of six members elected to the Board of the Foundation is a woman and after the AGM in 2014 it will be two. At management level, the Foundation aims to have a mix of genders reflecting the dis-tribution of genders of the recruitment base. Two out of six of the Foundation’s senior managers are women.

RisksThe Lundbeck Foundation seeks to ensure a reasonable ba-lance between risk exposure and value creation. The goal is to achieve a long-term, stable return subject to moderate risk. The risk management of the Lundbeck Foundation is per-formed across Lundbeckfond Invest and Lundbeckfond Ven-tures. Portfolio investments' market risk is managed by limiting maximum exposure to individual asset classes and underlying assets. In addition, limits have been set for the duration of bond investments to manage interest rate risk. The Board lays down the investment policy. Derivative financial instruments such as swaps, options and forward contracts are used for risk management purposes. The investment policy governs the use of such instruments with regard to maturity, quantity and counter-party requirements. Weekly portfolio performance re-ports are prepared for the CEO, and there is monthly detailed reporting to the Board.

Risks also involve the business risks and financial risks associ-ated with the operations of the subsidiaries: Lundbeck, ALK, and Falck as well as Lundbeckfond Invest and Lundbeckfond Ventures. Risk management policies and procedures of the subsidiaries are defined individually by the managements of the subsidiaries in which the Foundation is represented on the boards of directors. The Foundation monitors the perfor-mance of the subsidiaries on an ongoing basis, which is part of the regular monthly reporting to the Board. See the annual reports of the subsidiaries for information on their risk mana-gement policies and procedures.

Further informationFor further information on the Lundbeck Foundation’s cor-porate and grant governance, CSR and risks please go to the Foundation’s webpage: www.lundbeckfonden.com

Evaluation committeesThe Lundbeck Foundation has set up two permanent peer review evaluation committees for assessing biomedical science project applications as well as teaching and commu-nication initiatives. The Biomedical Science Committee has nine members six of whom are external experts who may be affiliated with the committee for a maximum of six years. The remaining three members are members of the Board with research expertise. The Science Teaching and Communication Commitee has three members of whom two are external ex-perts and one is a member of the Board.

External ad hoc reviewsExternal review of applications by ad hoc expert panels is used for example in connection with the assessment of the Lundbeck Foundation Fellowships and strategic initiatives. To support the assessment of such applications, the Foundation also makes bibliometric analyses of applicants' publications and quotations.

Through the years, the Foundation has built a database of external reviewers. Some of the ways in which the Foundation selects its reviewers are via expert panels around the world set up by the European Research Council (ERC), among ex-perts known within the European Science Foundation (ESF), via its own assessment committees and via recommendations from partners in private European research foundations.

CSRThe Lundbeck Foundation Group is a global group with sig-nificant societal influence. The Lundbeck Foundation would like to live up to this responsibility and to be recognised by external as well as internal stakeholders as a trustworthy and responsible group characterised by professionalism, commit-ment, honesty and integrity.

The Foundation is committed to the UN Global Compact, which consists of ten principles concerning corporate social responsibility. These are the cornerstones of the policies, strategies and guidelines of the Lundbeck Foundation, inclu-ding its grant-making activities, ownership of Lundbeck, ALK and Falck as well as portfolio investments and other invest-ments. One of the consequences is that the Foundation op-poses all forms of corruption, including extortion and bribery, and that the Foundation follows the UN guidelines related to labour standards, environment and human rights as well as sustainable development.

The Lundbeck Foundation’s values and policies are reflected within the entire Lundbeck Foundation Group. The specific CSR policies and codes of the subsidiaries are laid down by the boards of directors of the subsidiaries in which the Lund-beck Foundation is represented and make sure that policies for CSR, including human rights and impacts on climate are in force. Values and policies may thereby be adapted to the special circumstances of the subsidiaries. See the annual re-ports and websites of the subsidiaries for further information about their respective CSR policies.

The CSR policies, strategies and guidelines of the Lundbeck Foundation are for example reflected through: Support to independent research. The Foundation allocates substantial funds to research for the benefit of society and people's health and lives.

37


FINANCIAL STATEMENTSLUNDBECK FOUNDATION GROUP

CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Income statement for the period 1 January – 31 December 38 Statement of comprehensive income for the period 1 January – 31 December 39 Balance sheet at 31 December 40 Management statement and Independent auditors’ report 42 Cash flow statement for the period 1 January – 31 December 44 Statement of changes in equity for the period 1 January – 31 December 45 Notes 1. Accounting policies 45 2. Revenue 56 3. Staff costs 56 4. Depreciation, amortisation and impairment 59 5. Fees to auditors appointed at general meeting 60 6. Special items 60 7. Net financial items 61 8. Tax on profit for the year 62 9. Grants for the year 63 10. Intangible assets 64 11. Property, plant and equipment 65 12. Financial assets and financial risks 66 13. Investments in associates 69 14. Deferred tax 70 15. Inventories 7 1 16. Trade receivables and other receivables 7 1 17. Cash resources 73 18. Capital base 73 19. Other reserves 74 20. Minority interests 74 21. Provisions 75 22. Mortgage, bank, leasing and repo debt 79 23. Other payables 81 24. Adjustment for non-cash operating items 81 25. Working capital changes 81 26. Acquisition of companies 81 27. Financial risks and financial instruments 83 28. Contractual obligations 89 29. Guarantees, contingent assets and liabilities 90 30. Related parties 92 31. Events after the balance sheet date 92 Group overview 93

38


2013 2012 Note DKKm DKKm Revenue 2 30,092 28,675 Cost of sales 3, 4 -14,232 -12,959Gross profit 15,860 15,716 Research and development costs 3, 4 -3,344 -3,436Sales and distribution costs 3, 4 -5,694 -6,293Administrative expenses 3, 4, 5 -3,357 -3,145Operating profit before special items 3,465 2,842 Special items 6 -1,249 -396Operating profit 2,216 2,446 Financial items, Lundbeckfond Invest, net 7 1,206 1,286Financial items, Lundbeckfond Ventures, net 7 181 -78Financial items, subsidiaries, net 7 -441 -381Income from investments in associates 13 - -Profit before tax 3,162 3,273 Tax on profit for the year 8 -707 -627Profit for the year 2,455 2,646 Minority interests’ share of profit for the year 20 -381 -531Lundbeck Foundation’s share of profit for the year 2,074 2,115 Lundbeck Foundation’s share of profit for the year 2,074 2,115 Special items after tax 1,123 267Minority interests’ share of special items -390 -90Lundbeck Foundation’s share of profit for the year before special items 2,807 2,292

Grants authorised during the year, including Emerge activities, gross 9 376 482

INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER


39


2013 2012 Note DKKm DKKm Profit for the year 2,455 2,646 Actuarial gains/losses 21 19 -113Tax -4 34 Items that will not subsequently be reclassified to the income statement 15 -79 Currency translation, foreign subsidiaries -354 -17Currency translation concerning additions to net investments in foreign subsidiaries -145 -27Realised exchange gains/losses concerning additions to net investments in foreign subsidiaries -8 -40Adjustment, deferred exchange gains/losses, hedging 142 -67Exchange gains/losses, hedging (transferred to the hedged items) -126 130 Exchange gains/losses, trading (transferred from hedging) - 1 Value adjustment of interest hedging instruments 9 -32Repayment of interest hedging instruments 51 - Fair value adjustment of available-for-sale financial assets 19 -35 8 Adjustment for hyperinflation -2 1 Tax on other comprehensive income 8 71 1 Items that may subsequently be reclassified to the income statement -397 -42 Other comprehensive income -382 -121 Comprehensive income 2,073 2,525 Minority interests’ share of comprehensive income for the year 20 -242 -490Lundbeck Foundation’s share of comprehensive income 1,831 2,035

Currency translation of foreign subsidiaries and currency translation concerning additions to net investments in foreign subsidi-

aries and tax related to these items, net loss of DKK 427 million (net loss of DKK 72 million in 2012), is recognised in the currency translation reserve in equity. Other items and tax related to such items are recognised in reserve for hedging transactions and reserve for fair value adjustments of available-for-sale financial assets, respectively, at net gain DKK 57 million (DKK 23 million in 2012) and net loss DKK 35 million (net gain DKK 8 million in 2012) and recognised under retained earnings in equity in the amount of DKK 152 million (DKK 10 million in 2012).

STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD 1 JANUARY - 31 DECEMBER


40


2013 2012 Note DKKm DKKm Goodwill 10,435 10,158 Contractual customer relationships etc. 2,261 2,634Other intangible assets 5,880 5,612 Intangible assets 10 18,576 18,404 Property, plant and equipment 11 6,153 5,912 Financial assets – Lundbeckfond Invest 12 11,814 10,924Financial assets – Lundbeckfond Ventures and Emerge 12 728 519 Investments in associates 13 86 17Deferred tax 14 550 576 Other financial assets 12 232 194Financial assets 13,410 12,230 Non-current assets 38,139 36,546 Inventories 15 2,312 2,101 Trade receivables and other receivables 16 5,809 5,401 Income tax 275 538Receivables 6,084 5,939 Securities – Lundbeckfond Invest 188 72Securities – subsidiaries 1,300 1,597 Securities 17 1,488 1,669 Cash – Lundbeckfond Invest 208 214Cash – subsidiaries 5,890 3,763 Cash 17 6,098 3,977 Current assets 15,982 13,686 Assets 54,121 50,232

BALANCE SHEET AT 31 DECEMBER, ASSETS


41


2013 2012 Note DKKm DKKm Capital base 18 2,523 2,270 Other reserves 19 -626 -221Retained earnings 23,540 21,984

Lundbeck Foundation’s share of equity 25,437 24,033 Minority interests’ share of equity 20 3,920 3,895 Total equity 29,357 27,928 Payable grants 298 400 Provisions 21 1,490 1,245 Deferred tax 14 1,881 2,018 Payables to financial institutions – subsidiaries 22 9,037 8,356 Other payables 31 54 Non-current liabilities 12,737 12,073 Payable grants 674 591 Provisions 21 544 446 Income tax 106 68 Payables to financial institutions – subsidiaries 22 643 672 Repo debt – Lundbeckfond Invest 22 196 126 Other payables 2, 23 9,864 8,328 Current liabilities 12,027 10,231 Liabilities 24,764 22,304

Equity and liabilities 54,121 50,232

BALANCE SHEET AT 31 DECEMBER, EQUITY AND LIABILITIES


42


The Board of Directors and the Executive Management have today considered and approved the annual report of the Lundbeck Foundation for the financial year ended 31 Decem-ber 2013.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the financial statements of the Foundation have been prepared in accordance with the Danish Financial Statements Act. In addition, the annual report has been prepared in accordance with the Danish disclosure requirements for annual reports.

We consider the accounting policies used to be appropriate. Accordingly, the consolidated financial statements and finan-

cial statements of the Foundation give a true and fair view of the Group’s and the Foundation’s assets, liabilities and financial position at 31 December 2013, and of the Group’s and the Foundation’s activities and the Group’s cash flows for the financial year 1 January – 31 December 2013.

We believe that the management’s review includes a fair review of developments in the Group’s and the Foundation’s activities and finances, results for the year and the Group’s and the Foundation’s financial position in general as well as a fair description of the principal risks and uncertainties to which the Group and the Foundation are exposed.

We recommend that the annual report be approved at the annual meeting.

MANAGEMENT STATEMENT

Copenhagen, 7 April 2014

Executive Management

Christian Dyvig

Board of Directors

Jørgen Huno RasmussenChairman

Thorleif Krarup

Kim KlitgaardElected by the employees

Mikael Rørth Vice-chairman

Povl Krogsgaard-Larsen

Ken LiljegrenElected by the employees

Steffen Kragh

Gunhild Waldemar

Peter Adler WürtzenElected by the employees

43


To the Board of Directors of the Lundbeck Foundation

Report on the consolidated financial statements and the Foundation’s financial statementsWe have audited the consolidated financial statements and the Lundbeck Foundation’s financial statements for the financial year 1 January – 31 December 2013, which comprise the income statement, balance sheet, statement of changes in equity and notes, including the accounting policies, for the Group as well as the Foundation, and the statement of comprehensive income and the cash flow statement of the Group. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports, and the Foundation’s financial statements are prepared in accordance with the Danish Financial Statements Act.

Management’s responsibility for the consolidated financial statements and the Foundation’s financial statementsManagement is responsible for the preparation of consoli-dated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports as well as the preparation of financial state-ments of the Foundation that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and financial statements of the Foundation that are free from material mis-statement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on the consolidated financial statements and the Foundation’s financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional re-quirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and the Foundation’s finan-cial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consoli-dated financial statements and the Foundation’s financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the Foundation’s financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers

internal control relevant to the preparation of consolidated financial statements and the Foundation’s financial statements that give a true and fair view in order to design procedures that are appropriate in the circumstances, but not to express an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of ac-counting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the Foundation’s financial statements.

We believe that the audit evidence we have obtained is suffi-cient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the Group’s assets, liabilities and financial position at 31 December 2013 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2013 in accordance with the International Finan-cial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports.

Further, in our opinion, the Foundation’s financial statements give a true and fair view of the Foundation’s assets, liabilities and financial position at 31 December 2013 and of the results of the Foundation’s operations for the financial year 1 January – 31 December 2013 in accordance with the Danish Financial Statements Act.

Statement on the management reviewPursuant to the Danish Financial Statements Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the Foundation’s financial state-ments.

On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and Foundation’s financial statements.

Copenhagen, 7 April 2014

DeloitteStatsautoriseret Revisionspartnerselskab

INDEPENDENT AUDITOR’S REPORT

Anders DonsState Authorised Public

Accountant

Martin FaarborgState Authorised Public

Accountant

44


2013 2012 Note DKKm DKKm Operating profit before special items 3,465 2,842 Special items -744 -14Adjustment for non-cash operating items etc. 24 1,899 1,543 Working capital changes 25 1,005 108 Cash flows from operating activities 5,625 4,479 Financial receipts 499 241 Dividend received 118 153 Financial payments -779 -507Income tax paid -593 -1,135Authorised grants paid -370 -388Cash flows from operating activities 4,500 2,843 Acquisition of companies 26 -593 -437Divestment of subsidiaries, non-controlling interests and operations -22 12 Investments in intangible assets -1,377 -1,488Investments in property, plant and equipment -984 -938Disposal of intangible assets and property, plant and equipment 42 106 Investments in other financial assets at fair value through profit or loss -5,759 -8,272Sale of other financial assets at fair value through profit or loss 6,057 8,357 Change in other financial assets -46 -2Cash flows from investing activities -2,682 -2,662 Loan proceeds 1,309 555 Repayment of loans -664 -252Change in other financial liabilities -5 -5Buyback of shares from minority interests -20 -238Capital injections from minority interests 17 39 Settlement of exercised share options -14 - Employee bonds -19 -13Dividend paid to minority interests 20 -193 -269Cash flows from financing activities 411 -183 Change in cash 2,229 -2Cash at 1 January 3,977 3,985 Unrealised exchange adjustments for the year -108 -6Cash at 31 December 17 6,098 3,977

CASH FLOW STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER


45


Lundbeck Minority Foundation’s interests’ Other Retained share of share of Capital base reserves earnings equity equity Total equity DKKm DKKm DKKm DKKm DKKm DKKm Equity at 1 January 2013 2,270 -221 21,984 24,033 3,895 27,928 Profit for the year 2,074 2,074 381 2,455 Other comprehensive income -405 162 -243 -139 -382Comprehensive income - -405 2,236 1,831 242 2,073 Grants authorised during the year, net -351 -351 - -351Minority interests’ share of dividends - - -166 -166Buyback of shares from minority interests -13 -13 -8 -21Change in minority interests 8 8 20 28 Adjustment of provision for acquisition of minority interests -108 -108 -80 -188Incentive programmes 40 40 22 62 Settlement of share options -6 -6 -8 -14Tax related to items recognised directly on equity 3 3 3 6 Other transactions - - -427 -427 -217 -644 Increase of capital base 253 - -253 - - - Equity at 31 December 2013 2,523 -626 23,540 25,437 3,920 29,357 Equity at 1 January 2012 2,225 -180 20,506 22,551 3,781 26,332 Profit for the year 2,115 2,115 531 2,646 Other comprehensive income -41 -39 -80 -41 -121Comprehensive income - -41 2,076 2,035 490 2,525 Grants authorised during the year, net -460 -460 - -460Minority interests’ share of dividends - - -245 -245Buyback of shares from minority interests -37 -37 -115 -152Decrease in minority interests -49 -49 - -49Adjustment of provision for acquisition of minority interests -51 -51 -37 -88Incentive programmes 44 44 21 65 Other transactions - - -553 -553 -376 -929 Increase of capital base 45 - -45 - - - Equity at 31 December 2012 2,270 -221 21,984 24,033 3,895 27,928

STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD 1 JANUARY – 31 DECEMBER


1. ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance

with International Financial Reporting Standards (IFRS) as adopted by the

EU and the Danish Statutory Order on Adoption of IFRS issued pursuant to

the Danish Financial Statements Act.

The consolidated financial statements are presented in Danish kroner (DKK),

which also is the functional currency of the Lundbeck Foundation.

The annual report has been prepared under the historical cost convention,

except that the following assets and liabilities are measured at fair value:

derivative financial instruments and financial instruments at fair value.

The consolidated financial statements are presented in accordance with the

new and revised standards (IFRS/IAS) and interpretations (IFRIC) which

apply for the financial year. This has not resulted in any changes in accoun-

ting policies that have affected recognition and measurement in the current

or previous years other than the changes described below.

46


The changes have been made with retrospective effect, and comparative

figures have been restated. The changes in accounting policies with regard

to IAS 19 Employee Benefits have improved the profit for 2012 by DKK 79

million to DKK 2,646 million. The change in accounting policies with regard

to reallocation of amortization on product rights has no effect on the profit

for 2012. The changes in accounting policies have no impact on the balance

sheet and no net impact on the statement of comprehensive income, state-

ment of changes in equity and the cash flow statement.

If the change in accounting policies regarding IAS 19 Employee Benefits had

not been effected, profit for 2013 would have been DKK 15 million higher, i.e.

profit for the year would have been DKK 2,470 million. If the change in

accounting policies regarding the reallocation of amortization on product

rights had not been effected, sales and distribution costs would have been

DKK 800 million higher, and costs of sales would have been correspondingly

lower.

Restatement of comparative figures due to changes in accounting policies:

Changes in accounting policies

Two changes have been made to the accounting policies which relate to the

consolidated financial statements for 2013.

The Lundbeck Foundation has implemented the changes to IAS 19 Employee

Benefits effective from 1 January 2013, according to which actuarial gains

and losses must be recognized in the statement of comprehensive income

instead of the income statement and not subsequently be recycled through

profit or loss. The implementation has resulted in additional disclosures.

In addition, as from 1 January 2013, the Lundbeck Foundation has reallo-

cated to cost of sales amortization on product rights, which was previously

recognized as sales and distribution costs. The reallocation has been made

to align cost of sales on all products regardless of whether they are pro-

duced by Lundbeck or Lundbeck has purchased the right to the products

and subsequently amortizes the rights.

NOTE 1


New Previous New Previous policies Changes policies policies Changes policies DKKm DKKm DKKm DKKm DKKm DKKm

Income statement Cost of sales -14,232 -801 -13,431 -12,959 -396 -12,563Research and development costs -3,344 - -3,344 -3,436 -4 -3,432Sales and distribution costs -5,694 789 -6,483 -6,293 473 -6,766Administrative expenses -3,357 -7 -3,350 -3,145 40 -3,185Operating profit before tax 3,162 -19 3,181 3,273 113 3,160Tax on profit for the year -707 4 -711 -627 -34 -593Profit for the year 2,455 -15 2,470 2,646 79 2,567 Statement of comprehensive income Actuarial gains/losses 19 19 - -113 -113 - Tax -4 -4 - 34 34 - Items that will not subsequently be reclassified to the income statement 15 15 - -79 -79 - Other comprehensive income -382 15 -397 -121 -79 -42 Cash flow statement Operating profit before special items 3,465 -19 3,484 2,842 113 2,729Adjustment for non-cash operating items etc. 1,899 19 1,880 1,543 -113 1,656Cash flow from operating activities 5,625 - 5,625 4,479 - 4,479

2013 2012

47


•Themostsignificantrisksandbenefitsassociatedwiththeassetsoldare

transferred to the buyer.

•TheGroupdoesnotretainmanagementcontroloftheassetsold.

•Revenuefromtheindividualpaymentsinanoverallagreementcanbe

clearly separated and calculated reliably at fair value.

•ItisprobablethattheGroupwillreceivepaymentfortheassetsold.

•TherearenofurtherdeliveryobligationsfortheGroupconcerning

the asset sold.

Research and development costs

Research and development costs totalled DKK 3,344 million in 2013 (DKK

3,436 million in 2012). Research and development costs are recognised in

the income statement as they are incurred unless the criteria for capitalisa-

tion of the development costs are deemed to have been met and it is found

to be probable that future earnings will cover the development costs. Due

to a very long development period and significant uncertainty in relation

to the development of new products, in the opinion of the Group, develop-

ment costs should not normally be capitalised in the balance sheet until

the development of the product has been completed and all the necessary

public registration and marketing approvals have been obtained. Develop-

ment costs relating to individual minor development projects running for

short-term periods and subject to limited risk are capitalised under other

intangible assets.

Intangible assets

Goodwill, product rights and contractual customer relationships etc. repre-

sent a significant part of the Group's total assets, amounting to DKK 17,884

million in 2013 (DKK 17,754 million in 2012). The majority of the value of

these items arose through the acquisition of companies or the acquisition

of rights. In connection with acquisitions, the individual assets and liabilities

are re-assessed to ensure that both recognised and unrecognised values

are measured at fair value. Especially for intangible assets for which there is

often no active market, the calculation of fair value may involve uncertainty.

Intangible assets with indefinite lives and intangible assets in progress are

tested for impairment at least once a year or if there is evidence of impair-

ment. Contractual customer relationships etc. identified at acquisitions were

primarily acquired with a view to further developing the acquired business

areas and markets and establishing positions in new markets. As a result, a

large part of the purchase prices has been allocated to goodwill. The value

in use of the product rights is calculated by discounting the estimate made

by Management over the expected cash flows during a budget period of at

least five years with due consideration to patent expiry. For the calculation

of the value in use of the assets, the Group uses different discount factors

depending on the individual areas of activity and Management's expecta-

tions for growth and terminal value in the period over and above five years.

These factors are crucial for the assessment of any impairment and thus for

the final calculation of the fair value of intangible assets.

It is a precondition for the retention of the value of the Group's rights that

such rights are respected. It is the Group's policy to defend these rights

wherever they may be violated.

Impairment

Goodwill is written down through the income statement in those cases

where the carrying amount exceeds the future net income expected from

the cash-generating unit (CGU) to which the goodwill relates (recoverable

amount). In the impairment test, the discounted expected future cash flows

(value in use) for the CGU are compared to the carrying amounts of goodwill

and other net assets.

Future IFRS changes

At the date of the publication of these consolidated financial statements,

a number of new and amended standards and interpretations have not yet

entered into force or have not yet been adopted by the EU. Therefore, they

are not included in the consolidated financial statements.

None of the new standards or amendments of existing standards are expec-

ted to have any material impact on future consolidated financial statements.

Accounting policies and estimates critical to financial reporting

In the preparation of the consolidated financial statements in accordance

with IFRS and generally accepted accounting principles, it is necessary for

Management to make certain estimates and assumptions as not all accoun-

ting items and accruals can be calculated with certainty.

Management’s estimates are based on historical data, recent information

available at the time of presentation of the financial statements and other

assumptions considered reasonable under the given circumstances. The

actual outcome may differ from these estimates.

The estimates are made by the management of the Lundbeck Foundation,

the H. Lundbeck Group, the Falck Group and the ALK Group, respectively.

It is believed that the following accounting policies and accounting estimates

are critical to the Group's financial reporting for 2013.

Application of materiality and relevance

In the preparation of the consolidated financial statements, the Lundbeck

Foundation aims to focus on information which is considered to be material

and thus relevant to the users of the consolidated financial statements. This

applies both to the accounting policies and to the information given in the

notes in general.

Based upon events which have taken place during the year and the financial

position at year-end, Management has assessed which information is mate-

rial for the users. For this purpose, The Lundbeck Foundation operates with

internal guidelines for the application of materiality and relevance which

have been agreed with the external auditors.

When assessing materiality and relevance, due consideration is given to

ensure adherence to the International Financial Reporting Standards as

adopted by the EU and the Danish Statutory Order on Adoption of IFRS

issued pursuant to the Danish Financial Statements Act and to ensure that

the consolidated financial statements give a true and fair view of the Group’s

financial position at the balance sheet date and the operations and cash

flows for the financial year.

License income and income from research collaborations

License income and royalties from outlicensed products and non-refundable

downpayments and milestone payments including service income from such

agreements relating to research collaborations totalled DKK 1,304 million in

2013 (DKK 869 million in 2012), which is recognised in the income statement

under revenue when the following criteria have been met:

•Thepaymentrelatestoresearchresultsalreadyobtained.

•Thebuyerhasgainedaccesstoandpossessionoftheresearchresults.

NOTE 1


48


Consolidated financial statements

The consolidated financial statements include the Lundbeck Foundation and

subsidiaries controlled by the Foundation. Control is achieved where the

Foundation directly or indirectly holds more than 50% of the voting rights or

is otherwise able to exercise or actually exercises control.

Companies in which the Group holds between 20% and 50% of the voting

rights and/or exercises significant influence but not control are regarded as

associates. Unrealised gains on transactions with associates are eliminated in

proportion to the Group’s share of the enterprise.

Investments in associates included in the Group’s documented investment

strategy are recognised as financial assets measured at fair value through

profit or loss.

Basis of consolidation

The consolidated financial statements are prepared on the basis of the

financial statements of the Foundation and the subsidiaries, which are all

prepared in accordance with the Group’s accounting policies.

The consolidated financial statements are prepared by adding together uni-

form items and eliminating intra-group income and expenses, investments,

balances and dividends as well as realised and unrealised gains and losses

on transactions between the consolidated companies. Account is taken of

the tax effect of these eliminations.

Financial statement items of subsidiaries are fully consolidated. Profit for the

year and equity attributable to minority interests in subsidiaries that are not

fully controlled are included in the consolidated profit and equity and stated

as separate line items.

Business combinations

Newly acquired companies are recognised in the consolidated financial

statements from the date of acquisition. The date of acquisition is the date

when control actually passes to the Group. Businesses sold or discontinued

are recognised in the consolidated income statement up to the time of sale

or discontinuance. The date of disposal is the date when control of the busi-

ness actually passes to a third party. Expected costs related to divestment or

discontinuance are included in the calculation of gains or losses.

Acquired businesses are accounted for using the purchase method of ac-

counting, according to which the identifiable assets, liabilities and contin-

gent liabilities of the acquired businesses are measured at fair value at the

time of acquisition. Account is taken of the tax effect of the revaluations

made. The cost of a business is generally the fair value of the consideration

paid. If the final determination of the consideration is contingent on one or

more future events, the value thereof will be recognised at fair value at the

date of acquisition. Changes to contingent considerations are recognised

in the income statement. Put options issued in connection with acquisitions

and the value of which is contingent on future events will be recognised as

part of the consideration at the date of acquisition. The put options issued

are subsequently measured at fair value. Any changes to the fair value of

issued put options after initial recognition are recognised in equity. Costs di-

rectly attributable to the business combination are recognised in the income

statement as incurred. Adjustments of commitments in connection with

conditional consideration or issued put options the value of which is contin-

gent on future events concerning business combinations with an acquisition

date before 1 January 2010 will still be recognised in accordance with IFRS

The carrying amount of intangible assets and property, plant and equipment

is analysed in connection with the preparation of the consolidated financial

statements or if there are indications that the carrying amount of an asset

may exceed the expectations of future income from the asset (recoverable

amount). If this analysis concludes that the future expected net income from

the asset will be lower than the carrying amount, the carrying amount will be

reduced to the higher of fair value less cost to sell and value in use.

Impairment losses are recognised in the income statement under the same

items as the associated depreciation or amortization.

Financial assets

Financial assets include investments in listed and unlisted equity instruments

and securities, including life science investments recognised at their fair

value. Investments in unlisted equity instruments and securities at the end of

2013 amounted to DKK 1,389 million (DKK 1,550 million in 2012).

The assessment of fair value of these investments is subject to considerable

uncertainty. This applies especially to life science investments because the

value of these businesses is linked to the company's often long-term invest-

ment in the development of new pharmaceuticals and technologies.

Management estimates the fair value of unlisted investments in accordance

with International Private Equity and Venture Capital Valuation Guidelines.

i.e. on the basis of relevant valuation methods based on comparable transac-

tions on market conditions, capital increases and the like. If the fair value

cannot be determined with sufficient reliability, the investments in question

are recognised at cost less any impairment. The Group assesses at each

balance sheet date whether there is objective evidence that an investment

or a group of investments is impaired. An impairment loss is recorded if

the Group assesses that lack of compliance with business plans affect the

calculation of fair value or if subsequent capital injections are made at lower

prices.

Purchase price allocation in business combinations

In connection with allocation of purchase price in business combinations,

calculations are made of fair value of acquired assets and liabilities. Since

such calculations are based on expected future cash flows relating to the

acquired assets and liabilities, there is an inherent uncertainty in respect of

whether such cash flows will materialise as expected. In accordance with

IFRS 3, the purchase price allocations in business combinations may be

adjusted for up to 12 months from the date of acquisition.

Provisions for acquisition of minorities

Provisions for acquisition of minorities amounted to DKK 1,021 million at 31

December 2013 (DKK 711 million in 2012). When calculating the fair value of

issued put options which commit the Group to acquire minority interests

in subsidiaries, the Management applies estimates of, e.g. the subsidiaries’

future financial performance, the likelihood of option holders exercising their

selling right and the time of exercise. These factors are of material impor-

tance to the fair value calculation, which is therefore subject to uncertainty.

Amortisation and depreciation periods and scrap values

In the determination of the carrying amount of intangible assets and proper-

ty, plant and equipment, estimates are required of the estimated economic

lives of the assets and of scrap values.

NOTE 1


49


When put options are issued as part of the consideration for business com-

binations, the minority interests receiving put options are considered to have

been redeemed on the acquisition date. The minority interests are eliminated

and a debt obligation is recognised at fair value on initial recognition. Fair

value is calculated as the present value of the exercise price of the option.

Subsequent measurements are made at fair value and fair value changes are

recognised in equity on an ongoing basis.

Issued put options relating to business combinations with an acquisition

date before 1 January 2010 will still be recognised in accordance with

IFRS 3 (2004). Accordingly, the subsequent measurement will be made at

amortised cost with ongoing recognition of interest expenses in the income

statement and value changes in goodwill. Any subsequent dividend pay-

ments to option holders are recognised as a financial expense in the income

statement in the cases where the option price is independent of dividend

payments. Dividend payments are included in the determination of the cost

of the put options in cases where the option price is adjusted for dividend

payments received.

Translation of foreign currency

A functional currency is determined for each of the reporting enterprises of

the Group. The functional currency is the currency in the primary economic

environment in which the reporting entity operates. Transactions in curren-

cies other than the functional currency are transactions in foreign currencies.

On initial recognition, transactions denominated in foreign currencies are

translated at standard rates which approximate the actual exchange rates

at the transaction date. Exchange differences arising between the exchange

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

are recognised in the income statement as net financials except in case of

hedge accounting. In case of hedge accounting, such differences are recog-

nised in the same item as the hedged item.

Receivables, payables and other monetary items denominated in foreign cur-

rencies that have not been settled at the balance sheet date are translated

at the exchange rates at the balance sheet date. The difference between the

exchange rates at the balance sheet date and the rates at the time the re-

ceivable or payable is created or recognised in the latest consolidated finan-

cial statements is recognised in the income statement under net financials in

respect of unhedged items and under the same items for hedged items.

On recognition of foreign subsidiaries having a functional currency different

from that used by the Foundation, non-monetary as well as monetary items

are translated at the exchange rates at the balance sheet date. Exchange

differences arising from the translation of both the balance sheets and the

income statements of the foreign subsidiaries are recognised in the Group's

statement of comprehensive income under other comprehensive income.

However, for foreign subsidiaries and associates operating in hyperinflatio-

nary economies, revenue and costs are translated at the exchange rate ruling

at the balance sheet date. Prior to the translation, the income statement

and the non-monetary items of the balance sheet are restated taking into

account the buying power of the functional currency based on inflation

until the balance sheet date (inflation correction). The effect of the infla-

tion correction is recognised in the currency translation reserve in equity.

In the income statement, it is recognised in financials as a loss/gain on the

monetary net position in the relevant entities. The assessment of when an

3 (2004). Accordingly, the adjustments are recognised in goodwill until the

conditions have been met or the issued put options exercised.

Any positive difference (goodwill) between the consideration and the value

of non-controlling interests in the acquiree and the fair value of the previous-

ly held interests in the acquiree, on the one hand, and the fair value of the

acquired identifiable assets, liabilities and contingent liabilities, on the other

hand, is recognised in intangible assets. On acquisition, goodwill is allocated

to the cash-generating units which will subsequently form the basis for fu-

ture impairment tests. Negative differences (negative goodwill) between the

cost of the acquired business and the fair value of the acquired identifiable

assets, liabilities and contingent liabilities are recognised in the income state-

ment at the time of acquisition. Goodwill arising from acquired businesses is

adjusted within a maximum period of 12 months from the acquisition if ad-

ditional information about the fair value at the time of acquisition of assets,

liabilities and contingent liabilities acquired is obtained after the acquisition

and it is found that the fair values originally calculated were incorrect or the

consideration for the business combination is different from that originally

fixed. The effect of the adjustments will be recognised in the opening equity,

and the comparative figures will be restated accordingly. Subsequently,

goodwill is not adjusted. However, goodwill will not be recognised by an

amount exceeding the expectations of future income from the acquiree.

Goodwill and fair value adjustments in connection with the acquisition of

independent foreign entities (subsidiaries or associates) are accounted for

as assets and liabilities in the acquiree and translated at the exchange rate at

the balance sheet date.

Gains or losses on disposal or discontinuance of subsidiaries and associates

Gains or losses on the disposal or discontinuance of subsidiaries and asso-

ciates are calculated as the difference between the selling price or the

discontinuance amount and the carrying amount of net assets at the time of

sale as well as anticipated costs relating to sale or discontinuance. The re-

sulting gain or loss is recognised in the income statement together with ac-

cumulated currency translation adjustments previously recognised in other

comprehensive income. A proportional capital reduction does not result in

recycling of accumulated exchange rate adjustments through profit or loss.

Minority interests

On initial recognition, minority interests are either recognised at fair value

(including the fair value of goodwill related to minority interests in the

acquired company) or at the minority interests' share of the acquired com-

pany's identifiable assets, liabilities and contingent liabilities measured at fair

value (excluding the fair value of goodwill related to minority interests in the

acquired company). The measurement basis for minority interests is selected

for each individual transaction.

Acquisition and divestment of minority interests

Increases and reductions of minority interests are treated for accounting

purposes as transactions with owners, in their capacity as owners. As a

result, any differences between adjustment to the carrying amount of

minority interests and the fair value of the consideration received or paid

are recognised directly in equity.

NOTE 1


50


Changes in the fair value of derivatives used to hedge net investments in in-

dependent foreign subsidiaries or associates and which otherwise meet the

relevant criteria are recognised in the Group's statement of comprehensive

income under other comprehensive income.

Securities, available-for-sale financial assets and derivatives measured at

fair value are classified as belonging to levels 1-3 depending on the pricing

method applied. Level 1 includes financial assets for which the fair value is

measured on the basis of quoted prices (unadjusted) in active markets for

identical assets. Level 2 includes financial assets and financial liabilities for

which the fair value is measured on the basis of directly or indirectly obser-

vable inputs other than the quoted prices included in level 1. Level 3 includes

financial assets for which the fair value is measured on the basis of valuation

techniques which include inputs not based on observable market data.

Income statement

Revenue: Pharmaceuticals for the treatment of brain disorders and allergy

Revenue comprises invoiced sales for the year less returned goods and

revenue-based taxes consisting mainly of value added taxes and foreign

revenue-based drug taxes.

Moreover, revenue includes license income and royalties from outlicensed

products as well as non-refundable downpayments and milestone payments

relating to research and development collaborations and collaboration on

commercialization of products.

In addition, income from the reduction of investments in research enterprises

considered to represent sale of research results is recognised as revenue.

See Accounting policies and estimates critical to financial reporting for a

description of the accounting treatment of license income and income from

research collaborations.

Revenue: Emergency, Assistance, Healthcare and Training sectors

Revenue represents the value of services and goods delivered and invoiced

subscriptions attributable to the financial period, and is recognised in the in-

come statement if delivery and transfer of risk to the buyer have taken place

before year-end, and if the income can be reliably measured and is expected

to be received.

The value of services rendered is recognised on the basis of the delivered

percentage of the total service.

Revenue from subscriptions is allocated to the income statement on a

straight-line basis.

Revenue from sales of goods is recognised when the significant risks and

rewards of ownership have been transferred to the buyer.

Revenue is measured at the fair value of the agreed consideration excluding

VAT and other taxes collected on behalf of third parties. All discounts gran-

ted are recognised in revenue.

Cost of sales

Cost of sales comprises the cost of goods and services sold. Cost includes

the cost of raw materials, transport costs, consumables and goods for resale,

direct labour and indirect costs of production, including costs for operating

economy is hyperinflationary is based on qualitative as well as quantitative

factors, including whether the accumulated inflation over a three-year period

is in the order of 100%.

Foreign exchange adjustment of receivables from or debt to subsidiaries

which are considered part of the Foundation's overall investment in the sub-

sidiary in question is recognised in the Group's statement of comprehensive

income under other comprehensive income.

On recognition of foreign associates having a functional currency different

from that used by the Foundation, assets and liabilities are translated at the

exchange rates at the balance sheet date, while the income statement is

translated at average exchange rates for the year. Exchange differences ari-

sing from the translation of foreign associates are recognised in the Group's

statement of comprehensive income under other comprehensive income.

On the divestment of wholly-owned foreign entities, foreign exchange ad-

justments accumulated in equity via other comprehensive income and which

can be attributed to entities are reclassified from the “Currency translation

reserve” to the income statement together with any gain or loss on the di-

vestment. On the divestment of partially owned foreign subsidiaries, the part

of the currency translation reserve that relates to non-controlling interests

is not recognised in the income statement. On partial divestment of foreign

subsidiaries without giving up control, a proportionate share of the currency

translation reserve is transferred from the parent company shareholders’ to

the non-controlling shareholders’ share of equity. On partial divestment of

associates and joint ventures, the proportionate share of the accumulated

currency translation reserve recognised in other comprehensive income

is transferred to profit for the year together with the gain or loss on the

divestment. Any repayment of intercompany balances that are considered

part of the net investment is not considered, in itself, a partial divestment of

subsidiaries.

Financial instruments

Forward exchange contracts, interest rate swaps, share options and other

derivatives are initially recognised in the balance sheet at fair value on the

value date and are subsequently remeasured at fair value at the balance

sheet date. Positive and negative fair values are included in other receivables

and other payables respectively.

Changes in the fair value of derivatives classified as hedging instruments

and meeting the criteria for hedging future cash flows are recognised in the

Group's statement of comprehensive income under other comprehensive

income. Income and expenses related to such hedging transactions are

transferred from other comprehensive income on invoicing of the hedged

item and recognised in the same item as the hedged item.

Changes in the fair value of derivatives classified as hedging instruments

and meeting the criteria for hedging the fair value of a recognised asset or

liability are recognised in the income statement together with changes in the

value of the hedged asset or liability.

For derivatives which do not qualify for hedge accounting, changes in fair

value are recognised in the income statement under net financials as they

arise.

NOTE 1


51


as a financial expense in the cases where the option price is independent of

dividend payments and other financial expenses.

Tax

The Group's controlled Danish companies are jointly taxed with Lundbeck-

fond Invest A/S as administration company. The current Danish income tax

liability is allocated among the companies of the tax pool in proportion to

their taxable income (full allocation subject to reimbursement in respect of

tax losses).

The Lundbeck Foundation has opted to use section 3(4) of the Danish

Corporation Tax Act. Under these rules, the taxable income of Lundbeckfond

Invest A/S is considered to have been earned by the Lundbeck Foundation if

the taxable income is distributed as dividends to the Lundbeck Foundation.

Since the Lundbeck Foundation's taxable income is regularly offset against

grants for the year and provisions for future grants, no current or deferred

tax is recognised.

Tax for the year, which consists of the year's current tax and the change in

deferred tax, is recognised in the income statement as regards the amount

that can be attributed to the net profit or loss for the year and directly in the

statement of comprehensive income under other comprehensive income as

regards the amount that can be attributed to items under other comprehen-

sive income or directly in equity. Exchange adjustments of deferred tax are

recognised as part of the movements in deferred tax in the balance sheet.

The current tax charge for the year is calculated based on the tax rates and

rules applicable at the balance sheet date.

Special items

Special items comprise major one-off amounts not directly attributable to

the Group's ordinary activities, and they concern matters such as amortisa-

tion on contractual customer relationships identified at acquisitions and

transaction costs associated with acquisitions.

Balance sheet

Intangible assets

Goodwill

On initial recognition, goodwill is measured and recognised as the excess

of the cost or fair value of the acquired business over the fair value of the

acquired assets, liabilities and contingent liabilities. On recognition of good-

will, the goodwill amount is allocated to those of the Group’s activities that

generate separate cash flows (cash generating units).

Goodwill is not amortised, but is tested for impairment at least once a year

(impairment test), or if there is evidence of impairment.

Development projects

Clearly defined and identifiable development projects are recognised as

intangible assets where the technical rate of utilisation of the project,

the availability of adequate resources and a potential future market or

development opportunity in the company can be demonstrated and where

the intention is to manufacture, market or use the project if the cost can

be measured reliably and it is probable that the future earnings can cover

production and selling expenses, administrative expenses as well as the

development costs. Other development costs are recognised in the income

statement as the costs are incurred.

and maintaining production facilities and equipment, amortisation/deprecia-

tion and impairment losses relating to such assets. Cost of sales moreover

includes royalty payments concerning inlicensed products, expenses in con-

nection with quality assurance of products and any writedown to net realis-

able value of unsaleable and slow-moving items. Cost of sales also includes

external assistance to generate the year's income.

Research and development costs

Research and development costs comprise expenses incurred during the

year in connection with the Group's research and development functions,

including wages and salaries, amortisation/depreciation and impairment and

other indirect costs as well as costs relating to research and development

collaborations on in-licensed products.

Research costs are always recognised in the income statement as they are

incurred.

Development costs are recognised in the income statement as they are

incurred. Development costs are capitalised only if a number of specific

criteria are deemed to have been met.


description of conditions for capitalising development costs.

Sales and distribution costs

Sales and distribution costs comprise expenses incurred in connection with

the sale and distribution of the Group's products sold during the year. This

includes expenses for sales campaigns launched, training and administration

of the sales force and direct distribution and marketing costs. Also recog-

nised are wages and other expenses for the sales and marketing functions,

amortisation/depreciation and impairment of product rights, for example,

and other indirect costs.

Administrative expenses

Administrative expenses comprise expenses incurred in the year for the

management and administration of the Group. This includes wages and

other costs relating to the Group's management, HR, IT and finance func-

tions. Also recognised are amortisation/depreciation and impairment and

other indirect costs.

Results of investments in associates

The proportionate share of the results of associates is recognised in the

consolidated income statement after tax and elimination of the proportio-

nate share of any intra-group gains and losses and after deduction of any

writedowns of the equity investments.

Net financials

Net financials include interest income and expenses, including the interest

component of financial lease payments, which are recognised in the income

statement at the amounts relating to the financial year. Net financials also

include value adjustments of financial assets and realised and unrealised

gains and losses on securities, unhedged items denominated in foreign

currencies as well as forward contracts and other derivatives not used for

hedge accounting, realised exchange gains and losses concerning additions

to net investments in foreign subsidiaries that are recycled from other com-

prehensive income, realised fair value adjustments and prolonged losses on

available-for-sale financial assets. Dividends to capital holders who have re-

ceived put options in connection with business combinations are recognised

NOTE 1


52


finance leases are depreciated over the useful lives of the assets or, if shorter,

over the lease term.

Borrowing costs to finance the manufacture of property, plant and equip-

ment are recognised in the cost price if such borrowing costs relate to the

production period. Other borrowing costs are expensed.

Property, plant and equipment are depreciated on a straight-line basis over

the expected useful lives of the assets, which are expected to be as follows:

Years

Buildings 25-50

Installations 10

Plant and machinery 3-10

Vehicles according to category 5-12

Fixtures and fittings, tools and equipment 3-10

Leasehold improvements max. 10

The depreciation base is cost less the estimated residual value at the end

of the expected useful life. The cost of a total asset is divided into smaller

components that are depreciated separately if such components have dif-

ferent useful lives. Depreciation methods, useful lives and residual values are

re-assessed annually.

Depreciation is recognised in the income statement under cost of sales, sales

and distribution costs, administrative expenses and research and develop-

ment costs, respectively.

Gains or losses on the sale or retirement of items of property, plant and

equipment are calculated as the difference between the carrying amount

and the selling price reduced by costs relating to divestment or discontinu-

ance. Gains and losses are recognised in the income statement under the

same items as the associated depreciation.

Investments in associates

Investments in associates, except for investments in associates, that are

included in the Group’s documented investment strategy, are recognised and

measured in the consolidated financial statements according to the equity

method, which entails that the investments are measured in the balance

sheet at the proportionate share of the associate's net asset value calculated

in accordance with the Group' accounting policies less or plus unrealised

intra-group gains and losses and plus the carrying amount of goodwill.

The proportionate share of the result of the associate is recognised in the

income statement after tax and elimination of the proportionate share of any

intra-group gains and losses and after deduction of any writedowns of the

investments. The proportionate share of all transactions and events recog-

nised directly in the associate's other comprehensive income is recognised in

the Group's statement of comprehensive income under other comprehensive

income.

Investments in associates with a negative carrying amount are recognised

at DKK 0. Receivables and other long-term financial assets considered to

form part of the overall investment in the associate are written down by any

remaining negative net asset value. Trade receivables and other receivables

are written down only to the extent they are deemed to be irrecoverable. A

provision to cover the remaining negative net asset value will only be made

if the Group has a legal or constructive obligation to cover the liabilities of

the relevant associate.

After completion of the development work, development costs are amor-

tised on a straight-line basis over the expected useful life. For development

projects protected by intellectual property rights, the maximum amortisation

period is the remaining term of the rights concerned. Ongoing development

projects are tested for impairment at least once a year, or if there is evidence

of impairment.

Product rights and other intangible assets

Acquired intellectual property rights in the form of product rights, contrac-

tual customer relationships, patents, licenses, brand names and software are

measured at cost less accumulated amortisation and impairment. The cost of

software comprises the cost of planning, including labour and costs directly

attributable to the project.

Product rights are amortised on a straight-line basis over the economic

lives of the underlying products which in all material aspects are currently

between 8-12 years. Contractual customer relationships are measured at cost

less accumulated depreciation and impairment. Intangible assets acquired

on acquisition are amortised over the expected economic life, estimated to

be 3 to 10 years. Patents are amortised over a maximum of the remaining

life of the patent, which in all material aspects is currently between 10-13

years. Licenses are amortised over the period of the agreement. Software is

amortised over the expected economic life, estimated to be 3 to 5 years. The

economic lives of large administrative systems are estimated to be 8 years.

Amortisation commences when the asset is ready to be brought into use,

which means at the time of commercialisation.

Depreciation is recognised in the income statement under cost of sales, sales

and distribution costs, administrative expenses and research and develop-

ment costs, respectively.

Other intangible assets with indeterminable useful lives are not amortised

but tested for impairment at least once a year, or if there is evidence of

impairment.

Borrowing costs to finance the manufacture of other intangible assets are

recognised in the cost price if such borrowing costs relate to the production

period. Other borrowing costs are expensed.

Gains and losses on the disposal of development projects, patents and

licenses are measured as the difference between the selling price less cost to

sell and the carrying amount at the time of sale.


description of the calculation of the fair value of intangible assets.

Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated de-

preciation and impairment. Land is not depreciated.

Cost includes the costs of purchase and expenses directly attributable to

the purchase until the asset is ready for use. In the case of assets manufac-

tured by the company, cost includes expenses directly attributable to the

manufacture of the asset, including materials, components, subsupplies and

labour.

Assets held under finance leases are recognised under property, plant and

equipment and measured at the lower of the fair value and value in use of

the future lease payments at the inception of the lease. Assets held under

NOTE 1


53


is determined having regard to marketability, obsolescence and expected

selling price developments.

Receivables

Current receivables comprise trade receivables and other receivables arising

in the Group's normal course of business. Other receivables recognised un-

der financial assets are financial assets with fixed or determinable payments

that are not quoted on an active market and are not derivative financial

instruments.

On initial recognition, receivables are measured at fair value and subse-

quently to amortised costs, which usually corresponds to the nominal value

less writedowns to counter the risk of loss calculated on the basis of an

individual evaluation. A provision account is used for this purpose.

Prepayments

Prepayments consist of expenses relating to subsequent financial years.

Prepayments are measured at cost.

Securities

The bond portfolio and other securities, which are included in the Group's

documented investment strategy for excess liquidity, or bonds with a term to

maturity of less than one year, are recognised under current assets. Securi-

ties are initially recognised at fair value on the value date and are subse-

quently remeasured at market value at the balance sheet date. Both realised

and unrealised gains and losses are recognised in the income statement

under net financials.

Equity

Authorised grants

Grants are considered equity movements and are recognised as a liability at

the time when the grant has been authorised by the Board of Directors and

announced to the recipient. Authorised grants not yet disbursed are recog-

nised in long-term or short-term liabilities, respectively.

Hedging reserve

Hedge transactions that meet the criteria for hedging future cash flows and

for which the hedged transaction has yet to be realised are recognised in

equity under the hedging reserve.

Value adjustments concerning hedging transactions used to hedge the

Group's net investment in such entities are recognised in equity under the

hedging reserve.

Currency translation reserve

Foreign exchange adjustments arising on the translation of financial state-

ments for entities which have a functional currency other than Danish kroner,

foreign exchange adjustments relating to financial assets and liabilities

representing a part of the Group’s net investment in such entities are recog-

nised in equity under the currency translation reserve.

On full or partial realisation of a net investment, foreign exchange adjust-

ments are recognised in the income statement.

Reserve for fair value adjustment of available-for-sale financial assets

Reserve for fair value adjustment comprises accumulated changes in the fair

values of available-for-sale financial assets. The reserve, which forms part of

the Group’s free reserves, is dissolved and transferred to the income state-

ment as the investment is sold or written down.

Financial assets

Securities that are included in the Group's documented investment strategy

in accordance with the fair value option of IAS 39 Financial Instruments:

Recognition and Measurement are recognised on the basis of the settle-

ment date at fair value and are subsequently measured at market price or

estimated fair value at the balance sheet date. Bonds with a term to maturity

of less than one year are recognised in current assets. Both realised and

unrealised gains and losses are recognised in the income statement under

net financials.

Financial assets are measured at fair value through profit or loss, including

investments in associates if they are included in the Group's documented

investment strategy.

Bonds forming part of repo transactions, i.e. the selling of bonds to be

repurchased at a later date, remain in the balance sheet as financial assets,

and the amount received on repo transactions is recognised as repo debt.

Returns on such bonds are recognised under financials.

On initial recognition, other investments classified as available-for-sale are

measured at fair value with the addition of costs directly attributable to the

acquisition. Other investments are subsequently measured at fair value at

the balance sheet date, and changes to the fair value are recognised in the

statement of comprehensive income under other comprehensive income

with the exception of impairment losses and dividends, which are taken to

the income statement. When other available-for-sale investments are sold

or settled, the accumulated fair value adjustments recognised under other

comprehensive income are recycled to the income statement.

The fair value of listed investments is calculated using closing prices

according to exchange markets. The calculation of fair value of unlisted

investments, including life science investments, is made in accordance with

International Private Equity and Venture Capital Valuation Guidelines. i.e. on

the basis of relevant valuation methods based on comparable transactions

on market conditions, capital increases and the like. If the fair value cannot

be determined with sufficient reliability, the investments in question are re-

cognised at cost less any impairment. The Group assesses at each balance

sheet date whether there is objective evidence that an investment or a

group of investments is impaired. Assessments of investments in unlisted

equity instruments and securities, including life science investments, include

an assessment of whether the companies live up to the defined business

plans and the impact of any non-compliance on the calculation of fair value.

Inventories

Raw materials, packaging and goods for resale are measured at the latest

known cost at the balance sheet date, which equals cost computed accor-

ding to the FIFO method. Work in progress and finished goods manufac-

tured by the company are measured at cost, i.e. the cost of raw materials,

consumables, direct labour and indirect costs of production. Indirect costs

of production include materials and labour as well as maintenance of and

depreciation on the machines, factory buildings and equipment used in the

manufacturing process as well as the cost of factory administration and

management. Indirect costs of production are allocated based on the normal

capacity of the production plant.

Inventories are written down to net realisable value if it is lower than the

cost price. The net realisable value of inventories is determined as the selling

price less costs of completion and costs incurred to execute the sale, and it

NOTE 1


54


Tax on items in other comprehensive income is recognised in the statement

of comprehensive income under other comprehensive income. Tax on equity

entries is recognised in equity.

Deferred tax is recognised on all temporary differences between the carry-

ing amounts of assets and liabilities and their tax base, except for temporary

differences arising either on initial recognition of goodwill or a transaction

that is not a business combination and with the temporary difference as-

certained at the time of the initial recognition affecting neither the financial

result nor the taxable income. The tax value of the assets is calculated based

on the planned use of each asset.

Deferred income tax is provided on temporary differences arising on invest-

ments in subsidiaries and associates, unless the Group has a possibility of

controlling when the deferred tax is to be realised and it is likely that the

deferred tax will not materialise as current tax.

Deferred tax is measured on the basis of the tax rates and tax rules in force

in the respective countries on the balance sheet date. Changes in deferred

tax as a result of changed tax rates or tax rules are recognised in the income

statement.

Deferred tax assets, including the tax value of tax loss carry-forwards, are

recognised in the balance sheet at the value at which the asset is expected

to be realised, either through a set-off against deferred tax liabilities or as

net assets to be offset against future positive taxable income.

Changes in deferred tax concerning the cost of share-based payments are

generally recognised in the income statement.

Deferred tax in respect of recaptured losses previously deducted in foreign

subsidiaries is recognised on the basis of a specific assessment of the inten-

tion with each individual subsidiary.

Balances calculated according to the rules on interest deductibility limita-

tions in the Danish Corporate Income Tax Act are allocated between the

jointly-taxed companies according to a joint taxation agreement and are

allocated between the companies that are subjected to deductibility limita-

tion in proportion to their share of the total limitation. Deferred tax liabilities

in respect of these balances are recognised in the balance sheet, whereas

deferred tax assets are recognised only if the criteria for recognition of

deferred tax assets are met.

Other provisions

Other provisions consist of different types of provisions, including provisions

for pending lawsuits. Management makes assessments of provisions and

contingent liabilities, including the probable outcome of pending and pos-

sible future lawsuits, which inherently depends on uncertain future events.

When management determines the probable outcome of lawsuits and

similar factors, it relies on assessments made by external advisers who are

familiar with the specific cases and the existing legal practice in the area.

Provisions for restructuring are recognised when a detailed, formal plan for

the restructuring has been made before or on the balance sheet date and

has been announced to the parties involved. In connection with acquisi-

tions, provisions for restructuring costs are only included in the computation

of goodwill if an obligation exists for the entity acquired as of the date of

acquisition.

Treasury shares

Cost and selling prices of treasury shares as well as dividends are recognised

directly in equity under retained earnings.

Minority interests

The proportionate shares of the profits and equity of subsidiaries attribut-

able to minority interests are recognised as a separate item under equity.

On initial recognition, minority interests are recognised as described under

“Business combinations”. The issuance of put options as part of the consi-

deration in business combinations is recognised as described under “Acquisi-

tion and divestment of minority interests”.

Share-based payments

Share-based incentive programmes in which employees may opt to buy

shares in H. Lundbeck A/S, Falck Holding A/S and ALK A/S and in which

shares are allocated to employees (equity schemes) are measured at the eq-

uity instruments' fair value at the date of grant and recognised in the income

statement under staff costs under the respective functions when or as the

employee obtains the right to buy/receive the shares. The balancing item is

recognised directly in equity under other transactions.

Share price-based incentive programmes in which employees have the diffe-

rence between the agreed price and the actual share price settled in cash

(debt schemes) are measured at fair value at the date of grant and recog-

nised in the income statement under staff costs when or as the employee

obtains the right to such difference settlement. The incentive programmes

are subsequently remeasured on each balance sheet date and upon final

settlement, and any changes in the fair value of the programmes are recog-

nised in the income statement under staff costs under the respective func-

tions. The balancing item is recognised under provisions until the time of the

final settlement.

Pension obligations

Periodical payments to defined contribution plans are recognised in the

income statement at the due date and any contributions payable are recog-

nised in the balance sheet under current liabilities.

The present value of the Group's liabilities relating to future pension pay-

ments according to defined benefit plans is measured on an actuarial basis

once a year on the basis of the pensionable period of employment up to the

time of the actuarial valuation. The present value is calculated based on as-

sumptions of the future developments of salary, interest, inflation, mortality

and disability rates and other factors. Present value is computed exclusively

for the benefits to which the employees have earned entitlement through

their employment with the Group. Pension expenses, finance costs and ad-

ministration fees are recognized in the income statement under staff costs.

Actuarial gains and losses are recognized in the statement of comprehensive

income as they are calculated and cannot subsequently be recycled through

profit or loss.

The present value of the liability according to defined benefit plans is

measured less the fair value of the plan assets, and any net obligation is

recognised in the balance sheet under non-current liabilities. Any net asset is

recognised in the balance sheet as a financial asset.

Income tax and deferred tax

Current tax liabilities and receivables are recognised in the balance sheet,

computed as tax calculated on the taxable income for the year, adjusted for

provisional tax paid.

NOTE 1


55


Assets held under operating leases are not recognised in the balance sheet.

Lease liabilities under operating leases are disclosed as contingent liabilities.

Lease payments concerning operating leases are recognised in the income

statement on a straight-line basis over the term of the lease.

Cash flow statement

The consolidated cash flow statement is presented according to the indirect

method and shows the composition of cash flows, divided into operating,

investing and financing activities respectively, and cash and cash equivalents

at the beginning and at the end of the year.

Cash flows from acquisitions and divestments of companies are shown sepa-

rately under cash flows from investing activities. The cash flow statement

includes cash flows from acquired companies from the date of acquisition

and cash flows from divested companies until the time of divestment.

Cash flows from operating activities are calculated as the Group's profit from

operations and special items, adjusted for non-cash operating items, working

capital changes, financial receipts and payments and income taxes paid.

Cash flows from investing activities include payments in connection with

purchases and sales of intangible assets, property, plant and equipment and

financial assets, including equity investments in companies. Also included

are securities classified as current assets. Entering into a finance lease is

considered a non-cash transaction.

Cash flows from financing activities include payments to and from share-

holders and related expenses as well as the raising of and repayments on

loans, mortgage debt and other long-term debt and cash flows from divi-

dends and minorities.

Cash comprises cash less current bank debt falling due on demand.

Cash flows denominated in foreign currencies, including cash flows in foreign

subsidiaries, are translated at the average exchange rates during the year

because they approximate the actual exchange rates at the date of payment.

Cash at year-end is translated at the exchange rates at the balance sheet

date, and the effect of exchange rate adjustments on cash is shown as a

separate item in the cash flow statement.

Key figures

Key figures are calculated according to Recommendations and Financial

Ratios 2010 issued by the Danish Society of Financial Analysts.

Operating profit: Defined as the Group's profit before

special items, financial items and tax

Operating profit margin: Operating profit x 100 / Revenue

Return on equity: Lundbeck Foundation's share of profit x 100 /

Lundbeck Foundation's share of average equity

Provisions are made for onerous contracts when the anticipated benefits to

the Group from a contract are outweighed by the unavoidable costs under

the contract.

When the Group is under an obligation to dismantle an asset or re-establish

the site where the asset has been used, a provision is made corresponding to

the present value of the expected future costs. The provision is determined

based on current orders and estimated future costs, discounted to their

present value. The discount factor used reflects the general level of interest

rates. The present value of the costs is recognised in the cost of the item of

property, plant and equipment in question and depreciated with these as-

sets. The increase of the present value over time is recognised in the income

statement under financial expenses.

Other provisions are recognised when the Group has a legal or constructive

obligation that arises from past events and it is probable that an outflow of

financial resources will be required to settle the obligation.

Other provisions are measured as the best estimate of the costs required to

settle the liabilities at the balance sheet date.

Return obligations imposed on the industry are recognised in the balance

sheet under other provisions.

Debt

Mortgage debt and debt to credit institutions are recognised at the time of

the raising of the loan at proceeds received less transaction costs paid. In

subsequent periods, the financial liabilities are measured at amortised cost,

equivalent to the capitalised value when the effective rate of interest is used,

so that the difference between the proceeds and the nominal value is recog-

nised in the income statement over the loan period.

Residual lease commitments from finance leases are recognised at amor-

tised cost.

Repo debt relates to bonds included in repo transactions. Debt is recognised

at amortised cost, and accumulated repo interest has been accrued.

Potential rights to offsetting financial assets and financial liabilities for repo

transactions does not qualify for offsetting for accounting purposes and

therefore repo transactions is recognised and presented gross.

Debt included in the short-term financial liquidity is also measured at amor-

tised cost in subsequent periods.

Other payables, which include trade payables and debt to public authorities

etc. are measured at amortised cost.

Leases

For accounting purposes, lease obligations are divided into finance and

operating leases. Leases are classified as finance leases when substantially

all risks and rewards of ownership of the leased asset are transferred. Other

leases are classified as operating leases.

The accounting treatment of assets held under finance lease and the related

liability is described in the sections on property, plant and equipment and

financial liabilities, respectively.

NOTE 1


56


2. REVENUE

2013 2012 DKKm DKKm Europe 19,993 19,369 USA 4,863 4,328 Rest of the world 5,236 4,978 Total 30,092 28,675 Brain diseases (H. Lundbeck Group) 15,258 14,802 Allergy treatment (ALK Group) 2,246 2,345 Emergency, assistance, healthcare and training (Falck Group) 12,588 11,528 Total 30,092 28,675 Revenue includes: Downpayments and milestone payments 1,148 435 Service income research collaborations 60 87 Royalty 96 347 Income from sale of ownership interest in Proximagen Group plc. - 115 Revenue Denmark 5,914 5,655 Other accrued income There is accrued subscription revenue in the amount of DKK 1,191 million in 2013 (DKK 1,121 million in 2012) and other accrued income in 2013 of DKK 345 million (DKK 326 million in 2012).

3. STAFF COSTS

2013 2012 DKKm DKKm Short-term staff benefits 10,410 10,289 Share-based payment 69 73 Pension benefits 598 594 Other social security costs 1,087 1,107 Total 12,164 12,063 The year's staff costs are specified as follows: Cost of sales 6,504 6,050 Research and development costs 1,235 1,256 Sales and distribution costs 2,328 2,869 Administrative expenses 2,097 1,888 Total 12,164 12,063 Total remuneration in the Group for the Executive Management of the Foundation amounts to 8 5 Total remuneration in the Group for the Board of Directors of the Foundation amounts to 7 7

NOTES 2 - 3


57


2013 2012 DKKm DKKmRemuneration of the Executive Management and the Board of Directors is specified as follows: Executive Management: Christian Dyvig 8.0 4.5 Board of Directors: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S from 2 May 2012, Chairman of the Investment Committee 0.8 0.7 Mikael Rørth, Vice-chairman of the Foundation and Lundbeckfond Invest A/S, Chairman of the Biomedical Sciences Committee and member of the Investment Committee 0.8 0.9 Steffen Kragh, member of the Investment Committee, from 23 May 2013 0.2 - Thorleif Krarup, member of the Investment Committee, Chairman of the Science Teaching and Communication Committee, Vice-chairman of Falck A/S, board member of H. Lundbeck A/S and ALK-Abelló A/S 2.0 2.1 Povl Krogsgaard-Larsen, member of the Investment, Biomedical Sciences and Natural Sciences Committees 0.5 0.5 Gunhild Waldemar, member of the Biomedical Sciences Committee 0.4 0.4 Kim Klitgaard, employee representative from H. Lundbeck A/S 0.2 0.2 Ken Liljegren, employee representative from H. Lundbeck A/S 0.2 0.2 Peter Adler Würtzen, employee representative from ALK-Abelló A/S 0.2 0.2 Jes Østergaard, Chairman of the Natural Sciences Committee and member of the Investment Committee, board member of H. Lundbeck A/S and ALK-Abelló A/S, stepped down on 23 May 2013 1.4 1.8 Total 6.7 7.0 Average number of full-time employees during the year 29,798 28,053 Number of employees at year-end 39,314 35,421 Incentive programmes The Executive Management of the Foundation is not offered incentive programmes. An incentive programme has been launched for employees of Lund-beckfond Invest and Lundbeckfond Ventures which is similar to standard incentive programmes for investment management and venture industry. The purpose of the incentive programme is for Lundbeckfond Invest and Lundbeckfond Ventures to be able to attract and retain skilled and qualified labour. In order to attract, retain and motivate key employees and align their interests with those of the shareholders, the Group has established a number of incentive programmes in the H. Lundbeck, ALK and Falck groups. The Group uses short-term incentive programmes that provide an annual bonus for the achievement of pre-determined targets of the financial year as well as long term equity-based and debt-based schemes. Equity-based schemes Equity-based schemes are used both in H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S. For the schemes in H. Lundbeck A/S, each warrant entitles the holder to buy one share of DKK 5 nominal value in the company. The Executive Manage-ment has been granted share schemes. Exercise of the warrants and the share schemes is subject to the relevant employees continuing employment at the date of exercise. Exercise of warrants and share schemes granted to the Executive Management is also subject H. Lundbeck achieving its financial targets. For the schemes in ALK-Abelló A/S, each warrant entitles the holder to buy one B share of DKK 10 nominal value in the company. The right to exercise the warrants is subject to the holder of the option not having resigned at the time of exercise. No other vesting conditions apply. The options can be exer-cised only during a period of four weeks after the publication of annual or interim financial statements. Share options are considered sufficiently covered by treasury shares. The ALK Group has established conditional shares plans for the Board of Management and a number of key employees as a part of a retention programme. Conditional shares will be available three years after the date of grant, provided that ALK achieves the targets for vesting. For the scheme in Falck Holding A/S, each warrant entitles the holder to buy one share of DKK 1 nominal value in the company. The warrants issued were acquired at market value, and no conditions were attached. Consideration for the issued warrants has been paid in the form of a non-cash contribution of a corresponding number of warrants in Falck A/S, which have subsequently been cancelled. Debt-based schemes H. Lundbeck A/S has granted Stock Appreciation Rights (SARs) and Restricted Cash Units (RCUs) to a few employees of US subsidiaries. SAR is a share price-based scheme with conditions and award criteria similar to those of the warrant schemes. RCU is a share price-based scheme with conditions and award criteria similar to those of the share schemes. Neither of the two schemes can be converted into shares, but the value of the scheme is distributed as a cash amount.

NOTE 3

3. STAFF COSTS, CONTINUED


58


The tables below shows the conditions for the active equity-based scheme in 2013 and 2012 financial year: Number of warrants/ Exercise Exercise shares Vesting date period begins period ends granted Exercise priceH. Lundbeck A/S - equity-based schemes 2008, warrants 6/5 2011 6/5 2011 5/5 2016 405,234 115.00 2009, warrants 16/3 2012 16/3 2012 15/3 2017 534,058 102.00 2010, warrants 16/3 2013 16/3 2013 15/3 2018 790,950 97.00 2011, warrants 31/3 2014 1/4 2014 31/3 2019 849,085 121.00 2012, warrants (3 years) 1) 31/3 2015 1/4 2015 31/12 2018 155,750 113.00 2012, warrants (4 years) 1) 31/3 2016 1/4 2016 31/12 2018 233,629 113.00 2012, warrants (5 years) 1) 31/3 2017 1/4 2017 31/12 2018 389,380 113.00 2012, warrants 31/3 2015 1/4 2015 31/3 2020 692,003 113.00 2009, share scheme 16/3 2012 92,627 2010, share scheme 16/3 2013 102,689 2011, share scheme 31/3-30/6 2014 539,962 2012, share scheme 31/3 2015 245,681 2013, share scheme 31/5 2016 540,562

1) As from 2012, the exercise price of DKK 113.00 is revalued by 4.00% per year adjusted for the dividend payout ratio. The fair value at the time of grants of 2013 share scheme was DKK 110.70 pr. share.

ALK-Abelló A/S - equity-based schemes 2007, share options 1/11 2010 1/11 2010 1/11 2014 29,000 799.00 2008, share options 1/11 2011 1/11 2011 1/11 2015 47,600 544.00 2009, share options 1/11 2012 1/11 2012 1/11 2016 58,300 492.00 2010, share options 1/11 2013 1/11 2013 1/11 2017 174,000 356.00 2011, share options 1/11 2014 1/11 2014 1/11 2018 220,000 342.00 2012, share options 1/5 2015 1/5 2015 1/5 2019 101,000 435.00 2013, share options 1/3 2016 1/3 2016 1/3 2020 87,975 464.00 2012, share scheme 1/5 2015 15,300 2013, share scheme 1/3 2016 14,600 The exercise price for ALK-Abelló A/S’ schemes equals the average of the market price during the last five business days prior to the date of grant. The exercise price is increased by 2.5% p.a. and reduced by dividends paid. Conditional share under the share scheme have been granted at DKK 420 pr. share (DKK 399 in 2012). Fair value at the time of grants in 2013 was DKK 69 pr. share. ALK’s share options exercised in 2013 were to be settled by cash settlement. A total of 77,000 share options were exercised and a total payment amounted to DKK 14 millions (DKK 0 in 2012). Number of

warrants/ Acquisition Exercise Exercise shares date period begins period ends granted Exercise priceFalck Holding A/S - equity-based schemes2011, warrants 13/7 2011 30/12 2015 30/12 2015 4,443,120 125.00

Outstanding at Exercised/ Expired/ Outstanding at 1 January Additions settled cancelled 31 December

Outstanding warrants and share schemes 2013 H. Lundbeck A/S, warrants 2,365,476 - -60,525 -61,043 2,243,908 ALK-Abelló A/S, share options 588,475 89,000 -77,700 -35,300 564,475 Falck Holding A/S, warrants 4,443,120 - - - 4,443,120 Total 2013 7,397,071 89,000 -138,225 -96,343 7,251,503 Average exercise price for options, DKK 145.88 464.00 273.82 749.49 142.12

NOTE 3

3. STAFF COSTS – CONTINUED


59


Outstanding at Exercised/ Expired/ Outstanding at 1 January Additions settled cancelled 31 December

Outstanding warrants and share schemes 2012 H. Lundbeck A/S, warrants 2,127,701 1,470,762 -593 -1,232,394 2,365,476 ALK-Abelló A/S, share options 588,350 101,000 - -100,875 588,475 Falck Holding A/S, warrants 4,443,120 - - - 4,443,120 Total 2012 7,159,171 1,571,762 -593 -1,333,269 7,397,071 Average exercise price for options/warrants DKK 149.45 134.01 102.00 147.73 145.88

Debt-based schemes The debt-based schemes consist of Stock Appreciation Rights and Restricted Cash Units awarded during the years 2008-2013.

In June 2013, a few employees of US subsidiaries were granted Restricted Cash Units (RCUs), a share price-based scheme with conditions and award criteria similar to those of the share scheme granted in June 2013 to a number of key employees of the parent company and its non-US subsidiaries. The al-located RCUs, a total of 19,003, will vest on 31 May 2016 subject to continuing employment with Lundbeck and Lundbeck achieving its financial targets, after which time they are settled. The size of the amount depends on the value of the Lundbeck share at the vesting date. The fair value per RCU at the time of grant was calculated at DKK 110.70.

The share price-based scheme for employees of the Lundbeck Group’s US subsidiaries cannot be converted into shares because the value of the scheme is distributed as a cash amount.

The SARs allocated in 2010 vested in 2013. The RCUs allocated in 2010 vested in 2013, after which time the scheme was settled. Liability and expense recognised in the income statement The warrants and shares granted are recognised in the income statement for 2013 at an expense corresponding to the fair value at the time of grant calcu-lated according to the Black-Scholes method for the vesting period that concerns 2013. The SARs granted are recognised in the income statement for 2013 at an expense corresponding to the value adjustment for the year based on the Black-Scholes method, and the RCUs granted are recognised in the income statement for 2013 at an expense corresponding to the value adjustment for the year based on the performance of the Lundbeck share.

2013 2012 DKKm DKKm Recognised expenses concerning equity-based schemes 62 71Recognised expenses concerning debt-based schemes 8 2 Total recognised expenses 70 73

At 31 December 2013, the total liability in respect of debt-based schemes amounted to DKK 11 million (DKK 3 million in 2012). The liability covers all debt-based schemes in force at 31 December 2013.

4. DEPRECIATION, AMORTISATION AND IMPAIRMENT 2013 2012 DKKm DKKmDepreciation, amortisation and impairment are specified as follows: Cost of sales 1,370 940 Research and development costs 204 225 Sales and distribution costs 63 61 Administrative expenses 145 136 Special items 505 515 Total 2,287 1,877

NOTES 3 - 4

3. STAFF COSTS – CONTINUED


60


An impairment loss on the Sycrests ® product rights totalling DKK 210 million was recognised in cost of sales. Furthermore an impairment loss on patent rights totalling DKK 38 million is recognised in research and development costs. The recoverable amounts were calculated on the basis of management’s re-assessed estimate of the value in use of the assets. In 2012 an impairment loss on other product rights totalling DKK 15 million is recognised in research and development costs. An impairment loss on patent rights totalling DKK 8 million is recognised in research and development costs. The recoverable amounts were calculated on the basis of manage-ment’s re-assessed estimate of the value in use of the assets. Losses and gains on the sale of intangible assets and property, plant and equipment were recognised at a net gain of DKK 14 million (DKK 142 million in 2012).

5. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING

Deloitte KPMG 2013 2012 2013 2012 DKKm DKKm DKKm DKKmAdministrative expenses include fees to the company’s auditors appointed by the general meeting in the amount of: Statutory audit 18 17 - - Other assurance engagements - - - - Tax advisory services 3 3 - 2 Other services 29 8 - 1 Total 50 28 - 3

Other services in 2013 include one-off advisory services provided by Deloitte which have been evaluated as not impairing the independence of the external audit services provided. A few small foreign subsidiaries are not audited by the parent company’s auditors, a foreign business partner of the auditors, or by a recognised, interna-tional auditing firm. The Falck Group was audited by KPMG in 2011 and fees covers the period up to the annual general meeting of 26 April 2012. 6. SPECIAL ITEMS

2013 2012 DKKm DKKm Fine from European Commission -699 - Reversal of provision concerning divestment of Chr. Hansen in 2005. In connection with the divestment, the Group assumed the usual representations and warranties towards the buyer in the amount of DKK 140 million and other recognised specific debt obligations of DKK 15 million. On expiry of the warranty period at the end of July 2012, the obligations were no longer considered to be in force - 155 Amortisation of contractual customer relationships, Falck Group -505 -515 Transaction costs associated with acquisitions, Falck Group -45 -36 Special items -1,249 -396

NOTES 4 - 5 - 6

4. DEPRECIATION, AMORTISATION AND IMPAIRMENT – CONTINUED


61


7. NET FINANCIAL ITEMS

2013 2012 DKKm DKKmFinancial items, Lundbeckfond Invest, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost 4 10 Gains on financial instruments at fair value through profit or loss 1,997 1,467 Gains on financial instruments included in the trading portfolio 46 13 Exchange gains 6 26 Total financial income 2,053 1,516 Financial expenses Other financial expenses 2 2 Losses on financial instruments at fair value through profit or loss 609 92 Losses on financial instruments included in the trading portfolio 205 131 Exchange losses 31 5 Total financial expenses 847 230 Net financials 1,206 1,286 Financial items, Lundbeckfond Ventures, net, are specified as follows: Financial income Gains on financial instruments at fair value through profit or loss 201 22 Total financial income 201 22 Financial expenses Losses on financial instruments at fair value through profit or loss 20 100 Total financial expenses 20 100 Net financials 181 -78 Financial items, subsidiaries, net, are specified as follows: Financial income Interest on financial assets measured at amortised cost 23 31 Gains on financial assets at fair value through profit or loss 3 16 Gains on available-for-sale financial assets, incl. dividends 20 - Gains on financial instruments included in the trading portfolio - 4 Exchange gains 133 94 Realised exchange gains concerning additions to net investments in foreign subsidiaries (transferred from comprehensive income) 8 40 Other financial income 8 6 Total financial income 195 191 Financial expenses Interest on financial liabilities measured at amortised cost 362 375 Other financial expenses 33 41 Losses on financial instruments at fair value through profit or loss 1 7 Losses on financial instruments included in the trading portfolio - 4 Interest component, discounted liabilities 5 4 Exchange losses 235 141 Total financial expenses 636 572 Net financials -441 -381

NOTE 7


62


At 31 December 2013, the Group recorded a net result on available-for-sale financial assets of DKK 20 million (net of DKK 0 million in 2012). The net gain on financial instruments measured at fair value through profit or loss amounted to DKK 1,568 million at 31 December 2013 (net gain of DKK 1,290 million in 2012). The net loss on financial instruments included in the trading portfolio amounted to DKK 159 million (net loss of DKK 118 million in 2012), and the net exchange gain, including realised net exchange loss transferred from other comprehensive income, amounted to net loss of DKK 119 million in 2013 (net gain of DKK 14 million in 2012).

8. TAX ON PROFIT FOR THE YEAR

2013 2012 DKKm DKKm Current tax 921 598 Prior-year adjustment, current tax -93 -15 Prior-year adjustment, deferred tax 12 56 Change of deferred tax for the year -23 -47 Change of deferred tax as a result of changed income tax rates -177 - Total tax for the year 640 592 Tax for the year is composed of: Tax on profit for the year 707 627 Tax on other comprehensive income -67 -35 Total tax for the year 640 592 Tax on other comprehensive income is specified as follows: Currency translation concerning additions to net investments in foreign subsidiaries -84 2 Realised exchange gains/losses, additions to net investments in foreign subsidiaries (transferred to profit and loss) -2 -10 Adjustment, deferred exchange gains/losses, hedging 36 -19 Exchange gains/losses, hedging (transferred to the hedged items) - income statement -29 36 Exchange gains/losses, hedging (transferred to the hedged items) - balance sheet -1 - Value adjustment of interest hedging instruments 13 -8 Fair value adjustment of available-for-sale financial assets -4 -2 Tax on actuarial adjustments relating to pension obligations 4 -34 Tax on other comprehensive income -67 -35 Explanation of the Group’s effective tax rate relative to the Danish tax rate 2013 DKKm % Profit before tax 3,162 Calculated tax, 25% 790 25.0 Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 25% 104 3.3 Non-deductible expenses/non-taxable income and other permanent differences 154 4.9 Fine from the European Commission 175 5.5 Research and development activities (tax credits) 22 0.7 Prior-year tax adjustments etc., total effect on operations -44 -1.4 Non-deductible losses/non-taxable gains on shares and other equity investments -84 -2.7 Unrecognised timing differences on securities recognised at fair value through profit or loss -9 -0.3 Deduction for grants -233 -7.4 Other taxes and other adjustments 9 0.3 Change of deferred tax as a result of changed income tax rates -177 -5.5 Effective tax for the year 707 22.4

NOTES 7 - 8

7. NET FINANCIAL ITEMS - CONTINUED


63


Explanation of the Group’s effective tax rate relative to the Danish tax rate 2012 DKKm % Profit before tax 3,273 Calculated tax, 25% 818 25.0 Tax effect of: Differences in the tax rates of foreign subsidiaries from the Danish tax rate of 25% -15 -0.5 Non-deductible expenses/non-taxable income and other permanent differences 97 3.0 Research and development activities (tax credits) -30 -0.9 Prior-year tax adjustments etc., total effect on operations 38 1.2 Non-deductible losses/non-taxable gains on shares and other equity investments 19 0.6 Unrecognised timing differences on securities recognised at fair value through profit or loss 1 0.0 Deduction for grants -307 -9.4 Other taxes and other adjustments 6 0.2 Effective tax for the year 627 19.2

9. GRANTS FOR THE YEAR

2013 2012 DKKm DKKm Biomedical science projects 128 175 Natural science projects 20 25 Teaching and communicating science 12 23 Regular grants 160 223 Lundbeck Foundation Professor 25 - Lundbeck Foundation Fellowships 70 80 Grete Lundbeck European Brain Research Foundation 15 15 Talent teaching prizes 1 1 Travel grants for conferences and similar activities 2 4 Research abroad 9 18 Visiting professorships 2 3 Other 2 2 Personal grants 126 123 DanFunD 12 - CINS II 30 - BBB-Project 40 - EMBL - 60 RESCueH - 44 MEPRICA - 16 Strategic grants 82 120 Grants for the year, gross 368 466 Descendants - - Reversed grants/repayments -17 -6 Grants for the year, net 351 460 Emerge activities 8 16 Grants authorised during the year, including Emerge activities, gross 376 482

NOTES 8 - 9

8. TAX ON PROFIT FOR THE YEAR - CONTINUED


64


10. INTANGIBLE ASSETS

Contractual customer Patent and Other relations Product and intangible Ongoing Goodwill etc. rights license rights assets projects Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm

Cost at 1 January 2013 10,178 3,400 6,860 703 1,714 48 22,903 Currency translation -328 -64 -125 -3 -18 - -538 Reclassification / transfers - - - 13 16 -28 1 Addition on acquisitions 579 171 - 10 - - 760 Adjustment of put options and contingent consideration 17 - - - - - 17 Additions - - 1,121 11 181 65 1,378 Disposals - - - - -36 -1 -37 Adjustment, acquisitions in 2012 9 - - - - - 9 Cost at 31 December 2013 10,455 3,507 7,856 734 1,857 84 24,493 Amortisation and impairment at 1 January 2013 -20 -766 -1,898 -531 -1,284 - -4,499 Currency translation - 25 60 - 5 - 90 Amortisation - -505 -620 -23 -144 - -1,292 Impairment - - -210 -38 - - -248 Amortisation and impairment on disposals - - - - 32 - 32 Amortisation and impairment at 31 December 2013 -20 -1,246 -2,668 -592 -1,391 - -5,917 Carrying amount at 31 December 2013 10,435 2,261 5,188 142 466 84 18,576 Carrying amount at 31 December 2012 10,158 2,634 4,962 172 430 48 18,404

Goodwill impairment test The management of H. Lundbeck A/S, Falck Holding A/S and ALK-Abelló A/S have tested intangible assets for impairment. Based on the impairment tests performed in 2013, it was concluded that there is no need for writing down the goodwill. Methodology In the impairment test, the discounted expected future cash flows (value in use) pursuant to the most recent management-approved budgets for each CGU are compared to the carrying amounts of goodwill and other net assets. The future cash flows are based on specific business plans for the next 1-7 years with due consideration to patent expiry. The key parameters in the calculation of the value in use are revenue, earnings, working capital, discount factor and the preconditions for the terminal period. Negative growth is projected in the H. Lundbeck Group in the terminal period due to patent expiry, and positive growth of 2.5-3.5% (2.5-3.5% in 2012) is projected for the Falck Group and 2% (2% in 2012) for the ALK Group. The calculation of the value in use for the H. Lundbeck Group is based on a discount rate of 11.8% (11.6% in 2012). Lundbeck Inc. is now considered fully integrated from a CGU viewpoint. In 2012 a discount rate of 13.6% was used for Lundbeck Inc. For the Falck Group, a discount rate of 10% (10% in 2012) has been used for emergency, assistance and healthcare activities, while a discount rate of 11% (11% in 2012) was used for training services. For the ALK Group, a discount factor of 12% was used (12% in 2012). The discount rate is before tax, and the result of [WACC/(1 – tax rate)] and the ap-plied cash flows are also pre-tax figures. Product rights Of product rights, DKK 2,632 million (DKK 2,539 million in 2012) are products not yet commercialised.

NOTE 10


65


Contractual customer Patent and Other relations Product and intangible Ongoing Goodwill etc. rights license rights assets projects Total DKKm DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2012 9,753 3,254 5,582 687 1,545 64 20,885 Currency translation -3 16 -17 1 8 - 5 Reclassification / transfers - - - - 54 -55 -1 Addition on acquisitions 391 114 - - - - 505 Adjustment of put options and contingent consideration 33 - - - - - 33 Additions - - 1,295 15 135 39 1,484 Disposals - - - - -28 - -28 Adjustment, acquisitions in 2011 4 16 - - - - 20 Cost at 31 December 2012 10,178 3,400 6,860 703 1,714 48 22,903 Amortisation and impairment at 1 January 2012 -20 -249 -1,312 -495 -1,159 - -3,235 Currency translation - -2 8 - -2 - 4 Reclassification - - - - 1 - 1 Amortisation - -515 -579 -28 -146 - -1,268 Impairment - - -15 -8 - - -23 Amortisation and impairment on disposals - - - - 22 - 22 Amortisation and impairment at 31 December 2012 -20 -766 -1,898 -531 -1,284 - -4,499 Carrying amount at 31 December 2012 10,158 2,634 4,962 172 430 48 18,404 Carrying amount at 31 December 2011 9,733 3,005 4,270 192 386 64 17,650

11. PROPERTY, PLANT AND EQUIPMENT

Other fixtures Prepayments and fittings, and assets Land and Plant and tools and Leasehold under buildings machinery equipment improvements construction Total DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2013 5,511 1,937 2,329 75 664 10,516 Currency translation -45 -6 -127 -5 -6 -189 Reclassification / transfers 63 105 132 - -301 -1 Addition on acquisitions - - 119 2 - 121 Additions 177 75 361 16 376 1,005 Disposals -35 -31 -318 - -1 -385 Cost at 31 December 2013 5,671 2,080 2,496 88 732 11,067 Depreciation and impairment at 1 January 2013 -2,229 -1,242 -1,116 -17 - -4,604 Currency translation 22 5 90 3 - 120 Reclassification / transfers 18 - -18 - - - Depreciation -205 -134 -389 -13 - -741 Depreciation and impairment on disposals 23 28 260 - - 311 Depreciation and impairment at 31 December 2013 -2,371 -1,343 -1,173 -27 - -4,914 Carrying amount at 31 December 2013 3,300 737 1,323 61 732 6,153 Carrying amount at 31 December 2012 3,282 695 1,213 58 664 5,912 In the carrying amount at 31 December 2013, financial leasing is included in the amount of 140 55 195 Carrying amount of property, plant and equipment provided as loan collateral 2,330 31 2,361

NOTES 10 - 11

10. INTANGIBLE ASSETS – CONTINUED


66


Other fixtures Prepayments and fittings, and assets Land and Plant and tools and Leasehold under buildings machinery equipment improvements construction Total DKKm DKKm DKKm DKKm DKKm DKKm Cost at 1 January 2012 5,219 2,158 2,076 62 788 10,303 Currency translation -9 - 14 4 -1 8 Reclassification / transfers 274 192 62 - -531 -3 Addition on acquisitions 14 - 46 - - 60 Additions 61 59 405 9 408 942 Disposals -48 -472 -274 - - -794 Cost at 31 December 2012 5,511 1,937 2,329 75 664 10,516 Depreciation and impairment at 1 January 2012 -2,039 -1,577 -982 -4 - -4,602 Currency translation 5 - -3 - - 2 Reclassification - - -1 - - -1 Depreciation -211 -127 -356 -13 - -707 Impairment for the year -4 -1 - - - -5 Depreciation and impairment on disposals 20 463 226 - - 709 Depreciation and impairment at 31 December 2012 -2,229 -1,242 -1,116 -17 - -4,604 Carrying amount at 31 December 2012 3,282 695 1,213 58 664 5,912 Carrying amount at 31 December 2011 3,180 581 1,094 58 788 5,701 In the carrying amount at 31 December 2012, financial leasing is included in the amount of 148 24 172 Carrying amount of property, plant and equipment provided as loan collateral 2,312 44 2,356

12. FINANCIAL ASSETS AND FINANCIAL RISKS

The Group’s financial investments classified as financial assets at fair value through profit or loss primarily relate to Lundbeckfond Invest’s investments. These investments are made on the basis of an investment policy approved by the Board of Directors. The strategy aims for an appropriate diversification of investments on different asset classes and geographical markets in order to achieve an appropriate diversification of interest rate, exchange rate, credit and equity risks on the financial investments. The purpose is to reduce the risk of losses but also to retain the prospect of gaining a long-term return on the investments. Credit risks Credit risks concerning the Group’s financial investments primarily relate to investment in bonds and other unlisted funds investing in loans to businesses. In order to limit the credit risk, a large proportion of this asset class has been invested in Danish government and mortgage bonds with a high credit rating. To achieve a higher return, the Group also invests in corporate bonds. Equity risks Equity risks concerns the Group’s holding of listed and unlisted shares, including private equity funds as part of the Group’s investment operations. Most of these investments are placed in listed shares. To limit the risk of losses on these shares, they are diversified on different geographical regions and sectors in accordance with the applicable investment policy. Derivative financial instruments are used to manage the equity risk.

NOTES 11 - 12

11. PROPERTY, PLANT AND EQUIPMENT – CONTINUED


67


Other things being equal, a 10% decrease/increase in equity prices would reduce/increase profits by DKK 582 million and DKK 384 million respectively (reduce by DKK 541 million and increase by DKK 477 million in 2012). For further information on risks concerning the Group’s financial investments, see note 17: Cash resources and note 27: Financial risks and financial instru-ments.

Financial Financial assets assets at fair value Financial at fair value through profit assets Other financial assets through profit or loss, at fair value Other or loss, Lundbeckfond through profit Available-for- Receivables financial Lundbeckfond Ventures and or loss, sale financial Other from assets, Invest Emerge total assets receivables associates total DKKm DKKm DKKm DKKm DKKm DKKm DKKm

Carrying amount at 1 January 2013 10,852 519 11,371 138 56 - 194 Reclassification to securities, current assets, 1 January 2013 72 - 72 - - - - Carrying amount at 1 January 2013, adjusted 10,924 519 11,443 138 56 - 194 Reclassification - -15 -15 - - - - Additions 5,651 109 5,760 11 39 52 102 Disposals -5,599 -67 -5,666 -42 -4 - -46 Value adjustments, year-end 954 182 1,136 -15 -3 - -18 Reclassification to securities, current assets -116 - -116 - - - - Carrying amount at 31 December 2013 11,814 728 12,542 92 88 52 232 Carrying amount at 1 January 2012 9,655 267 9,922 119 57 - 176 Reclassification to securities, current assets, 1 January 2012 -138 - -138 - - - - Carrying amount at 1 January 2012, adjusted 9,517 267 9,784 119 57 - 176 Additions 7,883 330 8,213 68 17 - 85 Disposals -7,412 - -7,412 -172 -17 - -189 Value adjustments, year-end 870 -78 792 123 -1 - 122 Reclassification to securities, current assets 66 - 66 - - - - Carrying amount at 31 December 2012 10,924 519 11,443 138 56 - 194

Fair value hierarchy for financial assets and financial liabilities, measured at fair value Level 1 includes financial assets for which the fair value is measured on the basis of quoted prices (unadjusted) in active markets for identical assets. Level 2 includes financial assets and financial liabilities for which the fair value is measured on the basis of directly or indirectly observable inputs other than the quoted prices included in level 1. Level 3 includes financial assets for which the fair value is measured on the basis of valuation methods which include inputs not based on observable market data. The requirement for reclassifications between the levels are evaluated continually during the year. For the individual financial assets and liabilities it is evaluated whether the most critical input variable in connection with determination of fair value have changed from unobservable to observable or the other way around. If this is the case the asset or liability is reclassified from the recent relevant level to new level from the time where the change in input variable occur.

NOTE 12

12. FINANCIAL ASSETS AND FINANCIAL RISKS – CONTINUED


68


Financial assets and liabilities measured at fair value Level 1 Level 2 Level 331 December 2013 DKKm DKKm DKKmFinancial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds 3,634 - - Credit bonds 2,234 61 25 Listed equities 5,979 - - Property companies 190 - 173 Lundbeckfond Ventures and Emerge 377 - 352 Private equity funds 152 - 579 Other unlisted funds 23 68 183 Available-for-sale financial assets 58 - 34 Derivative financial instruments - 150 - Financial assets at fair value 12,647 279 1,346 Financial liabilities Derivative financial instruments - 225 - Financial liabilities at fair value - 225 - Applied valuation methods for the determination of fair value of the majority of the separate categories above are as follows: Sensitivity in fair value in case of Valuation method used Used unobservable inputs changes in unobservable inputs Danish mortgage and Closing prices according N/A N/Agovernment bonds to exchange markets Credit bonds Closing prices according N/A N/A to exchange markets Listed equities Closing prices according N/A N/A to exchange markets Property companies Closing prices according Required rates on return 5.25% If required rate of return is reduced by to exchange markets 0.25pp the fair value will be reduced by DKK 21 million. Lundbeckfond Ventures Closing prices according Capital injections made at N/Aog Emerge to exchange markets and price different prices of recent transactions less write downs for level 3 Private equity funds Closing prices according Multiples If closing prices accordning to to exchange markets and market exchange markets for a peer group multiples for a peer group, reduced increase by 1% the fair value will be by an estimated factor for trading increased by DKK 6 million in an unlisted market Other unlisted funds At cost less write-downs N/A N/A Derivative financial instruments Fair value of interest rate swaps is N/A N/A calculated as the present value of estimated future cash flows based on observable yield curves, fair value of foreign exchange contracts is determined using forward exchange rate at the balance sheet date and fair value of share options is based on closing prices accordning to exchange markets

NOTE 12



69


Financial assets and liabilities measured at fair value Level 1 Level 2 Level 331 December 2012 DKKm DKKm DKKmFinancial assets Financial assets at fair value through profit or loss Danish mortgage and government bonds 3,880 - - Credit bonds 2,198 74 - Listed equities 4,813 - - Property companies 320 - 162 Lundbeckfond Ventures and Emerge 222 - 297 Private equity funds 63 27 757 Other unlisted funds 22 108 169 Available-for-sale financial assets 108 - 30 Derivative financial instruments - 37 - Financial assets at fair value 11,626 246 1,415 Financial liabilities Derivative financial instruments - 274 - Financial liabilities at fair value - 274 - 2013 2012 DKKm DKKmFinancial assets measured at fair value according to level 3 Carrying amount at 1 January 1,415 1,172 Additions 242 457 Disposals -284 -173 Reclassification, from level 3 -104 -71 Fair value adjustment 77 30 Carrying amount at 31 December 1,346 1,415

13. INVESTMENTS IN ASSOCIATES

2013 2012 DKKm DKKm Cost at 1 January 18 16 Exchange rate adjustments 3 - Additions through acquisitions 68 2 Disposal and reclassification -2 - Cost at 31 December 87 18 Value adjustments and impairment at 1 January -1 -1 Share of profit for the year after tax - - Accumulated value adjustments and impairment at 31 December -1 -1 Carrying amount at 31 December 86 17 Please see the Group overview for information about registered office and ownership interests in associates.

NOTES 12 - 13



70


2013 / 31 2012 / 31 December 2013 December 2012 DKKm DKKmSummarised financial data for associates Revenue 215 57 Profit for the year 2 3 Total assets 527 350 Total provisions 439 349

14. DEFERRED TAX

Temporary differences between the carrying amount and the tax base

Adjustment of Addition on Movements Balance at Currency deferred tax acqusition of during Balance at 1 January translation at 1 January activities the year 31 December DKKm DKKm DKKm DKKm DKKm DKKm 2013 Non-current assets 7,912 -55 -35 220 337 8,379 Current assets -400 41 6 - -35 -388 Other -421 65 -78 - -603 -1,037 Provisions in subsidiaries 300 -1 5 - -411 -107 Tax loss carry-forwards etc. -1,022 20 266 - -135 -871 Total 6,369 70 164 220 -847 5,976 Deferred (tax assets)/tax liabilities 1,619 77 17 55 -338 1,430 Research and development activities (tax credits) -177 9 -5 - 74 -99 Deferred (tax assets)/tax liabilities 1,442 86 12 55 -264 1,331 2012 Non-current assets 7,264 -19 72 116 479 7,912 Current assets -429 8 18 - 3 -400 Other -165 18 -43 - -231 -421 Provisions in subsidiaries -16 - - - 316 300 Tax loss carry-forwards etc. -614 1 30 - -439 -1,022 Total 6,040 8 77 116 128 6,369 Deferred (tax assets)/tax liabilities 1,579 12 39 29 -40 1,619 Research and development activities (tax credits) -191 3 17 - -6 -177 Deferred (tax assets)/tax liabilities 1,388 15 56 29 -46 1,442 2013 2012 DKKm DKKm Deferred tax assets concern the following items: Non-current assets 113 137 Current assets 179 186 Provisions and payables 29 38 Other 490 41 Provisions in subsidiaries 28 222 Tax value of tax loss carry-forwards etc. 302 363 Research and development activities (tax credits) 99 177 Offset within legal tax entities and jurisdictions -690 -588 Total 550 576

NOTES 13 - 14

13. INVESTMENTS IN ASSOCIATES – CONTINUED


71


2013 2012 DKKm DKKm

Deferred tax liabilities concern the following items: Non-current assets 2,189 2,280 Current assets 54 58 Provisions and payables 6 45 Other 322 223 Offset within legal tax entities and jurisdictions -690 -588 Total 1,881 2,018 Net 1,331 1,442 Of the recognised deferred tax assets, DKK 401 million (DKK 541 million in 2012) related to tax losses etc. and research and development activities (tax credits) to be carried forward. Utilisation of these is based on a future positive income that exceeds realisation of the deferred tax liabilities. The recognition of tax losses is based on estimates of the expected earnings and taxable income in the loss-making entities, supported by reports by external analysts, when available. 2013 2012 DKKm DKKmUnrecognised deferred tax assets: Unrecognised deferred tax assets at 1 January 303 323 Currency translation - -1 Prior-year adjustments -22 - Additions 32 11 Utilised -11 -30 Unrecognised deferred tax assets at 31 December 302 303 15. INVENTORIES

2013 2012 DKKm DKKm Raw materials and consumables 280 248 Work in progress 606 503 Manufactured goods and goods for resale 1,426 1,350 Total 2,312 2,101 Indirect costs of production 377 350 Impairment loss for the year 93 40 Inventories calculated at net realisable value 5 4 The total cost of goods sold is included in cost of sales in the amount of 2,705 2,445 16. TRADE RECEIVABLES AND OTHER RECEIVABLES

2013 2012 DKKm DKKm

Trade receivables and other receivables can be specified as follows: Trade receivables 4,444 4,075 Other receivables 753 741 Derivative financial instruments 150 37 Receivables from associates 50 67 Prepayments 412 481 Total 5,809 5,401

NOTES 14 - 15 - 16

14. DEFERRED TAX – CONTINUED


72


2013 2012 DKKm DKKm Trade receivables Receivables 4,772 4,322 Impairment -328 -247 Total 4,444 4,075 Due dates of trade receivables Not due 3,268 3,024 Overdue by more than 1 month and up to 6 months 1,111 943 Overdue by more than 6 month and up to 12 months 26 72 Overdue by more than 12 months 39 36 Total 4,444 4,075 Development in writedowns of trade receivables Writedowns at 1 January 247 105 Actual writedowns -180 -35 Reversed, unrealised writedowns - -8 Change in writedowns 261 185 Writedowns at 31 December 328 247 Specification of other receivables by due date Not due 743 729 Overdue by up to 3 months 8 8 Overdue by more than 12 months 2 4 Total 753 741 As no losses are expected on other receivables, no writedowns have been made. Credit risks The Group’s products are sold primarily to distributors of pharmaceuticals and hospitals and services to public authorities, other large customers and small subscription receivables from individual customers. Historically, the losses sustained on debtors have been insignificant. This was also the case in 2013, when there was an increase in losses incurred. However, the change in writedowns reflects a potentially higher loss. The Group has no particular customer concentration and no significant reliance on specific customers. For the Falck Group, the large customers are to a great extent represented by public authorities. The H. Lundbeck, ALK and Falck groups have all defined internal procedures to be followed in connection with the establishment of new customer rela-tionships and changes to existing relationships. The purpose of these procedures is to ensure that the risk of losses is reduced to the extent possible. Market risks The pharmaceutical market is characterised by the aim of the authorities to reduce or cap healthcare costs. Market changes such as price reductions may have a considerable impact on the earnings potential of pharmaceuticals. In recent years, the subsidiaries have experienced significant price reductions in several countries in Europe, where higher debts and rising unemployment have compelled the governments to identify savings in the public budgets. Furthermore, the earlier market access for generic pharmaceuticals has eroded earnings from the H. Lundbeck Group’s products in certain markets, where H. Lundbeck had expected exclusivity to protect the value of the large invest-ments it had made some years back. The Group expects that the uncertainty about public debt and development in unemployment and the resulting focus on public budgets will continue into 2014 and 2015.

The Group is monitoring development in the European economies and also development in trade receivables in order to reduce the risk of losses to the best possible extent.

NOTE 16

16. TRADE RECEIVABLES AND OTHER RECEIVABLES – CONTINUED


73


17. CASH RESOURCES

2013 2012 DKKm DKKm Fixed-term deposits 3,821 1,708 Other cash resources 2,277 2,269 Cash at 31 December 6,098 3,977 Securities with a maturity of less than 3 months 345 444 Securities with a maturity of more than 3 months 1,143 1,225 Securities at 31 December 1,488 1,669 Cash and securities at 31 December 7,586 5,646 DKK 101 million (DKK 107 million in 2012) of the Group’s cash and securities is held by a Swedish subsidiary comprised by Swedish insurance rules and, by extension, governed by rules on solvency requirements. Furthermore DKK 14 million of the Group’s cash resources has been provided as collateral for hedging instruments. The securities portfolio is classified as financial assets measured at fair value through profit or loss. Liquidity and credit risk and capital structure With the present capital structure, the Group is well-consolidated. The Group aims to retain adequate cash resources to support business development and flexibility in chase of changes to the market situation, potential acquisition activities and product inlicensing opportunities. This is achieved through a combination of liquidity management, ultra-liquid assets and guaranteed and unguaranteed credit facilities. The capital structure is considered appropriate relative to the Group’s strategic plans. The credit risk of cash and derivatives (forward exchange contracts, currency options, interest-rate options and equity options) is limited because the Group deals only with banks with a high credit rating. To further limit the risk of losses, internal limits have been defined for the credit exposure accepted towards the banks with which the Group collaborates, and the Group aims to maintain counterparty diversification to avoid material concentration at individual counterparties. The Group also uses collateral agreements (e.g. ISDA and GRMA) and exchange of collateral with counterparties with which the Group has hedging transactions.

Certain of the Falck Group’s loans, including the debt of Falck Holding A/S, are subject to certain loan covenants, and the Falck Group continuously monitors whether the covenants are observed. All loan covenants were observed in 2013. 18. CAPITAL BASE

The Foundation’s capital base is DKK 2,523 million. The present charter of the Foundation was approved by the Board of Directors on 23 May 2013. The Civil Affairs Agency acts as supervisory authority. Of the Foundation’s profit before tax less non-distributed dividends in the subsidiaries and associates, at least 20% must first be allocated to the capital base. 2013 2012 Note DKKm DKKm Change in the Foundation’s capital base during the period 1 January 2009 - 31 December 2013 The capital base at 1 January 2009 amounted to: 1,750 1,750 2009 Capital base increased by 150 150 2010 Capital base increased by 150 150 2011 Capital base increased by 175 175 2012 Capital base increased by 45 45 2013 Capital base increased by 253 - Capital base at 31 December 2013 2,523 2,270

Grants for the year, net 9 351 460

NOTES 17 - 18


74


19. OTHER RESERVES

2013 2012 DKKm DKKmCurrency translation reserve Balance at 1 January -166 -94 Currency translation for the year concerning foreign subsidiaries and additions to net investments in foreign subsidiaries -508 -85 Tax in relation hereto 81 13 Balance at 31 December -593 -166 Hedging reserve Balance at 1 January -59 -82 Adjustment, deferred exchange gains/losses, hedging, recognised in other comprehensive income 151 -67 Exchange gains/losses, hedging, transferred to revenue -123 130 Exchange gains/losses, hedging, transferred to the balance sheet -3 - Exchange gains/losses, trading, transferred to net financials (transferred from hedging) - 1 Value adjustment of interest hedging instruments 51 -32 Tax in relation hereto -19 -9 Balance at 31 December -2 -59 Reserve for fair value adjustment of available-for-sale financial assets Fair value adjustment at 1 January 4 -4 Fair value adjustment -15 123 Realised gain on disposal -20 -115 Fair value adjustment at 31 December -31 4 Total other reserves -626 -221 20. MINORITY INTERESTS

2013 2012 DKKm DKKm

Minority interests at 1 January 3,895 3,781 Share of profit/loss for the year 381 531 Share of other comprehensive income for the year -139 -41 Share of other capital movements 19 21 Dividend -166 -245 Addition on acquisition of Insusense 10 - Buyback of shares from minority interests -8 -115 Change in minority interests 8 - Adjustment of provision for acquisition of minority interests -80 -37 Minority interests at 31 December 3,920 3,895 Of dividend paid to minority interests, DKK 26 million (DKK 24 million in 2012) was recognised in provisions for acquisition of minority interests in 2013.

NOTES 19 - 20


75


21. PROVISIONS

2013 2012 Note DKKm DKKm Provisions can be specified as follows: Pensions and similar obligations 21.1 448 473 Liabilities relating to acquisitions and minority interests 21.2 1,021 711 Other provisions 21.3 565 507 Total 2,034 1,691 Provisions break down as follows: Long-term 1,490 1,245 Short-term 544 446 Total 2,034 1,691 21.1 PENSIONS AND SIMILAR OBLIGATIONS

The majority of the employees of the Group are covered by pension plans paid for by the companies of the Group. The nature of the plans varies according to regulatory requirements, tax rules and economic conditions in the countries in which the employees are employed. A summary of the most important plans is given below. Defined contribution plans For defined contribution plans, the employer undertakes to pay a defined contribution (e.g. a fixed amount or a fixed percentage of the pay). Under a defined contribution plan, the employees will usually bear the risk related to future developments in interest and inflation rates, mortality and disability etc. The cost of defined contribution plans, representing contributions to the plans, totalled DKK 560 million in 2013 (DKK 551 million in 2012). Defined benefit plans For defined benefit plans, the employer undertakes to pay a defined benefit (e.g. a retirement pension at a fixed amount or a fixed percentage of the em-ployee’s final salary). Under a defined benefit plan, the company usually bears the risk relating to future developments in interest and inflation rates etc. For defined benefit plans, the present value of future benefits, which the company is liable to pay under the plan, is computed using actuarial principles. The computation of present value is based on assumptions about discount rates, changes in pay rates and pensions, investment yield, staff resignation rates, mortality, disability and other factors. Present value is computed exclusively for the benefits to which the employees have earned entitlement through their employment with the company. Actuarial gains and losses are recognised in the income statement as they are calculated.

2013 2012 DKKm DKKmPensions and similar obligations Present value of funded pension obligations 407 423 Fair value of plan assets -314 -311 Funded pension obligations net 93 112 Present value of unfunded pension obligations 265 260 Provisions for pensions at 31 December 358 372 Other pension-like obligations 89 100 Provisions for pensions and pension-like obligations at 31 December 447 472 Pension assets/liabilities and similar obligations break down as follows: Non-current liabilities 438 466 Current liabilities 10 7 Pension obligations 448 473 Plan assets, recognised in other receivables -1 -1 Pension assets/liabilities and similar obligations at 31 December, net 447 472

NOTE 21


76


The actuarial assumptions applied in calculating pension obligations concerning the defined benefit plans vary from one country to the next and are based on local economic and social conditions. The following assumptions were applied: 2013 2012

Discount rate 3.4%-4.2% 3.3%-4.3%Inflation rate 2.2%-2.4% 2.0%-2.2%Pay rate increase 2.4%-4.4% 2.4%-3.7%Pension increase 2.4%-3.4% 2.2%-2.7%Age-weighted staff resignation rate 0%-8.0% 0%-8.0%Expected return on plan assets 2.9%-4.2% 2.9%-4.3% 2013 2012 % distribution % distribution

The fair value of the plan assets breaks down as follows: Shares 7 6 Bonds 18 18 Property 4 4 Insurance contracts 69 70 Other assets 2 2 Total 100 100 Shares and bonds are measured at fair value based on closing prices in an active market. Property, insurance contracts and other assets are not based on quoted prices in an active market. 2013 2012 DKKm DKKmChange in present value of funded pension obligations Present value of funded pension obligations at 1 January 423 345 Currency translation -11 8 Pension expenses 13 12 Interest expenses relating to the obligations 13 15 Actuarial (gains)/losses -18 49 Disbursements -15 -8 Employee contributions 2 2 Present value of funded pension obligations at 31 December 407 423 Change in fair value of plan assets Fair value of plan assets at 1 January 311 279 Currency translation -10 8 Expected return on plan assets 9 12 Actuarial (gains)/losses -5 1 Payments 24 18 Disbursements -15 -8 Employee contributions 2 2 Administration fee -2 -1 Fair value of plan assets at 31 December 314 311 Realised return on plan assets 7 5

NOTE 21

21.1 PENSIONS AND SIMILAR OBLIGATIONS – CONTINUED


77


2013 2012 DKKm DKKmChange in present value of unfunded pension obligations Present value of unfunded pension obligations at 1 January 260 190 Currency translation - 1 Pension expenses 7 7 Interest expenses relating to the obligations 8 9 Actuarial (gains)/losses -6 65 Disbursements -4 -3 Plan changes - -9 Present value of unfunded pension obligations at 31 December 265 260 Specification of expenses recognised in the income statement Pension expenses 20 19 Interest expenses relating to the obligations 21 24 Expected return on plan assets -9 -11 Actuarial (gains)/losses 2 1 Total expenses recognised 34 33 Specification of amount recognised in the statement of comprehensive income Actuarial (gains)/losses 19 -113 Total expenses recognised 19 -113 The expected contribution for 2014 for the defined benefit plans is DKK 37 million (DKK 28 million in 2013). Sensitivity analysis The most significant assumptions used in the calculation of the obligation for defined benefit plans are discount rate and inflation rate. An increase in the discount rate of 0.25% results in a decrease in the obligation of approximately DKK 26 mio. and vice versa. An increase in the inflation rate of 0.25% results in a increase in the obligation of approximately DKK 7 mio. and vice versa. Other pension-like obligations An obligation of DKK 89 million (DKK 100 million in 2012) is recognised in the Group to cover other pension-like obligations, including primarily termination benefits in a number of subsidiaries. The benefit payments are conditional upon specified requirements being met. The amount of pension-like obligations fell by DKK 11 million (fell by DKK 5 million in 2012).

21.2 LIABILITIES RELATING TO ACQUISITIONS AND MINORITY INTERESTS 2013 2012 DKKm DKKmLiabilities: Liabilities concerning acquisition of minorities 898 655 Payable considerations and contingent consideration 123 56 Liabilities at 31 December 1,021 711 Non-current portion: Liabilities concerning acquisition of minorities 817 653 Payable considerations and contingent consideration 74 49 Non-current portion at 31 December 891 702 Current portion: Liabilities concerning acquisition of minorities 81 2 Payable considerations and contingent consideration 49 7 Current portion at 31 December 130 9

NOTE 21

21.1 PENSIONS AND SIMILAR OBLIGATIONS – CONTINUED


78


2013 2012 DKKm DKKmLiabilities concerning acquisition of minorities Liabilities at 1 January 655 516 Currency translation -35 -4 Additions through acquisitions 101 42 Disposals on acquisition of minority interests -7 -9 Interest component, discounted liabilities 5 4 Dividends paid and other adjustments -26 -15 Adjustments recognised in goodwill relating to business combinations before 1 January 2010 17 33 Adjustments and interest recognised in equity relating to business combinations after 1 January 2010 188 88 Liabilities concerning acquisition of minorities at 31 December 898 655 Due dates in respect of acquisition of minorities are expected to be: Within 1 year of the balance sheet date 81 2 Between 1 and 5 years from the balance sheet date 785 508 More than 5 year after the balance sheet date 32 145 Liabilities concerning acquisition of minorities at 31 December 898 655 Payable considerations and contingent consideration Liabilities at 1 January 56 39 Additions through acquisitions 71 39 Reassessment of previously recognised earn-outs 2 -5 Payments during the year -6 -17 Payable considerations and contingent consideration at 31 December 123 56 Due dates in respect of payable considerations and contingent considerations are expected to be: Within 1 year of the balance sheet date 49 7 Between 1 and 5 years from the balance sheet date 74 49 Liabilities concerning acquisition of minorities at 31 December 123 56 In connection with Falck assuming an obligation to acquire non-controlling interests, a concurrent right was obtained for Falck to acquire the same non-controlling interests in the agreed period.

The consideration for obligations and rights to acquire non-controlling interests is determined on the basis of profit before exercise multiplied by an already agreed multiple, typically less net debt in the relevant companies. On recognition in the balance sheet, this value is made up at fair value on the basis of earnings and net debt at the time when the non-controlling interests are expected to exercise their right to sell their shares to Falck. The calculated fair value assumes an increase in earnings and a decrease in net debt in the relevant companies as compared with the value recognised in the financial statements.

21.3 OTHER PROVISIONS

2013 2012 DKKm DKKm Other provisions at 1 January 507 408 Currency translation -6 - Addition on acquisitions 6 3 Provisions charged 386 629 Provisions used -300 -228 Unused provisions reversed -28 -305 Total 565 507 Other provisions at 31 December break down as follows: Non-current provisions 161 77 Current provisions 404 430 Total 565 507 Other provisions primarily cover H. Lundbeck A/S’ expenses for e.g. disputes, returns and the restructuring of the H. Lundbeck Group’s administrative processes in Europe, initiated in 2013 and of the commercial organisation in Europe, initiated in 2012, the ALK Group’s organisational restructuring costs and the Falck Group’s pending litigation, actuarially estimated liabilities relating to worker injuries in the United States and the Group’s obligation to clean up and demolish facilities on leased land.

NOTE 21

21.2 LIABILITIES RELATING TO ACQUISITIONS AND MINORITY INTERESTS – CONTINUED


79


22. MORTGAGE, BANK, LEASING AND REPO DEBT

2013 2012 Note DKKm DKKmMortgage, bank, leasing and repo debt can be specified as follows: Mortgage debt 22.1 2,509 2,245 Bank and leasing debt 22.2 7,171 6,783 Repo debt 22.3 196 126 Total 9,876 9,154 Can be specified as follow: Long-term debt to financial institutions – subsidiaries 9,037 8,356 Short-term debt to financial institutions – subsidiaries 643 672 Repo debt – Lundbeckfond Invest 196 126 Total 9,876 9,154

22.1 MORTGAGE DEBT 2013 2012 DKKm DKKmMortgage debt by maturity: Within 1 year of the balance sheet date 3 1 Between 1 and 5 years from the balance sheet date 221 132 More than 5 year after the balance sheet date 2,285 2,112 Mortgage debt at 31 December 2,509 2,245 Specification of mortgage debt: Non-current liabilities 2,506 2,244 Current liabilities 3 1 Mortgage debt at 31 December 2,509 2,245

Weighted average Amortised Nominal Currency effective cost value Fair value Expiry Fixed/floating interest rate DKKm DKKm DKKm2013 Bond loan, H. Lundbeck DKK/2035 Floating 2.5% 1,414 1,481 1,526 Bond loan, H. Lundbeck DKK/2037 Floating 1.2% 438 440 426 Bond loan, H. Lundbeck DKK/2037 Floating 1.2% 268 283 274 Bond loan, H. Lundbeck DKK/2034 Floating 0.9% 10 10 10 Bond loan, H. Lundbeck DKK/2034 Floating 0.9% 2 2 2 Bond loan, Falck DKK/2025 Fixed until 2015 4.5% 353 369 380 Bond loan, ALK DKK/2026 Floating 2.0% 24 24 24 Total 2,509 2,609 2,642 2012 Bond loan, H. Lundbeck DKK/2035 Floating 2.1% 1,413 1,511 1,571 Bond loan, H. Lundbeck DKK/2037 Floating 1.2% 437 440 423 Bond loan, H. Lundbeck DKK/2034 Floating 0.9% 10 10 10 Bond loan, H. Lundbeck DKK/2034 Floating 0.9% 2 2 2 Bond loan, Falck DKK/2025 Fixed until 2015 4.5% 358 382 396 Bond loan, ALK DKK/2028 Fixed 4.0% 25 25 25 Total 2,245 2,370 2,427 Bond loans are classified as level 1 under the fair value hierarchy. Fair value has been determined based on closing prices according to exchange markets.

NOTE 22


80


22.2 BANK AND LEASING DEBT 2013 2012 DKKm DKKmBank and leasing debt by maturity: Within 1 year of the balance sheet date 640 671 Between 1 and 5 years from the balance sheet date 6,519 2,527 More than 5 year after the balance sheet date 12 3,585 Bank debt at 31 December 7,171 6,783 Specification of bank and leasing debt: Long-term obligations, loan 6,453 6,071 Long-term obligations, leased assets 78 41 Total long-term 6,531 6,112 Short-term obligations, loan 613 648 Short-term obligations, leased assets 27 23 Total short-term 640 671 Bank debt at 31 December 7,171 6,783

Weighted average Carrying effective amount2013 Currency Expiry Fixed/floating effective rate DKKm Bank debt, Falck Group DKK, EUR, USD, other 2014-2018 Floating 4.0% 6,769 Leasing debt, Falck Group AUD, BLR, CAD, COP, EUR, NOK, USD 2014-2025 Fixed/floating 7.0% 99 Leasing debt, ALK Group EUR, USD 2014-2016 Floating 3.5% 5 Other bank and finance loans, ALK Group EUR 2016 Fixed 3.1% 298 Total 7,171

2012

Bank debt, Falck Group DKK, EUR, NOK, USD, SEK, BLR, other 2013-2018 Floating 4.3% 6,420 Leasing debt, Falck Group EUR, BLR, COP, NOK, USD 2013-2020 Floating 6.1% 56 Leasing debt, ALK Group EUR, USD 2014-2016 Floating 3.5% 9 Other bank and finance loans, ALK Group EUR 2016 Fixed 3.1% 298 Total 6,783

22.3 REPO DEBT

Repo debt in Lundbeckfond Invest amounts to DKK 196 million (DKK 126 million in 2012) falls due 9 January 2014. The debt carries a fixed rate of interest from the date of conclusion at 0.15% (0.08% in 2012).

NOTE 22


81


23. OTHER PAYABLES

2013 2012 Note DKKm DKKm

Employee bonds 18 19 Trade payables 2,763 2,388 Other payables 5,322 4,121 Derivative financial instruments 225 274 Prepayments 29 1,536 1,526 Total 9,864 8,328

24. ADJUSTMENT OF NON-CASH OPERATING ITEMS

2013 2012 DKKm DKKm Depreciation, amortisation and impairment 1,761 1,346 Gain on reduction of ownership interest - -115 Incentive programmes 62 65 Change in pension obligation -7 -45 Change in other provisions 59 246 Other adjustments 24 46 Total 1,899 1,543

25. WORKING CAPITAL CHANGES

2013 2012 DKKm DKKm Change in inventories -252 -113 Change in receivables -434 -220 Change in receivables from associates -35 -6 Change in current liabilities 1,726 447 Total 1,005 108 26. ACQUISITION OF COMPANIES

Total 2013 Total 2012 DKKm DKKm Calculation of acquired net assets and cash consideration: Intangible assets 10 - Property, plant and equipment 121 60 Financial assets 3 -Cash and cash equivalents 32 25 Other current assets 122 82 Interest-bearing debt -105 -46 Current liabilities, provisions etc. -71 -58 Minority interests -10 - Net assets acquired 102 63 Goodwill 579 391 Other intangible assets 171 114 Deferred tax on intangible assets -56 -42 Acquisition cost 796 526

NOTES 23 - 24 -25 - 26


82


Total 2013 Total 2012 DKKm DKKm

Acquisition cost 796 526 Provisions for acquisition of minorities -101 -42 Acquisition cost exclusive of obligations to buy minority interests 695 484 Acquired cash in hand and at bank -32 -25 Outstanding consideration -79 -39 Consideration relating to prior-year acquisitions 9 17 Cash consideration 593 437 Expensed transaction costs 45 36

Acquisitions 2013

Name Principal activity Country Date of acquisition Purchase price Voting share acquired

Verihealth Emergency USA Apr. 2013 81 100%Skandinavisk Hälsovärd Group Healthcare Sweden Aug. 2013 43 100%GARD Emergency Germany Sep. 2013 462 100%Hostile Environment Services Emergency Australia Oct. 2013 79 55%Other 30 Total 695 Acquisitions 2012 Name Principal activity Country Date of acquisition Purchase price Voting share acquired

Grupo VL Emergency Spain Feb. 2012 113 75%American Ambulance Emergency USA Sep. 2012 243 96%Occupational Safety Training Training USA Dec. 2012 61 100%Other 67 Total 484

The transactions were accounted for using the purchase method of accounting. Verihealth is an American ambulance company whose primary activity is patient transportation. The acquisition strengthened Falck’s position as the third-largest ambulance company in the United States. The market in California is characterized by strong growth, driven by population growth as well as demo-graphic developments towards a greater proportion of elderly people. Part of the consideration has been allocated to existing customer contracts, while the rest has been allocated to goodwill, relating to the potential of continuing growth in the US market through expansion of the strategic platform, efficiency improvements by integrating operations with other activities in California and by exploiting the competencies, knowledge and relations of key persons. Skandinavisk Hälsovård Group is one of the leading Swedish providers of physician and nurse temps. The company has customers in the public as well as the private healthcare sector. The acquisition of Skandinavisk Hälsovård has given Falck a position as the largest group of providers of healthcare staffing in Scandinavia. Part of the purchase price has been allocated to existing customer contracts, while the rest has been allocated to goodwill. Goodwill relates to the expansion of the strategic platform for Falck’s healthcare activities and exploitation of synergies and the future growth potential. GARD is the largest private ambulance services provider in Germany. The company has activities in patient transportation, primarily in and around Ham-burg, and activities in other parts of northern and eastern Germany. The acquisition complements Falck’s existing activities in Germany and is considered to be strategically important for generating additional growth in Germany, the largest market in Europe. Part of the purchase price has been allocated to existing customer relations, while the rest has been allocated to goodwill, reflecting the establishment of a strong strategic platform with growth potential in terms of both revenue and earnings and the contribution of key persons with knowledge of the German market.

NOTE 26

26. ACQUISITION OF COMPANIES – CONTINUED


83


Hostile Environment Services is an Australian provider of ambulance services, fire fighting, medical clinics and safety training for the mining, oil and gas industries in remote areas of Australia and Papua New Guinea. Part of the consideration has been allocated to existing customer relations and the rest to goodwill, which relates to the strategic access to the Australian market and the growth potential that exists in the mining industry in relevant geographies and in the market for emergency services in Australia.

The cost price paid in connection with the company acquisitions exceeded the fair value of acquired identifiable assets, liabilities and contingent liabilities. According to a preliminary calculation, the positive difference amounts to DKK 694 million (DKK 463 million in 2012). The difference with respect to acquisition of companies represents the value of acquired contractual customer relationships in the amount of DKK 115 mil-lion (DKK 72 million in 2012) after tax. The remaining difference of DKK 579 million (DKK 391 million in 2012) represents goodwill. In connection with acquisitions, an assessment is made of the value of the acquired customer agreements, framework agreements and customer portfo-lios. The valuation thereof was based on the ”Multi Period Excess Earnings Method (MEEM-method)” in which the value is calculated on the basis of an expected future cash flow. The principal assumptions are expected lives of the existing agreements and portfolios, earnings and contribution for using associated assets and employees. Acquired assets include trade receivables at a fair value of DKK 99 million (DKK 46 million in 2012). The contractual gross receivable is DKK 126 million (DKK 50 million in 2012), of which DKK 27 million (DKK 4 million in 2012) was deemed to be unrecoverable as of the date of takeover. Minority interests in acquisitions in 2013 are recognised at fair value, including the fair value of goodwill related to the minority interest. In 2011, goodwill in relation to acquisition of the Falck Group was recognised exclusive of goodwill relating to minority interests. Business combinations may be adjusted for up to 12 months after the date of acquisition. Of the Group’s comprehensive income in 2013 of DKK 2,073 million (DKK 2,525 million in 2012), DKK 13 million (DKK 13 million in 2012) is at-tributable to results generated by the acquired operations after the acquisition date. Revenue and comprehensive income for the Group for 2013 calculated pro forma as if the acquired enterprises had been acquired on 1 January 2013 amount to DKK 30,638 million (DKK 28,996 million in 2012) and DKK 2,095 million (DKK 2,533 million in 2012), respectively. The amounts stated are exclusive of the effect of the purchase price allocation, which is incorporated in the pre-acquisition balance sheet. 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS

The Group’s business activities imply that the results and balance sheet may be affected by various financial risks. The management of these risks is decen-tralised and handled in the H. Lundbeck, ALK and Falck groups and in Lundbeckfond Invest based on policies and guidelines approved by the Board of Directors. See also note 12: Financial assets and financial risks, note 16: Trade receivables and other receivables, and note 17: Cash resources for a description of risks and the management thereof.

27.1 EXCHANGE RATE RISKS

Exchange rate risks arise because the Group’s expenses and income in different currencies do not match and because the Group’s assets and liabilities denominated in foreign currency do not balance, among other things due to Lundbeckfond Invest’s investment assets. The management of these risks is focused on risk mitigation. The Group applies various derivative financial instruments to manage these risks. Some of these instruments are classified as hedging instruments and meet the accounting criteria for hedging future cash flows. Changes in the fair value of these contracts are recognised in the statement of comprehensive income under other comprehensive income as they arise and – on invoicing of the hedged cash flow – transferred from other comprehensive income for inclusion in the same item as the hedged cash flow. Hedging contracts that do not meet the hedge criteria are classified as trading contracts, and changes in the fair value are recognised as financial items as they arise. The need for hedging is assessed separately in the H. Lundbeck, ALK and Falck groups and in Lund-beckfond Invest. Other things being equal, an increase of 5% in the DKK/USD exchange rate would increase the Group’s profit by DKK 182 million (DKK 120 million in 2012).

NOTES 26 - 27

26. ACQUISITION OF COMPANIES – CONTINUED


84


2013 2012 DKKm DKKmMonetary assets and monetary liabilities for the principal currencies at 31 December Monetary assets CAD 233 213 CHF 139 165 GBP 779 1,042 JPY 56 29 USD 5,227 3,720 Monetary liabilities CAD 239 227 GBP 252 124 JPY 100 100 USD 1,773 1,380 Due to the long-standing fixed exchange rate policy in Denmark, the foreign currency risk for EUR is considered immaterial, and EUR is therefore not included in the list above. Estimated impact on profit and equity from a 5% increase in year-end exchange rates of the most important currencies CAD CHF GBP JPY USD DKKm DKKm DKKm DKKm DKKm2013 Profit -1 7 11 -2 182 Equity -39 7 12 -2 401 2012 Profit -2 8 6 -4 120 Equity -38 8 24 -4 472 The profit impact is included in the impact on equity.

27.2 INTEREST RATE RISKS

Interest rate risk relates to the Group’s interest-bearing assets and liabilities and principally to the Group’s bonds classified as financial assets measured at fair value through profit or loss. See note 12: Financial assets and financial risks and the Falck Group’s overall loan financing, cf. note 22: Mortgage, bank, leasing and repo debt. Interest receivable The duration of the investments when selecting financing and investment instruments is used to manage the interest rate risk. In addition, the Group uses derivative financial instruments to mitigate the interest rate exposure. The use of financial instruments to manage interest rate risk does not qualify for hedge accounting, and the changes in fair value are therefore recognised as financial income or expenses in an ongoing process. The Group’s portfolio of bonds has a duration of 1.9 year (1.6 year in 2012). Other things being equal, an increase of 1 %-point in interest rates would increase the Group’s profit by DKK 88 million (DKK 74 million in 2012). At 31 December 2013, the Group had an interest rate swap for managing interest rate exposure on portfolio investments. Other than this, there were no derivatives at 31 December 2013 and 31 December 2012 to manage interest rate risks because the distribution of investments carrying floating and fixed interest at the given times was deemed to be satisfactory.

NOTE 27

27.1 EXCHANGE RATE RISKS – CONTINUED


85


Interest expenses The Falck Group’s interest rate risk is mainly affected by the Falck Group’s overall financing. Based on the current market situation, the Falck Group’s executive management and board of directors have resolved to prolong the interest rate swaps that expire in 2014 to 2016 and 2017 so 70%-80% of the overall financing is converted to a fixed rate of interest. The remainder of the overall financing is based on a short-term interest rate. The interest rate expo-sure is hedged by interest rate swaps during the hedging period to the effect that interest rates on the part of the debt that is denominated in DKK cannot exceed 1.18% exclusiv the current interest rate margin, for debt denominated in EUR interest rates cannot exceed 1.03% excluding the current interest rate margin, and for debt denominated in USD, interest rates cannot exceed 1.14% excluding the current interest rate margin. The remaining part of the syn-dicated financing is to be based on short-term interest rates. The Falck Group is therefore only to a minor extent sensitive to fluctuations in market interest rates, and a fluctuation by 1% would change the interest expense for the year by DKK 26 million (DKK 23 million in 2012), as a large part of the interest rate risk is hedged by interest rate swaps. Without this hedge, a fluctuation by 1%-point would change the Group’s interest expense by DKK 68 million (DKK 61 million in 2012) based on the current level of debt per year-end 2013. The sensitivity stated has been determined based on the recognised financial assets and liabilities at 31 December 2013. No adjustment has been made for servicing and raising of debt, or the like in 2013. Furthermore, it is assumed that all hedges of floating-rate loans are deemed to be effective. 27.3 MATURITY DATES FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES

More than Less than 1 year 1-5 years 5 years Total Effective31 December 2013 DKKm DKKm DKKm DKKm interest ratesFinancial assets Derivatives included in the trading portfolio 9 - - 9 - Securities 1) Danish mortgage and government bonds 1,444 404 1,786 3,634 0-6% Credit bonds 16 968 1,336 2,320 1-18% Listed equities - - 5,979 5,979 - Shares in property companies - - 363 363 - Lundbeckfond Ventures and Emerge 7 - 722 729 - Private equity funds - - 748 748 - Other unlisted funds - - 257 257 - Financial assets at fair value through profit or loss 1,476 1,372 11,191 14,039 - Derivatives to hedge future cash flows and net investment in foreign subsidiaries 134 7 - 141 - Financial assets used as hedging instruments 134 7 - 141 - Receivables 2) 5,574 88 - 5,662 - Fixed-term deposits 3,821 - - 3,821 0-7% Other cash resources 2,277 - - 2,277 0-7% Loans and receivables 11,672 88 - 11,760 - Available-for-sale financial assets - 65 23 88 - Total financial assets 13,282 1,532 11,214 26,028 - Financial liabilities Derivatives included in the trading portfolio 165 - - 165 - Financial liabilities at fair value through profit or loss 165 - - 165 - Derivatives to hedge future cash flows and net investment in foreign subsidiaries 31 29 - 60 - Financial liabilities used as hedging instruments 31 29 - 60 - Mortgage, bank, leasing and repo debt 3) 840 6,834 2,202 9,876 0-5% Employee bonds/purchase obligations 148 867 32 1,047 3-6% Other payables and non-disbursed grants 2) 8,863 300 - 9,163 - Financial liabilities, measured at amortised cost 9,851 8,001 2,234 20,086 - Total financial liabilities 10,047 8,030 2,234 20,311 -

NOTE 27

27.2 INTEREST RATE RISKS – CONTINUED


86


Less than More than 1 year 1-5 years 5 years Total Effective31 December 2012 DKKm DKKm DKKm DKKm interest ratesFinancial assets Derivatives included in the trading portfolio 1 - - 1 - Securities 1) Danish mortgage and government bonds 1,609 530 1,741 3,880 0-5% Credit bonds 46 548 1,678 2,272 1-25% Listed equities - - 4,813 4,813 - Shares in property companies - - 482 482 - Lundbeckfond Ventures and Emerge - - 519 519 - Private equity funds - - 866 866 - Other unlisted funds - - 280 280 - Financial assets at fair value through profit or loss 1,656 1,078 10,379 13,113 - Derivatives to hedge future cash flows 36 - - 36 - Financial assets used as hedging instruments 36 - - 36 - Receivables 2) 5,421 51 5 5,477 - Fixed-term deposits 1,708 - - 1,708 0-4% Other cash resources 2,269 - - 2,269 0-5% Loans and receivables 9,398 51 5 9,454 - Available-for-sale financial assets - 86 52 138 - Total financial assets 11,090 1,215 10,436 22,741 - Financial liabilities Derivatives included in the trading portfolio 160 - - 160 - Financial liabilities at fair value through profit or loss 160 - - 160 - Derivatives to hedge future cash flows and net investment in foreign subsidiaries 41 73 - 114 - Financial liabilities used as hedging instruments 41 73 - 114 - Mortgage, bank, leasing and repo debt 3) 798 2,427 5,929 9,154 0-6% Employee bonds/purchase obligations 28 611 145 784 3-6% Other payables and non-disbursed grants 2) 7,166 402 - 7,568 - Financial liabilities, measured at amortised cost 7,992 3,440 6,074 17,506 - Total financial liabilities 8,193 3,513 6,074 17,780 - The amounts in the table above are exclusive of interest. 1) The securities are classified as financial assets measured at fair value through profit or loss. 2) Including receivables and payments recognised in non-current assets and liabilities. 3) Nominal value of mortgage debt falling due after more than 5 years totals DKK 2,609 million at 31 December 2013 (DKK 2,370 million in 2012).

NOTE 27

27.3 MATURITY DATES FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES – CONTINUED


87


27.4 NET OUTSTANDING FORWARD EXCHANGE RATE TRANSACTIONS, CURRENCY OPTIONS, INTEREST RATE SWAPS AND EQUITY OPTIONS

27.4 Hedging part Exchange Exchange Average hedge Contractual gains/losses gains/losses prices of value recognised in recognised in existing according to other income forward hedge comprehensive statement/ exchange accounting income balance sheet contracts ExpiryForward contracts DKKm DKKm DKKm DKK period2013 CAD 851 38 39 535.33 Oct. 2014 GBP 532 -11 11 873.52 Dec. 2014 USD 1,968 -47 10 536.31 Nov. 2014 Other currencies 1,530 43 66 Forward contracts 2013 4,881 23 126 2012 CAD 775 -2 -42 561.84 Dec. 2013 GBP 618 - -29 907.86 Nov. 2013 USD 547 -6 -20 569.85 Dec. 2013 Other currencies 1,822 5 -39 Dec. 2013 Forward contracts 2012 3,762 -3 -130

At 31 December 2013, the exchange rate difference between the contract value and the market value of the concluded forward exchange contracts and currency options represented a gain of DKK 55 million (a loss of DKK 69 million in 2012), of which DKK 32 million was recognised in the income statement (DKK 2 million in 2012).

Interest rate gains/losses recognised in other Contractual comprehensive Fixed interest value income rate ExpiryInterest rate collar/interest rate swap DKKm DKKm % period2013 DKK interest rate swap 2,300 -19 1.40 Aug. 2014 DKK interest rate swap 425 - 0.56 Jun. 2016 DKK interest rate swap 300 - 0.56 Jun. 2016 DKK interest rate swap 815 1 0.89 Sep. 2017 DKK interest rate swap 900 2 0.88 Sep. 2017 DKK interest rate swap 300 - 0.88 Sep. 2017 USD interest rate swap 406 -1 0.55 Aug. 2014 USD interest rate swap 390 2 1.14 Sep. 2017 EUR interest rate swap 1,492 -9 1.17 Aug. 2014 EUR interest rate swap 1,201 2 0.67 Sep. 2017 Interest rate collar/interest rate swap -22

NOTE 27


88


Interest rate gains/losses recognised in other Contractual comprehensive Fixed interest value income rate ExpiryInterest rate collar/interest rate swap DKKm DKKm % period2012 DKK interest rate swap 2,300 -47 1.40 Aug. 2014 USD interest rate swap 424 -2 0.55 Aug. 2014 EUR interest rate swap 1,492 -24 1.17 Aug. 2014 Interest rate collar/interest rate swap -73 27.4 Trading part Average hedge Exchange prices of gains/losses existing recognised in forward Contractual the income exchange value statement transactions ExpiryForward contracts DKKm DKKm DKKm period2013 GBP 100 1 886.3 Feb. 2014 Forward contracts 1 2012 GBP 100 1 916.5 Mar. 2013 Forward contracts 1 Share option gains/losses recognised in Contractual the income Market value value statement 31 December ExpiryEquity contracts DKKm DKKm DKKm period 2013 Options on indices - -53 -162 Jan.-Mar. 2014 Options on equities - 40 - Equity contracts - -13 -162 2012 Options on indices 11,371 -53 -46 June 2013 Options on equities 245 11 -9 Jan.-Mar. 2013 Equity contracts 11,616 -42 -55

Exchange gains/losses recognised in Contractual the income Average value statement exercise prices ExpiryCurrency options DKKm DKKm DKK period2012 EUR/DKK (EUR put bought) - -1 - - EUR/DKK (EUR call sold) - 2 - - JPY/DKK (JPY put sold) - -2 - - Currency options -1

NOTE 27


– CONTINUED


89


Interest rate gains/losses recognised in Contractual the income Fixed interest value statement rate ExpiryInterest rate swap DKKm DKKm % period2013 Fixed to floating 600 19 2.24 Nov. 2023 Interest rate swap 19 2012 Fixed to floating 600 -41 3.47 May 2020 Interest rate swap -41

28. CONTRACTUAL OBLIGATIONS

2013 2012 DKKm DKKm The Group has signed operating lease obligations for a total amount of 2,378 2,548 Payment of the obligations breaks down as follows: Less than 1 year 489 502 Between 1 and 5 years 982 1,076 More than 5 years 907 970 2,378 2,548 Expensed lease payments amounted to 561 520 The operating lease commitments primarily concern the Falck Group’s leases for vehicles and buildings. The lease term for vehicles typically runs for 4-9 years. The lease term for buildings typically runs for 20 years. The Group has signed finance lease obligations for a total amount of 119 75 Payment of the finance lease obligations breaks down as follows: Less than 1 year 31 25 Between 1 and 5 years 72 37 More than 5 years 16 13 119 75 Present value of finance lease obligations 104 63 Financial lease arrangements comprise leases on buildings, vehicles and other lease arrangements. Besides this, the Group has made the following contractual obligations: Lundbeck Foundation and Lundbeckfond Invest A/S

The Lundbeck Foundation and Lundbeckfond Invest A/S have capital contribution obligations amounting to DKK 485 million (DKK 505 million in 2012).

H. Lundbeck Group

Other purchase obligationsThe H. Lundbeck Group has undertaken purchase obligations in the amount of DKK 274 million (DKK 305 million in 2012).

NOTES 27 - 28


– CONTINUED


90


Research collaborationsThe H. Lundbeck Group is part of multi-year research and development collaboration projects comprising minimum research and contractual obligations in the order of DKK 52 million (DKK 141 million in 2012).

The total amount of the obligations may increase substantially in line with the favourable development of the collaborations. Other contractual commitmentsThe H. Lundbeck Group has entered into various service agreements amounting to DKK 124 million (DKK 102 million in 2012). Furthermore H. Lundbeck had at 31 December 2013 capital contribution obligations amounting to DKK 8 million (DKK 3 million in 2012).

ALK Group

The ALK Group’s financial obligations in respect of research and development projects amounted to DKK 28 million (DKK 3 million in 2012).

Falck Group

Falck Holding A/S has a right of first refusal to buy a number of buildings at a preset value. At the end of the year, Falck Holding A/S had not notified any owners that it wanted to exercise such a right of first refusal in 2014 (DKK 0 million in 2012).

29. GUARANTEES, CONTINGENT ASSETS AND LIABILITIES The Group has the following warranty commitments and contingent liabilities: Joint taxationH. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S and their Danish subsidiaries are pooled for tax purposes with Lundbeckfond Invest A/S. As from the 2013 financial year, the companies have partly a joint and several liability and partly a secondary liability with respect to income taxes etc. for the jointly-taxed companies. As from 1 July 2012, the companies in the tax pool have partly a joint and several liability and partly a secondary liability with respect to any obligations to withhold tax on interest, royalties and dividends for the jointly-taxed companies. However, in both cases the secondary liability is capped at an amount equal to the share of the capital of the companies directly or indirectly owned by Lundbeckfond Invest A/S. H. Lundbeck Group

Bank guarantees and letters of intentThe H. Lundbeck Group’s bankers have issued bank guarantees to third parties in the amount of DKK 85 million (DKK 105 million in 2012). The Group has assessed that the fair value of guarantees is DKK 0 (DKK 0 in 2012). Pending legal proceedingsThe H. Lundbeck Group is involved in legal proceedings in a number of countries against a number of businesses, including patent disputes. In the opini-on of the management of H. Lundbeck A/S, the outcome of these proceedings will not have a material impact on the Group’s financial position, results of operations or cash flows beyond the amount provided for in the financial statements. Due to uncertainty about the outcome of the legal proceedings, the amount of the provision is uncertain. In June 2013, the European Commission issued a decision in which it found that H. Lundbeck by entering into a few selected patent settlement agree-ments in 2002 had violated EU competition law and thereby hindered a lawful entry of generic citalopram into markets in the European Economic Area (EEA). The European Commission issued a fine of EUR 93.8 million. In September 2013, this decision was appealed by Lundbeck to the General Court. It may take up to six years before this matter is finally decided by the courts. Lundbeck does not expect that the fine will increase as a result of the appeal. Lundbeck paid the fine in the third quarter of 2013. Consequently, Lundbeck has a contingent asset corresponding to a maximum of the amount of the fine. In December 2011, the Brazilian antitrust authorities (Secretariat of Economic Law – SDE) initiated administrative proceedings to investigate whether H. Lundbeck’s enforcement of data protection rights could be viewed as anticompetitive conduct. In January 2012, H. Lundbeck submitted a response to the authorities. Due to a change in the Brazilian Antitrust Law, handling of the case has shifted from SDE to CADE (the Administrative Council for Economic Defense) and remains pending.

NOTES 28 - 29

28. CONTRACTUAL OBLIGATIONS – CONTINUED


91


Industry obligationsThe H. Lundbeck Group has return obligations normal for the industry. H. Lundbeck A/S’ management expects no major loss on these obligations.

ALK Group Warranty and guarantee commitments Warranty and guarantee commitments amounted to DKK 13 million (DKK 13 million in 2012). Collaterals The carrying amount of land and buildings provided as collateral for credit institutions amounted to DKK 153 million (DKK 152 million in 2012). Contingent liabilities and assets The management of ALK-Abelló A/S assesses that the outcome of pending claims and other disputes will not have a material impact on the Group’s financial position. In connection with the divestment of the ingredients business, Chr. Hansen in 2005, ALK-Abelló A/S undertook usual representations and warranties towards the buyer. On expiry of the warranty period at the end of July 2012, the management assessed the company’s liabilities towards the buyer, which resulted in a reversal of the provision to cover specific risks of DKK 140 million. See note 6 regarding 2012.

Falck Group Warranty and guarantee commitments Warranty and guarantee commitments amounted to DKK 7 million (DKK 7 million in 2012). The Falck Group has issued performance bonds to a certain extent in connection with a number of contracts, including performance bonds for a total of DKK 317 million provided in connection with ambulance contracts in Denmark (DKK 297 million in 2012). As part of the Group’s activities, usual supplier agreements have been entered into. In connection with the divestment of companies and operations, usual representations and warranties are made. There are currently no outstanding claims which are not sufficiently recognised in the balance sheet. Contingent liabilities and assets The Falck Group is a party to certain litigation and claims. Management believes that rulings in this respect will not have a material impact on the Group’s financial position. Collaterals The shares in the subsidiary Falck A/S and Falck Danmark A/S have been provided as collateral for debt in the Falck Group. The carrying amount of property, plant and equipment provided as collateral for debt to credit institutions amounted to DKK 520 million (DKK 534 mil-lion in 2012). Issued mortgage deeds amounted to DKK 354 million (DKK 359 million in 2012). Lundbeck Foundation and Lundbeckfond Invest A/S Collaterals Bonds in repo transactions have been provided as collateral for repo debt, and other bonds have been provided as collateral for hedging transactions. The value of bonds provided as collateral at 31 December 2013 amounted to DKK 227 million (DKK 263 million in 2012).

NOTE 29

29. GUARANTEES, CONTINGENT ASSETS AND LIABILITIES – CONTINUED


92


30. RELATED PARTIES

The Lundbeck Foundation is a commercial foundation established by Grete Lundbeck in 1954. Related parties exercising a significant influence on the Lundbeck Foundation: •Thecompany’sExecutiveManagementandBoardofDirectors •Companiesinwhichthecompany'sExecutiveManagementandBoardofDirectorsexerciseasignificantinfluence The following transactions were made between related parties and the Lundbeck Foundation, all on an arm’s length basis: •TheBoardofDirectorsandtheExecutiveManagementreceivedremuneration.Seenote3. •Transactionswithassociates: Related parties of the Falck Group also comprise associates in which the company exercises significant influence. Reference is made to note 13 and the Group overview for an overview of associates. 2013 2012 DKKm DKKm Transactions with associates: Sale of property, plant and equipment - 5 Acquisition of services -10 -10 Sale of services - - Royalty income 1 - Rental costs -25 -20 Receivables from associates appear from the balance sheet, and interest payable for the period amounted to DKK 1 million. Transactions with associated companies have been eliminated in the consolidated financial statements. Transactions and balances with other related parties •In2013,H.LundbeckpaidaconsultancyfeeofDKK3million(DKK4millionin2012)toLundbeckInternationalNeuroscienceFoundation, an independent commercial foundation established by H. Lundbeck A/S in 1997. Other than the above and except for transactions eliminated in the consolidated financial statements, there have only been few transactions of immaterial importance with related parties.

31. EVENTS AFTER THE BALANCE SHEET DATE

No events have occurred in the period from the balance sheet date until the presentation of the financial statements which may change the evaluation of the annual report.

NOTES 30 - 31


93


GROUP OVERVIEW – LUNDBECK FOUNDATION GROUPAT 31 DECEMBER 2013


COMPANY NAME COUNTRY OWNERSHIP

Subsidiaries

Lundbeckfond Invest A/S Denmark 100%

- H. Lundbeck A/S Denmark 70%

- Falck Holding A/S Denmark 57%

- ALK-Abelló A/S Denmark 42% (69% of the votes)

Insusense ApS Denmark 60%

Lundbeckfond Invest A/S - associates

Obel-LFI Ejendomme A/S Denmark 50%

Veloxis Pharmaceuticals A/S Denmark 43%

Lundbeckfond Invest A/S - direct investments

Acacia Pharma Ltd. United Kingdom 25%

Allocure Inc. USA 20%

Asante Solutions Inc. USA 6%

Bonesupport Holding AB Sweden 17%

Celladon USA 12%

Cydan Inc. USA 19%

DBV Technologies France 1%

DySIS Medical Ltd. United Kingdom 21%

Enterome France 24%

EpiTherapeutics ApS Denmark 16%

Nexstim Oy Finland 8%

PsiOxus Ltd. United Kingdom 13%

River Vision Corp. USA 27%

Syntaxin Ltd. United Kingdom 7%

VHsquared Ltd. United Kingdom 21%

H. Lundbeck Group

Lundbeck Argentina S.A. Argentina 100%

Lundbeck Australia Pty Ltd. Australia 100%

- CNS Pharma Pty Ltd. Australia 100%

Lundbeck Austria GmbH Austria 100%

- Innenwelt Gemeinnützige GmbH Austria 100%

Lundbeck S.A. Belgium 100%

Lundbeck Brasil Ltda. Brazil 100%

Lundbeck Canada Inc. Canada 100%

Lundbeck Chile Farmacéutica Ltda. Chile 100%

Lundbeck (Beijing) Pharmaceuticals Consulting Co., Ltd. China 100%

Lundbeck Colombia S.A.S. Colombia 100%

Lundbeck Croatia d.o.o. Croatia 100%

Lundbeck Czech Republic s.r.o. Czech Republic 100%

Lundbeck China Holding A/S 1) Denmark 67%

- Lundbeck Pharmaceuticals (Tianjin) Co., Ltd. China 100%

- Lundbeck Pharmaceuticals Consulting (Shanghai) Co., Ltd. China 100%

Lundbeck Export A/S Denmark 100%

Lundbeck Insurance A/S Denmark 100%

Lundbeck Pharma A/S Denmark 100%

Lundbeck Eesti A/S Estonia 100%

OY H. Lundbeck AB Finland 100%

Lundbeck SAS France 100%

Sofipharm SA France 100%

- Laboratoire Elaiapharm SA France 100%

Lundbeck GmbH Germany 100%

Lundbeck Hellas S.A. Greece 100%

Lundbeck Hungária KFT Hungary 100%

Lundbeck India Private Limited India 100%

Lundbeck (Ireland) Ltd. Ireland 100%

Lundbeck Israel Ltd. Israel 100%

Lundbeck Italia S.p.A. Italy 100%

94




Lundbeck Pharmaceuticals, Italy S.p.A. Italy 100%

- Archid S.a. Luxembourg 100%

Lundbeck Japan K. K. Japan 100%

Lundbeck Korea Co., Ltd. Korea 100%

SIA Lundbeck Latvia Latvia 100%

UAB Lundbeck Lietuva Lithuania 100%

Lundbeck Malaysia SDN. BHD. Malaysia 100%

Lundbeck México, SA de CV Mexico 100%

Lundbeck B.V. The Netherlands 100%

Lundbeck New Zealand Limited New Zealand 100%

H. Lundbeck AS Norway 100%

Lundbeck Pakistan (Private) Limited Pakistan 100%

Lundbeck America Central S.A. Panama 100%

Lundbeck Peru S.A.C. Peru 100%

Lundbeck Poland Sp.z.o.o. Poland 100%

Lundbeck Portugal - Produtos Farmacêuticos Unipessoal Lda. Portugal 100%

Lundbeck RUS OOO Russia 100%

Lundbeck Singapore PTE. LTD. Singapore 100%

Lundbeck Slovensko s.r.o. Slovakia 100%

Lundbeck Pharma d.o.o. Slovenia 100%

Lundbeck South Africa (Pty) Limited South Africa 100%

Lundbeck España S.A. Spain 100%

H. Lundbeck AB Sweden 100%

- CNS Pharma AB Sweden 100%

Lundbeck (Schweiz) AG Switzerland 100%

Lundbeck Pharmaceutical GmbH Switzerland 100%

Lundbeck İlaç Ticaret Limited Şirketi Turkey 100%

Lundbeck Group Ltd. (Holding) United Kingdom 100%

- Lundbeck Limited United Kingdom 100%

- Lundbeck Pharmaceuticals Ltd. United Kingdom 100%

- Lifehealth Limited United Kingdom 100%

- Lundbeck UK LLP United Kingdom 100%

Lundbeck USA LLC USA 100%

- Lundbeck LLC USA 100%

- Lundbeck Pharmaceuticals Ireland Limited Ireland 100%

- Lundbeck Pharmaceuticals Services, LLC USA 100%

- Lundbeck Research USA, Inc. USA 100%

Lundbeck de Venezuela, C.A. Venezuela 100%

1) In subsidiaries in which Lundbeck does not hold 100% of the share capital but has a put option to buy the remaining capital at a fixed price after a

pre-arranged number of years, a debt obligation is recognised instead of recognition of minority interests.

ALK Group

ALK-Abelló Nordic A/S Denmark 100%

ALK-Abelló Nordic A/S (branch) Sweden 100%

ALK-Abelló Nordic A/S (branch) Norway 100%

ALK-Abelló Nordic A/S (branch) Finland 100%

ALK-Abelló Ltd. United Kingdom 100%

ALK-Abelló S.A. France 100%

ALK-Abelló Arzneimittel GmbH Germany 100%

ALK-Abelló Allergie-Service GmbH Austria 100%

ALK-Abelló AG Switzerland 100%

ALK AG Switzerland 100%

ALK-Abelló B.V. The Netherlands 100%

- Artu Biologicals Europe B.V. The Netherlands 100%

- Artu Biologicals Onroerend Goed B.V. The Netherlands 100%

ALK-Abelló S.A. Spain 100%

- ALK-Abelló S.p.A. Italy 100%

ALK-Abelló sp. z.o.o. Poland 100%

ALK-Abelló, Inc. USA 100%

ALK-Abelló, Source Materials, Inc. USA 100%


95




ALK-Abelló Pharmaceuticals, Inc. Canada 100%

ALK-Abelló A/S (branch) China 100%

Falck Group

Falck A/S Denmark 100%

- Falck Danmark A/S Denmark 100%

- Falck Hjælpemidler A/S Denmark 100%

- Falck Treasury A/S Denmark 100%

- Falck Health Care Holding A/S Denmark 100%

- Falck Health Care A/S Denmark 100%

- Falck Dental Care ApS Denmark 100%

- Falck Luftambulance A/S Denmark 100%

- Falck Air AB Sweden 100%

- ActivCare A/S Denmark 100%

- ActivCare Privat A/S Denmark 100%

- Vikteam A/S Denmark 80%

- Falck JobService A/S Denmark 85%

- Falck Assistance A/S Denmark 100%

- Falck Air Ambulance A/S 2) Denmark 50%

- North Securities A/S 2) Denmark 49%

- Falck Fire Services A/S Denmark 100%

- Falck Fire Services DE GmbH Germany 100%

- Falck Fire Services CH AG Schwitzerland 100%

- Falck Fire Services BE NV Belgium 100%

- Falck Norge Holding AS Norway 100%

- Falck Redning AS Norway 100%

- Falck Emergency AS Norway 100%

- Falck Ambulanse AS Norway 100%

- Falck Norge Leasing AS Norway 100%

- Falck Health Care Norge AS Norway 100%

- Falck Services AS Norway 100%

- Falck Safety Services Holding A/S Denmark 100%

- Falck Safety Services A/S Denmark 100%

- Falck Nutec Management A/S Denmark 100%

- Falck Global Safety B.V. The Netherlands 100%

- Falck Nutec AS Norway 100%

- Falck Nutec Ltd. United Kingdom 100%

- Nutec Centre for Safety Ltd. 1) United Kingdom 100%

- Falck Onsite Limited United Kingdom 100%

- Onsite Training Services Limited. 1) United Kingdom 100%

- Falck Nutec Trinidad and Tobago Limited Trinidad & Tobago 80%

- Nutec UK Ltd. United Kingdom 100%

- Nutec Belgium Holding BVBA 1) Belgium 100%

- Nutec Belgium BVBA 1) Belgium 100%

- Falck Nutec B.V. The Netherlands 100%

- Marinesafety International Rotterdam B.V. The Netherlands 100%

- MSTS Asia Sdn. Bhd. Malaysia 70%

- Risktec (M) Sdn. Bhd. Malaysia 100%

- Falck Bestari Healthcare Sdn Bhd Malaysia 82%

- MSTS Asia (S'pore) Pte. Ltd. Singapore 100%

- Falck Nutec Malaysia Sdn. Bhd. Malaysia 70%

- Falck BHV Operations B.V. The Netherlands 100%

- Falck Safety Services Nigeria Limited Nigeria 51%

- Falck Prime Atlantic Limited Nigeria 51%

- Falck Caspian Safe LLC Azerbaijan 65%

- Falck Safety Services Canada Ltd. Canada 55%

- Falck Safety Services Belgium BVBA Belgium 100%

- Falck Nutec Brasil Participacoes Ltda Brazil 100%

- Falck Nutec Brasil Treinamentos em Segurança Marítima Ltda Brazil 100%

- Southfield Ltd Thailand 50%


96




- Falck Nutec (Thailand) Ltd Thailand 65%

- Falck USA Holdings, Inc USA 100%

- Falck Alford Holdings, Inc USA 80%

- Alford Services, Inc USA 100%

- Alford Safety Services, Inc USA 100%

- Haztec Services - West Indies, LLC USA 100%

- Haztec Services St. Lucia Ltd St. Lucia 100%

- Haztec Services Trinidad Limited Trinidad & Tobago 100%

- Occupational Safety Training, Inc. USA 100%

- Falck Alford International BV The Netherlands 100%

- Falck Holding de México, S.A. de C.V. Mexico 100%

- Falck Safety Services de México, S.A.P.I. de C.V. Mexico 55%

- Falck Nutec Vietnam Limited Vietnam 88%

- Falck Safety Services LLC UAE 49%

- Falck Global Assistance Norway AS Norway 100%

- Falck Followit Norge AS Norway 100%

- Falck Sverige Holding AB Sweden 100%

- Falck Investment Sverige AB Sweden 100%

- Falck Räddningskär AB Sweden 100%

- Falck Security AB Sweden 100%

- Falck Forsäkring AB Sweden 100%

- Falck TravelCare AB Sweden 100%

- Falck Ambulans AB Sweden 95%

- Falck Räddningstjänst AB Sweden 100%

- Falck Services AB Sweden 100%

- Svensk Sjöambulans AB 2) Sweden 50%

- Falck Ensihoito Oy Finland 100%

- S Reg Holding A/S Denmark 100%

- S Reg AB Sweden 100%

- Falck Secure AB Sweden 100%

- S Reg A/S Denmark 100%

- S Reg Oy Finland 100%

- S Reg AS Norway 100%

- Falck Health Care Sverige Holding AB Sweden 100%

- Falck AM Health Care AB Sweden 100%

- Falck Aktiv Arbetsmedicin AB Sweden 100%

- Falck Healthcare AB Sweden 100%

- Skandinavisk Hälsovård AB Sweden 100%

- Svensk Närsjukvård AB Sweden 100%

- Doc Care AB Sweden 100%

- Ofelia Vård AB Sweden 100%

- Ofelia Vård AS Norway 100%

- Falck USA, Inc. USA 98%

- FCA Corp. USA 87%

- Care Ambulance Service, Inc. USA 100%

- Falck EMS Corp. USA 97%

- Lifestar Response Corporation, Inc. USA 100%

- Lifestar Response of Alabama, Inc. USA 100%

- Medibus, Inc. USA 100%

- STAT Equipment Corp. USA 100%

- STAT EMS, LLC USA 51%

- Bi-County Ambulance & Ambulette Transport Services Corp. USA 100%

- Lifestar Response of New Jersey, Inc. USA 100%

- Lifestar Response of Maryland, Inc. USA 100%

- Access Transport Services Holding, Inc. USA 100%

- Access on Time Language Services LLC USA 100%

- Home Care Equipment, Inc. USA 100%

- Robinson's Ambulance & Oxygen Service, Inc. USA 100%

- Falck Southeast Corp. USA 96%

- Cape Cod Medica Enterprises, Inc USA 100%


97




- American Ambulance, Inc. USA 100%

- Falck Southeast II Corp. USA 96%

- Transitional Health Solutions LLC USA 100%

- Falck Northern California Corp. USA 100%

- Falck Northwest Corp. USA 100%

- Falck Investments Finland Oy Ab Finland 100%

- Falck Oy Finland 100%

- Falck Autoabi OÜ Estonia 100%

- Falck Benelux NV Belgium 93%

- Falck Investments NV Belgium 88%

- Falck Medical Services LLC UAE 49%

- Falck Eurasia B.V. The Netherlands 100%

- Falck Russia Holding B.V. 2) The Netherlands 49%

- Falck Medical Vladivostok LLC Russia 100%

- Beijing Falck Rescue Consulting Services Co., Ltd China 100%

- Falck Kazakhstan LLP Kazakhstan 100%

- Open Clinic LLP Kazakhstan 80%

- Falck Fire Services Rus LLC Russia 100%

- Falck Foundation VZW Belgium 100%

- Falck Medycyna Sp. z o.o. Poland 100%

- Starowka Sp. z o.o. Poland 76%

- Falck SK a.s. Slovakia 93%

- Falck Emergency AS Slovakia 51%

- Falck Záchranná a.s. Slovakia 100%

- Falck Academy s.r.o. Slovakia 100%

- Falck Healthcare a.s. Slovakia 100%

- Falck Pharma s.r.o. Slovakia 100%

- Falck Fire Services a.s. Slovakia 100%

- Falck CZ a.s. Czech Republic 93%

- Falck SCI, S.A. Spain 65%

- Falck Emergency Spain, S.L. Spain 65%

- Falck VL Servicios Sanitarios, S.L. Spain 75%

- Falck Servizi Industriali di Emergenza S.r.l. Italy 65%

- Falck France SAS France 100%

- Falck Holding B.V. The Netherlands 100%

- Falck B.V. The Netherlands 100%

- Falck Fire Services NL B.V. The Netherlands 100%

- Falck AVD B.V. The Netherlands 100%

- AVD-ICT B.V. The Netherlands 100%

- Safety Center Zuid Holland B.V. The Netherlands 100%

- Safety Center Zuid Holland c.v. The Netherlands 52%

- Safe Building B.V. The Netherlands 100%

- Falck BHV B.V. The Netherlands 100%

- AVD Consultancy N.V. Belgium 100%

- Falck Brasil AVD Participações Ltda. Brazil 100%

- Falck Brasil Plano de Saúde Ltda. Brazil 100%

- Falck Brasil 747 Participações Ltda. Brazil 100%

- Falck Brasil FF Participações Ltda. Brazil 100%

- Falck Panama Holding S.A. Panama 100%

- EMI Holdings Management S.A. Panama 63%

- EMI Foreign Holdings 1 S.A. Panama 100%




- Servicio Emergencias Regional SER S.A. Panama 100%

- Falck Fire & Safety do Brasil S.A. Brazil 65%

- Empresa de Medicina Integral EMI S.A. Servicio de Ambulancia Prepagada - Grupo EMI S.A. Colombia 100%

- EMI El Salvador S.A. de C.V. El Salvador 100%

- Inversiones EMI Worldwide S.A. Panama 100%

- EMI Panama S.A. Panama 100%


98




- EMI Ecuador S.A.- Emergencia Medica Integral Ecuador 100%

- Perses S.A. Uruguay 100%

- Portovenus S.A. Uruguay 16%

- EMI Venezuela Holding S.A. Panama 100%

- Emergencia Medica Integral EMI Centro S.A. Venezuela 100%

- Centro Medico Integral CEMICA S.A. Venezuela 100%

- Falck Chile Holding S.A. Chile 100%

- Falck Chile S.A. Chile 80%

- Falck Safety Services Limitada Chile 100%

- Falck Capacitacion Limitada Chile 100%

- Falck Rettungsdienst GmbH Germany 90%

- G.A.R.D. Verwaltungsgesellschaft für Ambulanz und Rettungsdienst mbH Germany 100%

- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Cuxhaven GmbH Germany 100%

- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Hamburg West mbH Germany 100%

- GUARD Hospital Service GmbH Germany 100%

- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Bremen mbH Germany 100%

- ASN-Ambulanz-Service-Nord GmbH Germany 100%

- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst Hamburg-Ost GmbH Germany 100%

- G.A.R.D. Arbeitsgemeinschaft Rettungsdienst Dresden GmbH Germany 100%

- G.A.R.D. ArGe Dresden GbR Germany 100%

- G.A.R.D. Gemeinnützige Ambulanz und Rettungsdienst GmbH Germany 100%

- GUARD Gesellschaft für unabhängige ambulante Rettungsdienstleistungen GmbH Germany 100%

- G.A.R.D. Gesellschaft für Ambulanz und Rettungsdienst NRW mbH Germany 100%

- K&G Taxi-Krankentransporte und Dienstleitungs GmbH Germany 80%

- G.A.R.D. Beteiligungsgesellschaft für Ambulanz und Rettungsdienst mbH Germany 100%

- promedica Rettungsdienst GmbH Germany 90%

- RTD Consulting GmbH Germany 100%

- ASG Ambulanz Leipzig GmbH Germany 100%

- promedica Rettungsdienst Bremehaven/Bremen GmbH Germany 100%

- promedica Rettungsdienst Walbeck-Frankenberg GmbH & Co. KG Germany 70%

- Euro-Med Einkaufsgemeinschaft GmbH Germany 63%

- promedica Services GmbH Germany 100%

- G.A.R.D. Ambulanzflugdienst GmbH Germany 50%

- Brava Holding GmbH 2) Germany 25%

- Kranken-Transport Herzig GmbH Germany 100%

- KS-Medi-Service GmbH Germany 100%

- Falck Österreich GmbH Austria 100%

- Falck Yardim Hizmetleri Limited Şirketi Turkey 100%

- Falck Pty Ltd Australia 55%

- Falck Ambulance Services Australia Pty Ltd Australia 100%

- Falck UK Limited United Kingdom 100%

- Falck EMS UK Limited United Kingdom 100%

- Medical Services Limited 2) United Kingdom 45%

- Falck Emergency Services UK Ltd. United Kingdom 93%

- Frontline Fire International Limited United Kingdom 100%

- Falck Fire Services UK Limited United Kingdom 100%

- Falck Emergency Asia Pte. Ltd. Singapore 100%

- Falck India Limited United Kingdom 93%

- Falck Services Limited Mauritius 100%

- Falck India Pvt. Ltd. (India) India 100%

- Falck Services Pvt Ltd. (India) India 100%

- Falck Fire Services S.R.L Romania 93%

- Falck South Africa Holding (PTY) LTD South Africa 100%

- Med1 (Private) Limited 2) Sri Lanka 50%

- A C Trafik A/S Denmark 100%

- KPC Ejendomme af 6. juni 2002 A/S 2) Denmark 25%

1) Dormant company

2) Associate


99


FINANCIAL STATEMENTS – LUNDBECK FOUNDATION

FINANCIAL STATEMENTSPARENT FOUNDATION

CONTENTS Income statement for the period 1 January – 31 December 100Balance sheet at 31 December 10 1

Notes 1. Accounting policies 1022. Financial income and expenses 1023. Staff costs and other operating costs 1024. Fees to auditors appointed at the general meeting 1035. Tax on profit for the year 1046. Grants for the year 1047. Investments in subsidiaries 1058. Other securities and investments 1059. Statement of changes in equity and capital base 10610. Pension obligations 10611 . Related parties 10612. Events after the balance sheet date 106

100


2013 2012 Note DKKm DKKm Dividend from Lundbeckfond Invest A/S 7 1,064 - Financial income 2 341 279 Financial expenses 2 -116 -25Profit from investing activities before costs 1,289 254 Other operating income 12 - Staff costs 3 -18 -21Other external costs 4 -11 -12Depreciations and amortisations -3 -7Profit before tax 1,269 214 Tax on profit for the year 5 -5 -1Profit for the year 1,264 213 Proposed distribution of profit: Profit for the year 1,264 Amount available for distribution 1,264 The Board of Directors proposes that the profit be allocated as follows: Transferred to capital base 253 Total amount for grants in 2013 368 Reversed grants/repayments -17 Net grants for the year 6 351 Retained earnings 660 Distributed 1,264


INCOME STATEMENT FOR THE PERIOD 1 JANUARY – 31 DECEMBER

101


Assets 2013 2012 Note DKKm DKKm Other intangible assets 2 2 Intangible assets 2 2

Land and buildings 82 12 Property, plant and equipment 82 12 Investments in subsidiaries 7 4,059 4,061 Other securities and investments 8 3,987 3,239 Financial assets 8,046 7,300 Non-current assets 8,130 7,314 Other receivables 39 21 Receivable from subsidiary 1 1 Income tax receivable 1 2 Cash 97 71 Current assets 138 95 Assets 8,268 7,409 Equity and liabilities Capital base 2,523 2,270 Retained earnings 4,658 3,998 Equity 9 7,181 6,268 Pension liabilities 10 20 29 Provisions 20 29 Payable grants, long-term 298 400 Non-current liabilities 298 400 Payable grants, short-term 674 591 Repo debt 8 89 95 Other payables 6 26 Current liabilities 769 712 Liabilities 1,067 1,112 Equity and liabilities 8,268 7,409 Related parties 11 Events after the balance sheet date 12

BALANCE SHEET AT 31 DECEMBER


102


1. ACCOUNTING POLICIES

The financial statements of the parent company of the Lundbeck Foundation for 2013 has been prepared in accordance with the provisions of the Danish Financial Statements Act for medium-sized reporting class C enterprises. The annual report is presented in Danish kroner (DKK), which also is the functio-nal currency of the Foundation. The accounting policies are unchanged from last year. Differences relative to the Group’s accounting policies The Fondation’s accounting policies for recognition and measurement are in accordance with the Group’s policies with the exceptions stated below: Other operating income Other income consist of rental and other service income as well as gain on sale of tangible fixed assets. Investments in subisidiaries Investments in Lundbeckfond Invest A/S are recognised in the Foundation’s balance sheet at cost. Dividends are recognised in the income statement. Investments in other subsidiaries follow the same principles as for Lundbeckfond Invest A/S. The other current subsidiary is classified as a Lundbeckfond Emerge activity. In practice this means that the fair value of the investment is written down yearly based on costs incurred by the subsidiary.

2. FINANCIAL INCOME AND EXPENSES

2013 2012 DKKm DKKm Financial income Interest income, etc. 183 117 Gain from securities and other equity investments 158 162 341 279 Financial expenses Interest expenses etc. - - Loss on securities and other equity investments 116 25 116 25

3. STAFF COSTS AND OTHER OPERATING COSTS

2013 2012 DKKm DKKm Wages and salaries, incl. holiday allowance 15.8 12.2 Pension contributions - 0.1 Pension benefits, including adjustment of pension provision 1.8 8.4 Other social security costs 0.1 0.1 17.7 20.8

Pension benefits including adjustment of pension provision relates to pension obligations taken over from H. Lundbeck and pension obligations towards existing and former board members. The decrease is due to the fact that it was decided in 2012 to terminate the scheme going forward, and the conditions for this termination were specified in this connection resulting in an increase in the provision in 2012. Remuneration of the Executive Management 4 2 Remuneration of the Board of Directors, including committee fees 4 4


NOTES 1 - 2 - 3

103


Members of Executive Management and the Board of Directors who also serve as directors in subsidiaries also receive board remuneration directly from such subsidiaries. For a complete description hereof, please see the consolidated financial statements in the annual report of the Lundbeck Foundation for 2013, note 3.

Total remuneration of the Executive Management and Board of Directors (including remuneration 2013 2012received from the wholly owned subsidiary Lundbeckfond Invest A/S) is specified as follows: DKKm DKKm Executive Management: Christian Dyvig 6.5 3.4 Board of Directors: Jørgen Huno Rasmussen, Chairman of the Foundation and Lundbeckfond Invest A/S from 2 May 2012, Chairman of the Investment Committee 0.8 0.7 Mikael Rørth, Vice-chairman of the Foundation and Lundbeckfond Invest A/S, Chairman of the Biomedical Sciences Committee and member of the Investment Committee 0.8 0.9 Steffen Kragh, member of the Investment Commitee, from 23 May 2013 0.2 - Thorleif Krarup, member of the Investment Committee, Chairman of the Science Teaching and Communication Committee 0.3 0.3 Povl Krogsgaard-Larsen, member of the Investment, Biomedical Sciences and Natural Sciences Committees 0.5 0.5 Gunhild Waldemar, member of the Biomedical Sciences Committee 0.4 0.4 Kim Klitgaard, employee representative from H. Lundbeck A/S 0.2 0.2 Ken Liljegren, employee representative from H. Lundbeck A/S 0.2 0.2 Peter Adler Würtzen, employee representative from ALK-Abelló A/S 0.2 0.2 Jes Østergaard, Chairman of the Natural Sciences Committee and member of the Investment Committee, stepped down on 23 May 2013 0.3 0.6 Rounding - -0.1 3.9 3.9 Average number of employees during the year 9 8 Number of employees at year-end 9 9 Total operating costs of the Lundbeck Foundation and Lundbeckfond Invest A/S Lundbeck Foundation - Staff costs, other external costs and depreciations 32 34 Lundbeckfond Invest A/S - Staff costs and other external costs 27 20 59 54 Can be allocated to the Foundations activities as follows: Strategic investment, monitoring and administration 26 28 Lundbeckfond Invest 11 6 Lundbeckfond Ventures 10 9 Grant and Emerge activities 12 11 59 54

4. FEES TO AUDITORS APPOINTED AT THE GENERAL MEETING

2013 2012 DKKm DKKm

Administrative expenses include fees to the company's auditors appointed by the general meeting, Deloitte, in the amount of: Statutory audit 0.3 0.3 Other services 0.3 0.2 0.6 0.5

NOTES 3 - 4

3. STAFF COSTS AND OTHER OPERATING COSTS – CONTINUED


104


5. TAX ON PROFIT FOR THE YEAR

2013 2012 DKKm DKKm

Tax on profit for the year, Lundbeck Foundation 5 1 5 1

In the financial year, the Lundbeck Foundation paid income tax of TDKK 1,222 (TDKK 677 in 2012). When calculating taxable income, the Foundation has deducted grants and tax provisions for future grants. No deferred tax is recognised for accounting purposes concerning tax provisions for future grants as this is not expected to crystallise. Deferred tax hereon amounted to DKK 450 million (DKK 333 million in 2012). The Lundbeck Foundation is jointly taxed with Lundbeckfond Invest A/S, which means that the Lundbeck Foundation is taxable on dividends received from Lundbeckfond Invest A/S. The total income tax payment for the Lundbeck Foundation Group amounted to DKK 593 million (DKK 1,136 million in 2012), of which Danish income tax accounted for DKK (70) million (DKK 475 million in 2012). The negative tax payment in Denmark was due to excess payment of Danish taxes in 2012.

6. GRANTS FOR THE YEAR

2013 2012 DKKm DKKm Biomedical science projects 128 175 Natural science projects 20 25 Teaching and communicating science 12 23 Regular grants 160 223 Lundbeck Foundation Professor 25 - Lundbeck Foundation Fellowships 70 80 Grete Lundbeck European Brain Research Foundation 15 15 Talent and teaching prizes 1 1 Travel grants for conferences and similar activities 2 4 Research abroad 9 18 Visiting professorships 2 3 Other 2 2 Personal grants 126 123 DanFunD 12 -CINS II 30 -BBB-Projekt 40 -EMBL - 60 RESCueH - 44 MEPRICA - 16 Strategic grants 82 120 Grants for the year, gross 368 466 Descendants - - Reversed grants/repayments -17 -6Grants for the year, net 351 460 Emerge activities 8 16 Grants for the year, including Emerge activities, gross 376 482


NOTES 5 - 6

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7. INVESTMENTS IN SUBSIDIARIES

Lundbeckfond Other Invest A/S subsidiaries Total DKKm DKKm DKKm

Cost at 1 January 2013 4,046 15 4,061 Additions - - - Cost at 31 December 2013 4,046 15 4,061 Net revaluation at 1 January 2013 - - - Value adjustments for the year - -2 -2 Net revaluation at 31 December 2013 - -2 -2 Carrying amount at 31 December 2013 4,046 13 4,059Carrying amount at 31 December 2012 4,046 15 4,061 Carrying amount of equity as per the most recently published annual report 14,586 - 14,586 Dividend received 2013 1,064 - 1,064Dividend received 2012 - - - Lundbeckfond Invest A/S has its registered office in Copenhagen and is wholly owned by the Lundbeck Foundation. At the end of 2012, the Foundation acquired 60% of the share capital of Insusense ApS, registered in Risskov, Denmark.

8. OTHER SECURITIES AND INVESTMENTS

Bond and

corporate Unlisted loans investment portfolios Equities funds Total DKKm DKKm DKKm DKKm

Carrying amount at 1 January 2013 2,435 785 19 3,239 Additions 2,855 187 1 3,043 Disposals -2,079 -247 -3 -2,329Value adjustments for the year -25 59 - 34 Carrying amount at 31 December 2013 3,186 784 17 3,987

Bonds in repo transactions have been provided as collateral for repo debt. The value of bonds in repo transactions provided as collateral at 31 December 2013 amounted to DKK 89 million (DKK 95 million in 2012). Unlisted investment funds include investments in an unlisted investment fund with a residual payment obligation of DKK 5 million (DKK 5 million in 2012).

NOTES 7 - 8


106


9. STATEMENT OF CHANGES IN EQUITY AND CAPITAL BASE

Retained Capital base*) earnings Total DKKm DKKm DKKm Equity at 1 January 2013 2,270 3,998 6,268 Grants, net. -351 -351Retained profit for the year 253 1,011 1,264 Equity at 31 December 2013 2,523 4,658 7,181 *) Changes in capital base 2009-2013: The capital base at 1 January 2009 amounted to: 1,750 2009 Capital base increased by 150 2010 Capital base increased by 150 2011 Capital base increased by 175 2012 Capital base increased by 45 2013 Capital base increased by 253 Capital base at 31 December 2013 2,523

10. PENSION OBLIGATIONS

2013 2012 DKKm DKKm Obligations at 1 January 29 23 Adjustment for the year -9 6 Obligations at 31 December 20 29

11. RELATED PARTIES

The Lundbeck Foundation defines related parties as the Foundation’s Board of Directors and Executive Management, its wholly-owned investment and holding company Lundbeckfond Invest A/S and this company’s subsidiaries H. Lundbeck A/S, ALK-Abelló A/S and Falck Holding A/S, and Insusense ApS. Lundbeckfond Invest A/S shares the same address as the Lundbeck Foundation, and there is duality of membership between the Executive Management, administration (partly) and Board of Directors. The Lundbeck Foundation receives dividends from Lundbeckfond Invest A/S. Lundbeckfond Invest A/S pays rent to the Lundbeck Foundation on an arm's length basis. Payments are likewise made/received for administrative services. The Foundation also receive service fee for administrative services provided to Insusense ApS. For information on remuneration paid to the members of the Executive Manage-ment and Board of Directors, please see note 3. Other than the above, the Lundbeck Foundation has only had immaterial transactions with the related parties. 12. EVENTS AFTER THE BALANCE SHEET DATE

No events after the balance sheet date with effect on the financial statements have occured.

NOTES 9 - 10 - 11 - 12


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BOARD

Steffen KraghBorn 1964, elected to the Board in 2013.M.Sc. and MBA,Member of the Investment Committee,President & CEO of Egmont Foundation and Egmont International Holding. Non-executive board member Nykredit Holding A/S (VC), Nykredit Realkredit A/S (VC), Foreningen Nykredit, CapplenDamm Holding (C) and chairman of numerous companies in the Egmont group.

Special qualificationsExpertise within strategy, economics, finance and accounting, capital markets, securities and funding, legal and regulatory matters of importance to financial business, corporate management and financial business management, including IT.

Jørgen Huno Rasmussen, ChairmanBorn 1952, elected to the Board in 2008.MSc engineering (civil), B. Com. and Lich.tech. Chairman of the Investment Committee.Chairman of the board of Tryghedsgruppen and board of Tryg A/S, member of the boards of Bladt Industries A/S, Haldor Topsoe A/S,Terma A/S and Vestas Wind Systems A/S.

Special qualificationsIn-depth knowledge of managing an international, listed group and skills in new markets, strategy, branding, acquisitions and divestments, business development, procurement, finance, risk management and optimising production processes.

Special qualificationsExperienced clinician with substantial scientific production in clinical oncology and basic research. Chief physician at the Copenhagen University Hospital since 1980 and professor at Copenhagen University since 1993. Long-standing contribution to research policy, including chairmanship of a number of scientific committees.

Mikael Rørth, Vice-chairmanBorn 1943, elected to the Board in 2002.Professor, Chief Physician, M.D., Copenhagen University Hospital.Chairman of the Research Committee and member of the Investment Committee.

Kim KlitgaardBorn 1963, elected to the Board in 2010.Operator.

Elected by the employees of H. Lundbeck A/S.

Ken LiljegrenBorn 1963, elected to the Board in 2010.Civil engineer, Principal Scientist.

Elected by the employees of H. Lundbeck A/S.

Peter Adler Würtzen Born 1968, elected to the Board in 2008.Ph.d., Team Leader.

Elected by the employees of ALK A/S.

Thorleif KrarupBorn 1952, elected to the Board in 2003.B.Sc. (Economics) and B. Com., Director.Member of the Investment Committee, Chairman of the Science Teaching and Communication Committee.Chairman of the board of Exiqon A/S, vice-chairman of Falck A/S, member of the boards of ALK A/S, H. Lundbeck A/S, Bisca A/S andthe Denmark-America Foundation.

Special qualificationsManagement experience from large international organisations. Expertise in finance and economics. In-depth experience with board work in listed companies in the Nordic, UK and US

Gunhild WaldemarBorn 1957, elected to the Board in 2011.Professor, Chief Physician, M.D., D. M. Sc. Dept. of Neurology, Copen-hagen University Hospital, Rigshospitalet. Member of the Research Committee. Director of Danish Dementia Research Centre, Chairman of the research committee under the Danish Alzheimers Association, Liaison with the European Federation of Neurological Societies EFNS and vice-chairman of the Dementia Council, Capital Region of Denmark.

Special qualificationsSkills in research, development, research evaluation and innovation. Long-standing experience with international research management and board work in international scientific companies.

Special qualificationsExperience with board work in large international company and management of knowledge-intensive organisations. Skills in research, development and innovation and experience with research evaluation. Introduction of the concept of scientific social responsibility and contribution to principles of academic leadership.

Povl Krogsgaard-LarsenBorn 1941, elected to the Board in 2011.Professor, Pharm. D., Copenhagen University.Member of the Research Committee and the Investment Committee.Chairman of the board of Bioneer A/S, vice-chairman of the Alfred Benzon Foundation and member of the board of the Carlsberg Laboratory.

Management Christian Dyvig Chief Executive Officer

Theis Martin Malmborg Executive AssistantBritt Wilder Executive SecretaryNina Kamille Holmgaard Adm. Service Coordinator

Invest Bertil From Chief Financial OfficerKlaus Ørtoft Madsen Chief Investment DirectorKasper Kitaj Pedersen Investment DirectorChristoffer Gundelach Student Assistant

Grants Anne-Marie Engel Director of ResearchSissel Vorstrup Associate Director of ResearchNina Espegård Hassel Strategic AdvisorUlla Jakobsen Science ManagerKirsten Ljungdahl SecretaryHeidi Stoklund Larsen Student Assistant

The Brain Prize Kim Krogsgaard DirectorJanne Axelsen International Relations Manager

Emerge Christian E. Elling Partner

Ventures Mette Kirstine Agger Managing PartnerJohan Kördel Senior PartnerCasper Breum PartnerJon Kaznelson AnalystBerit Mikkelsen Associate

Accounting/Controlling Claus Køhler Carlsson Director of Accounting & TaxSusanne Bernth Senior Investment ControllerLotte Halse Investment ControllerDorthe Mathiasen Book-keeperSteen Rosendal Controller

Design: Klaus Wilhardt

Photo: Pernille Ringsing

ISSN 1901-5933

EMPLOYEES

SCIENTIFIC COMMITIEES

Biomedical Science CommitteeMikael Rørth, chairman, Professor, Chief Physician, M.D.

Gunhild Waldemar, Professor, Chief Physician, M.D.Povl Krogsgaard-Larsen, Professor, Pharm D. Anders Björklund, Professor, M.D.Peter Friberg, Professor, MDUlf Hedin, Professor, MDOle Petter Ottersen, Professor, M.D.Ole William Petersen, Professor, M.D.Edvard Smith, Professor, MD

Natural Science CommitteeJes Østergaard, chairman, M.Sc. Chemical Engineering

Povl Krogsgaard-Larsen, Professor, Pharm D.Knut Conradsen, Professor, dr. phil.Björn Lindman, Professor, ph.d.

Science Teaching and Communication CommitteeThorleif Krarup, chairman, B.Sc. Economics and B. Com.

Nils O. Andersen, Professor, dr. scient. Doris Jorde, Professor, ph.d.

Lundbeck Foundation Group 2013


Operating profit DKK 3,465 million

Lundbeck Foundation’s share of profit DKK 2,807 million

Grants DKK 376 million

Net wealth DKK 37,642 million

Number of employees 29,798 million

Lundbeck Foundation is an active industrial foundation that strives to maintain and expand Lundbeck by:

•beingavalue-addingownerofLundbeck,ALKandFalckandotherinnovative companies through Lundbeckfond Ventures and Lundbeckfond Emerge

•beinganactivemanagerofitsportfolioinvestmentsthroughLundbeckfondInvest

•supportingandstrengtheningresearchinbiomedicalsciencesofthehighest international standards in order to make a significant difference to human health and life

CVR no 11814913

Lundbeck Foundation ı Scherfigsvej 7 ı DK-2100 Copenhagen ı Tel +45 39 12 80 00 ı www.lundbeckfonden.com

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2013 Annual Report

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