The annual report of Chr. Hansen Holding A/S and the Chr. Hansen Group has been prepared in accordance with the provisions of the Danish Financial Statements Act of June 7, 2001 (class D), Danish accounting standards and the Copenhagen Stock Exchange regulations on the presentation of financial statements by listed companies.

For a number of years the Chr. Hansen Group has comprised two separate business units: the Ingredients Sector and the Allergy Sector, but after the divestment of the Ingredients Sector (the discontinuing operations) with effect from July 29, 2005, the Group now solely consists of the Allergy Sector and Chr. Hansen Holding A/S (the continuing operations).

The assets and liabilities of the Group as of August 31, 2005 solely comprise the continuing operations. In order to further enhance the information and forward-looking value of the financial statements a supplementary income statement has been added in order to present comparative figures for the continuing operations, while the equivalent notes to the income statements present the division between the continuing and the discontinuing operations. Relevant notes to the balance sheet furthermore present the seperate effects of the divestment of the Ingredients Sector.

Segment information is presented according to the same principle as the previous year, although for this year the operations of the Ingredients Sector solely comprise an 11-month period.

The accounting policies are unchanged from last year.

Moreover, certain editorial adjustments and clarifications that do not represent accounting policy changes have been made to the accounting policies.

The consolidated financial statements incorporate the financial statements of Chr. Hansen Holding A/S (the Parent Company) and companies (subsidiaries) in which the Parent Company holds, directly or indirectly, more than 50% of the votes or any other controlling interest. Companies in which the Chr. Hansen Group holds between 20% and 50% of the votes and exercises a significant but not controlling interest are considered associated companies. Legal structure of the Chr. Hansen Group.

The consolidated financial statements are prepared on the basis of the financial statements of the Parent Company and the subsidiaries, which are all presented in accordance with the accounting policies of the Chr. Hansen Group.

The consolidated financial statements are prepared by adding items of a like nature and eliminating intercompany income and costs, equity investments, balances and dividends as well as realized and unrealized gains and losses on transactions among the consolidated companies. The tax effect of the elimination is taken into account.

Acquisitions are accounted for using the purchase method, under which assets and liabilities in the company acquired are measured at their fair values at the date of acquisition. Expected costs of restructuring of the company acquired, planned to be made in connection with the acquisition, are recognized as provisions. The tax effect of revaluations is taken into account.

If the cost of the company acquired exceeds the fair value of the net assets of the company, the difference is recognized as goodwill. If it later turns out that the fair value of the assets or liabilities taken over deviates from the values determined at the time of acquisition, the calculation of goodwill will be adjusted until the end of the financial year following the year of acquisition if the new value does not exceed the capital value of the expected future income. All other adjustments are recognized in the income statement.

Newly acquired or newly established companies are recognized in the consolidated financial statements from the date of acquisition. Companies divested or wound up are consolidated in the income statement until the date they are divested or wound up. The comparative figures are not restated to reflect acquisitions, divestments or companies wound up.

Minority interests. Minority shareholders’ proportionate share of the results of subsidiaries and equity is stated separately in the calculation of the Chr. Hansen Group’s net income or loss and equity.

Foreign currency. Transactions denominated in foreign currency are translated into local currency on the basis of average monthly exchange rates, which roughly express the exchange rates prevailing on the transaction date. Translation differences arising between the exchange rate prevailing on the transaction date and the exchange rate prevailing on the date of payment are recognized in the income statement as financial items.

Receivables, payables and other monetary items are translated at the exchange rates prevailing on the balance sheet date. Any difference between the exchange rate at the time a receivable or payable arose and the exchange rate prevailing on the balance sheet date is recognized in the income statement under financial items.

Fixed assets acquired denominated in foreign currency are translated at the exchange rates prevailing on the transaction dates.

On consolidation, the income statements of foreign subsidiaries are translated at average exchange rates for the year and balance sheet items are translated at the exchange rates prevailing on the balance sheet date. Exchange differences arising on the translation of the equity of subsidiaries at the beginning of the year to the exchange rates prevailing on the balance sheet date and exchange differences arising on the translation of income statements to average exchange rates for the year and the translation of balance sheets to the exchange rates prevailing on the balance sheet date are recognized directly in equity. All foreign subsidiaries are considered independent companies for foreign currency purposes.

When translating the financial statements of foreign companies which present their financial statements in currencies affected by annual inflation rates exceeding 50%, the exchange rates prevailing on the balance sheet date are used both for income statement and balance sheet items.

Derivative financial instruments are measured at fair value and recognized under other receivables or other
payables, respectively.

Changes in the fair value of derivative financial instruments that are designated as and qualify as fair value hedges of a recognized asset or a recognized liability are recognized in the income statement together with any changes in the value of the hedged asset or hedged liability.

Changes in the fair value of derivative financial instruments that are designated as and meet the conditions for hedging future transactions are recognized directly in equity. Income and expenses relating to such hedging transactions are transferred from equity on realization of the hedged item and are recognized under the same line item as the hedged item, with due consideration of the tax effect.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the income statement under financial items as they arise.

Public loans and grants. Development loans with a clause that the debt may be waived or grants are recognized in the income statement when the related research and development costs are incurred.

In the event of repayment, repayments plus interest are charged to the income statement when the related income is recognized.

Investment grants are set off against the cost of the assets for which the grants were provided and are then recognized when depreciation is recognized on the asset.