Statement on Corporate Governance and Corporate Governance Report

The Statement on Corporate Governance and the Corporate Governance Report are available on the Company’s website under Media and Investors – Corporate Governance.

Statement on Corporate Governance under Sec. 289a (HGB) for the 2015 Financial Year

In the Statement on Corporate Governance under Sec. 289a HGB, the Management Board and the Supervisory Board report on corporate governance. In addition to the annual Declaration of Conformity in accordance with Sec. 161 of the Stock Corporation Act (AktG), the Statement on Corporate Governance also includes relevant information on corporate governance practices and other aspects of corporate governance, including a description of the working practices of the Management Board and Supervisory Board.

DECLARATION OF CONFORMITY WITH THE GERMAN CORPORATE GOVERNANCE CODE (THE “CODE”) OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD OF MORPHOSYS AG

The Management Board and Supervisory Board of MorphoSys AG declare the following under Sec. 161 of the German Stock Corporation Act:

  1. Since the last Declaration of Conformity on December 5, 2014, MorphoSys AG has complied with the recommendations of the “Government Commission on the German Corporate Governance Code” dated June 24, 2014 and the version from May 5, 2015 with the following exceptions:
    1. There is no cap on the overall or individual variable remuneration components of Management Board members’ remuneration (see Item 4.2.3 Para. 2 sentence 6 of the Code). Based on the Supervisory Board’s existing limitations for the Management Board’s variable remuneration components and their annual allocation, the Supervisory Board does not believe that an additional cap is required.
    2. Until July 21, 2015, the Supervisory Board refrained from fully applying the recommendations in Item 5.4.1 Paras. 2 and 3 sentence 1 of the Code. According to Item 5.4.1 Para 2, the Supervisory Board shall specify certain objectives regarding the Board’s composition that provides for an appropriate level of female participation. Recommendations made by the Supervisory Board to the responsible election bodies shall take these objectives into account in accordance with Item 5.4.1 Para. 3 sentence 1. The Supervisory Board has established concrete objectives for its composition and has thereby resolved to strive for adequate female representation. An exact quota of women was not specified because qualification and not gender should be the deciding criteria in appointing members of the Supervisory Board. As of July 22, 2015, the recommendations in Item 5.4.1 Paras. 2 and 3 sentence 1 of the Code have been fully applied because on this date a corresponding quota was established.
  2. MorphoSys will continue to comply with the recommendations of the “Government Commission on the German Corporate Governance Code” in the version dated May 5, 2015 with the exceptions described under Item 1a.

Martinsried/Planegg, December 3, 2015

MorphoSys AG

On behalf of the Management Board:
Dr. Simon Moroney
Chief Executive Officer

On behalf of the Supervisory Board:
Dr. Gerald Möller
Chairman of the Supervisory Board

RELEVANT INFORMATION ON CORPORATE GOVERNANCE PRACTICES

MorphoSys ensures compliance with laws and rules of conduct through the Group-wide application of the following documents: the Code of Conduct, the Compliance Handbook and supplementary internal guidelines.

MorphoSys’s Code of Conduct sets out the fundamental principles and key policies and practices for business behavior. The code is a valuable tool for employees and executives, particularly in business, legal and ethical situations of conflict. It reinforces the principles of transparent and sound management and fosters trust in the Company from the financial markets, business partners, employees and the public. Compliance with the Code of Conduct is carefully monitored. The Group-wide application of the Code is overseen by a Code of Conduct Committee, and the Code itself is routinely reviewed and updated when necessary. The Code of Conduct can be downloaded from the Company’s website under Media and Investors – Corporate Governance.

The Compliance Handbook describes MorphoSys’s compliance management system and is intended to ensure compliance with all legal regulations as well as set out high ethical standards that apply to both the management and all employees. The Management Board has overall responsibility for the compliance management system and is required to report regularly to the Audit Committee and the Supervisory Board. In carrying out its compliance responsibility, the Management Board has assigned the relevant tasks to various offices at MorphoSys.

The Compliance Officer monitors the communication between the individual compliance posts within MorphoSys and makes adjustments to the system as needed in consultation with the Management Board. The Compliance Officer also routinely reports all relevant developments in the Company’s compliance system to the Chief Executive Officer.

The Compliance Officer is supported by a Compliance Committee that meets at regular intervals to discuss compliance issues. This committee serves as a liaison between the various departments dealing with compliance issues and facilitates the identification and discussion of all the compliance posts’ relevant issues. This is the basis upon which the Compliance Officer periodically verifies adherence to the compliance management system and MorphoSys’s compliance status.

More information on MorphoSys’s compliance management system can be found in the Corporate Governance Report.

COMPOSITION OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD

MANAGEMENT BOARD

The Management Board of the Company consists of a Chief Executive Officer and three other members. A schedule of responsibilities defines the different areas of responsibility as follows:

  • Dr. Simon Moroney, Chief Executive Officer, responsible for Strategy and Planning; Compliance and Quality Assurance; Internal Audit; HumanHuman: Of human origin Resources; Business Development & Portfolio Management; Legal; the coordination of individual areas of the Management Board; and representation of the Management Board to the Supervisory Board.
  • Jens Holstein, Chief Financial Officer, responsible for Accounting and Taxes; Controlling; Corporate Finance & Corporate Development; Risk Management; IT; Technical Operations; Procurement & Logistics; Corporate Communications and Investor Relations; and Environmental Social Governance (ESG).
  • Dr. Arndt Schottelius, Chief Development Officer, responsible for Preclinical Development; Clinical Research; Clinical Operations; Drug Safety & Pharmacovigilance; Regulatory Affairs; and Project Management.
  • Dr. Marlies Sproll, Chief Scientific Officer responsible for Development Partnerships & Technology Development; TargetTarget: Target molecule for thera­peutic intervention, e.g. on the surface of diseased cells Molecule & AntibodyAntibody: Proteins of the immune system that ­recognize antigens, thereby triggering an immune response Research; ProteinProtein: Polymer consisting of amino acids, e. g. antibodies and enzymes Chemistry; Alliance Management; and Intellectual Property.

SUPERVISORY BOARD

As of December 31, 2015, the MorphoSys AG Supervisory Board consisted of six members who oversee and advise the Management Board. The current Supervisory Board consists of professionally qualified members who represent MorphoSys AG shareholders. Dr. Gerald Möller, acting Chairman of the Supervisory Board, coordinates the Board’s activities, chairs the Supervisory Board meetings and represents the interests of the Supervisory Board externally. All Supervisory Board members are independent, as defined in the German Corporate Governance Code, and have many years of experience in the biotechnology and pharmaceutical industries. The members are duly elected by the shareholders during the Annual General Meeting. The Chairperson of the Supervisory Board is not a former member of MorphoSys AG’s Management Board. The terms of office of all six Supervisory Board members ended with the conclusion of the 2015 Annual General Meeting and, therefore, six Supervisory Board members were either elected or reelected to the Supervisory Board during the 2015 Annual General Meeting. The members of the Supervisory Board and its committees are listed in the table below.

12 TABLE Composition of the Supvervisory Board until Termination of the 2015 Annual General Meeting

Position Initial Appointment End of Period Audit Committee Remuneration and Nomination Committee Science and Technology Committee
Dr. Gerald Möller Chairman 1999 2015
Dr. Geoffrey Vernon Deputy Chairman 1999 2015
Dr. Walter Blättler Member 2007 2015
Dr. Daniel Camus Member 2002 2015
Dr. Marc Cluzel Member 2012 2015
Karin Eastham Member 2012 2015
 
Independent Financial Expert Chairman Member

13 TABLE Composition of the Supvervisory Board since Termination of the 2015 Annual General Meeting

Position Initial Appointment End of Period Audit Committee Remuneration and Nomination Committee Science and Technology Committee
Dr. Gerald Möller Chairman 1999 2018
Dr. Frank Morich Deputy Chairman 2015 2017
Karin Eastham Member 2012 2018
Klaus Kühn Member 2015 2017
Dr. Marc Cluzel Member 2012 2018
Wendy Johnson Member 2015 2017
 
Independent Financial Expert Chairman Member

WORKING PRACTICES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD

To ensure good corporate governance, a guiding principle of the cooperation between the Management Board and Supervisory Board at MorphoSys AG is the open, comprehensive and regular communication of information. The dual board system prescribed by the German Stock Corporation Act clearly differentiates between a company’s management and supervision. The responsibility of both Boards is clearly stipulated by the legislator and the Boards’ bylaws and Articles of Association. The stated objective of MorphoSys AG’s Management Board and Supervisory Board is to sustainably increase Company value. The Boards work closely together to make decisions and take actions for the Company’s benefit.

Management Board members have their own area of responsibility defined in the schedule of responsibilities and regularly report to their Management Board colleagues. Cooperation among Management Board members is governed by the bylaws. The Supervisory Board ratifies both the schedule of responsibilities and the bylaws. Management Board meetings are typically held weekly and chaired by the Chief Executive Officer. During these meetings, resolutions are passed concerning dealings and transactions that, under the bylaws, require the approval of the entire Management Board. At least half of the Management Board’s members must be present to pass a resolution. Management Board resolutions are passed by a simple majority and, in the event of a tied vote, the Chief Executive Officer’s vote decides. For material events, each Management Board or Supervisory Board member can call an extraordinary meeting of the entire Management Board. Management Board resolutions can also be passed outside of meetings by an agreement made orally, by telephone or in writing (also by e-mail). A written protocol is completed for each meeting of the full Management Board and is submitted for approval to the full Management Board and for signature to the chief executive officer at the following meeting.

Management Board strategy workshops are also held in which the Group-wide strategic objectives are developed and prioritized.

The Management Board promptly and comprehensively informs the Supervisory Board in writing and at Supervisory Board meetings about planning, business development, the Group’s position, risk management and other compliance issues. Extraordinary meetings of the Supervisory Board are also called for material events. The Management Board involves the Supervisory Board in the strategy, planning and all fundamental Company issues. In addition to routine Supervisory Board meetings, a strategy meeting takes place between the Management Board and Supervisory Board once annually to discuss MorphoSys’s strategic direction. The Management Board’s bylaws specify that material business transactions require the approval of the Supervisory Board. Detailed information on the cooperation of the Management Board and Supervisory Board and important items of discussion during the 2015 financial year can be found in the Report of the Supervisory Board.

The Supervisory Board holds a minimum of two meetings per calendar half-year and at least six meetings per full calendar year. The Supervisory Board has supplemented the Articles of Association with rules of procedure that apply to its duties: The Chairperson of the Supervisory Board coordinates the activities of the Supervisory Board, chairs the Supervisory Board meetings and represents the interests of the Supervisory Board externally. The Supervisory Board typically passes its resolutions in meetings, but resolutions may also be passed outside of meetings in writing (also by e-mail), by telephone or video conference.

The Supervisory Board has a quorum when at least two-thirds of its members (including either the Chairperson or Deputy Chairperson of the Supervisory Board) take part in the vote. Resolutions of the Supervisory Board are passed with a simple majority unless the law prescribes otherwise. In the event of a tied vote, the Chairperson of the Supervisory Board’s vote decides.

Protocols are completed for Supervisory Board meetings, and resolutions passed outside of meetings. A copy of the Supervisory Board’s protocol is made available to all Supervisory Board members. The Supervisory Board conducts an efficiency evaluation regularly in accordance with the recommendation in Item 5.6 of the Code.

COMPOSITION AND WORKING PRACTICES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD COMMITTEES

The Management Board has not formed any committees.

The Supervisory Board has three committees: the Audit Committee, the Remuneration and Nomination Committee and the Science and Technology Committee. The members of the three committees formed by the Supervisory Board are professionally qualified.

14 TABLE Participation of Supervisory Board Members

Zoom

MEETINGS OF THE AUDIT COMMITTEE

by phone
by phone by phone

Name
02/25/2015 03/18/2015 04/29/2015 07/22/2015 10/01/2015 11/03/2015 12/03/2015
Dr. Daniel Camus
Dr. Geoffrey Vernon
Karin Eastham
Klaus Kühn
Wendy Johnson
MEETINGS OF THE REMUNERATION AND NOMINATION COMMITTEE

by phone
by phone
Name 02/20/2015 02/25/2015 03/03/2015 05/07/2015 12/02/2015
Dr. Gerald Möller
Dr. Marc Cluzel
Karin Eastham
MEETINGS OF THE SCIENCE AND TECHNOLOGY COMMITTEE

by phone
by phone by phone

Name
02/25/2015 04/30/2015 05/07/2015 07/22/2015 09/15/2015 10/01/2015 11/09/2015 12/03/2015
Dr. Walter Blättler
Dr. Marc Cluzel
Wendy Johnson
Frank Morich
 
at tended in person part icipated by phone

AUDIT COMMITTEE

The main task of the Audit Committee is to support the Supervisory Board in fulfilling its supervisory duties with respect to the accuracy of the annual and consolidated financial statements, the activities of the auditor and internal control functions, such as risk management, compliance and internal auditing. The Audit Committee submits a recommendation to the Supervisory Board for the election at the Annual General Meeting of an independent auditor. The members of the Audit Committee until May 8, 2015, were Dr. Daniel Camus (Chairman), Dr. Geoffrey Vernon and Karin Eastham, who all fulfill the prerequisite of being independent financial experts. The members of the Audit Committee as of May 8, 2015, were Klaus Kühn (Chairman), Karin Eastham and Wendy Johnson. Klaus Kühn and Karin Eastham fulfill the prerequisite of being independent financial experts.

REMUNERATION AND NOMINATION COMMITTEE

The Remuneration and Nomination Committee is responsible for preparing and reviewing the Management Board’s compensation system annually before its final approval. When necessary, the Committee searches for suitable candidates to appoint to the Management Board and Supervisory Board and submits appointment proposals to the Supervisory Board. The Committee also prepares the contracts made with Management Board members. The members of the Remuneration and Nomination Committee are Dr. Gerald Möller (Chairman until May 8, 2015), Dr. Marc Cluzel and Ms. Karin Eastham (Chairperson as of May 8, 2015).

SCIENCE AND TECHNOLOGY COMMITTEE

The Science and Technology Committee advises the Supervisory Board on matters concerning proprietary drug and technology development and prepares the relevant Supervisory Board resolutions. The members of the Science and Technology Committee until May 8, 2015 were Dr. Walter Blättler (Chairman) and Dr. Marc Cluzel. As of May 8, 2015, the members of the Science and Technology Committee are Dr. Marc Cluzel (Chairman), Dr. Frank Morich and Ms. Wendy Johnson.

The Supervisory Board members’ biographies can be found on the MorphoSys website under Company – Management – Supervisory Board.

Corporate Governance Report

At MorphoSys, responsible, sustainable and value-oriented corporate governance assumes a high priority. Good corporate governance is an essential aspect of MorphoSys’s corporate management and forms the framework for the Group’s management and supervision, which includes the Group’s organization, commercial principles and tools for its guidance and control.

The German Corporate Governance Code (“the Code”) provides a standard for the transparent monitoring and management of companies that strongly emphasizes shareholder interests. Many of the corporate governance principles contained in the Code have been practiced at MorphoSys for many years. Corporate governance issues at MorphoSys AG are detailed in the Statement on Corporate Governance under Sec. 289a HGB. The statement also contains the annual Declaration of Conformity, relevant information on corporate governance practices and a description of the Management Board and Supervisory Board’s working practices. Additional information can be found in this Corporate Governance Report.

COMMUNICATION WITH THE CAPITAL MARKETS

At MorphoSys, a key corporate communication principle is to simultaneously and fully inform institutional investors, private shareholders, financial analysts, employees and all other stakeholders of the Company’s situation through regular, transparent and timely communication. Shareholders have immediate access to the information provided to financial analysts and similar recipients and can obtain this information in both German and English. The Company is firmly committed to following a fair information policy.

Regular meetings with analysts and investors in the context of road shows and individual meetings play a central role in investor relations at MorphoSys. Conference calls accompany publications of quarterly results and give analysts and investors an immediate opportunity to ask questions about the Company’s development. Company presentations for on-site events, visual and audio recordings of other important events as well as conference call transcripts are also available on the Company’s website to all interested parties.

The Company’s website www.morphosys.com serves as a central platform for current information on the Company and its development. Financial reports, analyst meeting and conference presentations as well as press releases and ad hoc statements are also available. The important regularly scheduled publications and events (annual reports, interim reports, annual general meetings and press and analyst conferences) are published in the Company’s financial calendar well in advance.

ESTABLISHMENT OF SPECIFIC TARGETS FOR THE COMPOSITION OF THE SUPERVISORY BOARD

MorphoSys AG’s Supervisory Board has a total of six members. The Supervisory Board believes a ratio of at least two non-German members, or at least two members having extensive international experience, provides a fair share of diversity given the Company’s international orientation. The Supervisory Board currently meets this ratio.

The Supervisory Board also strives to have at least four independent members. The Supervisory Board currently meets this ratio. Material and lasting conflicts of interest should be avoided, particularly those arising from activities for major competitors. No such conflict of interest currently exists.

The Supervisory Board has two female members and the Company intends to maintain this ratio in the future.

The age limit of 75 years contained in the Supervisory Board’s bylaws is respected but the Supervisory Board may make an exception to this provision in specific cases.

At the Annual General Meeting, the Supervisory Board intends to propose an initial period of office of two years for Supervisory Board members. The Supervisory Board still intends to allow reappointment only once for an additional term of three years but reserves the right to make exceptions in specific cases and permit members to be reappointed for a third or potentially fourth term of three years each.

The Supervisory Board intends to respect the targets described in future election proposals.

WOMEN’S QUOTA FOR THE SUPERVISORY BOARD, MANAGEMENT BOARD AND THE TWO MANAGEMENT LEVELS BELOW THE MANAGEMENT BOARD

In July 2015, the Supervisory Board established a women’s quota for the Supervisory Board and Management Board:

MorphoSys AG’s Supervisory Board has a total of six members. Two of those members are women, which places the current ratio of female members on the Company’s Supervisory Board above 30 %, at 33.33 %. The Supervisory Board intends to maintain this ratio in the future.

MorphoSys AG’s Management Board has a total of four members. One of those members is a woman, which places the current ratio of female members on the Company’s Management Board below 30 %, at 25 %. The Supervisory Board intends to maintain this ratio in the future.

In July 2015, the Management Board established a women’s quota for the two management levels below the Management Board:

At the time of the decision, the first management level below the Management Board (the Senior Management Group) consisted of 20 members, seven of who were women, placing the level of female representation above 30 %, at 35 %. The Management Board intends to maintain a minimum ratio of 30 %.

At the time of the decision, the second management level below the Management Board (executives outside of the Senior Management Group) consisted of 48 members, 19 of who were women, placing the level of female representation above 30 %, at 39.59 %. The Management Board intends to maintain a minimum ratio of 30 %.

REMUNERATION REPORT

The Remuneration Report presents the principles, structure and amount of Management Board and Supervisory Board remuneration. The report complies with the legal provisions and gives consideration to the Code’s recommendations.

MANAGEMENT BOARD REMUNERATION

The Management Board’s remuneration system is intended to provide an incentive for performance-oriented and sustainable corporate management. Therefore, the aggregate remuneration of the Management Board members consists of different components: fixed components, an annual cash bonus based on the achievement of individual and corporate targets (short-term incentive – STI), a variable compensation component with a long-term incentive (long-term incentive – LTI) and other remuneration components. The variable remuneration component with long-term incentive consists of a performance share plan and convertible bond programs from prior years. Management Board members also receive fringe benefits in the form of non-cash benefits, mainly the use of a company car and the payment of insurance premiums. All remuneration packages are reviewed annually for their scope and appropriateness by the Remuneration and Nomination Committee and compared to the results of an annual management board remuneration analysis. The amount of compensation paid to Management Board members highly depends on their individual areas of responsibility, their personal achievement of goals, the Company’s economic situation and success and the Company’s business prospects versus its competition. All decisions concerning adjustments to the remuneration package are made by the entire Supervisory Board. The Management Board’s remuneration and index- linked pension scheme were last adjusted in July 2015.

OVERVIEW

In the 2015 financial year, total benefits of € 4,464,154 (2014: € 5,065,240) were granted to the Management Board in accordance with the provisions of the Corporate Governance Code.

Of the remuneration for the year 2015, € 2,613,470 was cash compensation and € 1,850,684, or 41%, resulted from personnel expenses for share-based compensation (performance share plan and convertible bond plan) (remuneration with long-term incentive – LTI).

The total amount of benefits paid to the Management Board in the 2015 financial year was € 9,508,884 (2014: € 6,984,419). In addition to cash compensation payments of € 2,869,901 (2014: € 2,893,199), this amount includes the value of exercised convertible bonds and the transfer of treasury shares from a performance-based share plan (share-based compensation) amounting to € 6,638,983 (2014: € 4,091,220) relevant under German tax law.

Management Board members exercised 51,800 convertible bonds in the course of 2015. On June 1, 2015 a total of 71,949 treasury shares were transferred to the Management Board from the 2011 performance-based share plan because the vesting period for this LTI program had expired. All transactions in MorphoSys shares executed by members of the Management Board were reported as required by law and published in the Corporate Governance Report and on the Company’s website.

In accordance with the requirements of Item 4.2.5, Para. 3 of the Code, the following table provides detailed mandatory information on the remuneration of the individual Management Board members.

Please note that the following tables are provided in the context of the Corporate Governance Report and differ from the information on Management Board remuneration presented in the Notes of this Annual Report (Item 7.4). These differences are due to the varying presentation requirements under the Corporate Governance Code and IFRSIFRS: International Financial Reporting Standards; future EU-wide standards produced by the IASB.

FIXED REMUNERATION AND FRINGE BENEFITS

The non-performance-related remuneration of the Management Board consists of fixed remuneration and additional benefits, which primarily include the use of company cars, as well as subsidies for health, welfare and disability insurance. The Chief Financial Officer, Mr. Jens Holstein, receives an additional expense allowance for maintaining two households.

PENSION EXPENSES

The Company also provides payments to Management Board members equal to a maximum of 10 % of the member’s fixed annual salary plus any payable taxes. This compensation is intended for the members’ individual retirement plans. Additionally, all Management Board members participate in a pension plan in the form of a provident fund, which was introduced in cooperation with Allianz Pensions-Management e.V. The pension obligations of the provident fund are met by Allianz Pensions-Management e.V.

PERFORMANCE-BASED COMPENSATION (SHORT-TERM INCENTIVE – STI)

Each member of the Management Board receives performancebased compensation in the form of an annual bonus of up to 70 % of the gross base salary when 100 % of his or her goals have been achieved. These bonus payments are dependent on the achievement of both corporate and personal goals specified by the Supervisory Board at the start of each financial year. Corporate goals comprise 80 % of performance-based compensation. These are based on the Company’s performance measured by revenue, operating result, the progress of the partnered pipeline, the Company’s proprietary portfolio and the achievement of technology targets. Individual goals comprise 20 % of annual performance-based compensation and include operating objectives that the respective Management Board members are expected to fulfill. At the start of the year, the Supervisory Board assesses the degree to which corporate and personal goals were achieved in the prior year and uses this information to determine the bonus. The bonus may not exceed 125 % of the target amount (corresponding to 87.5 % of gross base salary). Performance-based compensation can be omitted if the goals are not achieved. The bonus for the 2015 financial year will be paid in February 2016.

LONG-TERM INCENTIVE COMPENSATION (LONG-TERM INCENTIVE – LTI)

In 2011, MorphoSys introduced a new, long-term incentive compensation plan (Performance Share Plan) for the Management Board and members of the Senior Management Group. The LTI-program is based on the allocation of shares linked to the achievement of predefined performance targets over a four-year period.

Each year, the Supervisory Board determines the number of shares to be allocated to the Management Board. On April 1, 2015, the Management Board was granted 21,948 shares. Each Management Board member received an entitlement benefit for a specific number of shares. For more information, please refer to Item 8.2.5 in the Notes to the Consolidated Financial Statements and the explanation on share buybacks in the Corporate Governance Report.

The Supervisory Board sets the long-term performance targets along with the allocation of shares for a given year. The target for the 2015 LTI-program was the performance of the MorphoSys share compared to a benchmark index consisting equally of the Nasdaq Biotechnology IndexNasdaq Biotechnology Index: stock market index made up of biotechnological or pharmaceutical companies listed at the US stock exchange NASDAQ and the TecDAXTecDAX: Index of the 30 largest ­technology companies listed on the Frankfurt Stock Exchange Index. LTI-program participants are awarded shares annually based on the daily relative performance of the MorphoSys share versus the benchmark index. There is a hurdle of 50 % and a cap of 200 % for the price performance in any given year. For example, if the relative performance of the MorphoSys shares versus the benchmark index is less than 50 %, participants will not receive any entitlement benefits for the relevant year. Participants also do not receive entitlement benefits for additional shares when the share price performance exceeds 200 %.

The ultimate number of performance shares allocated to the LTI-program participants is determined at the completion of the program, namely after four years. This calculation incorporates the number of shares initially allocated after adjusting for the share price development of the MorphoSys share versus the benchmark index and a “company factor” that is determined at the Supervisory Board’s discretion. This company factor is a number between zero and two that is set by the Supervisory Board based on the Company’s situation. The company factor’s predefined default value is one.

MISCELLANEOUS

Management Board members were not granted any loans or similar benefits in the reporting year nor have they received any benefits from third parties that were promised or granted based on their position as a member of the Management Board.

TERMINATION OF MANAGEMENT BOARD EMPLOYMENT CONTRACTS/ CHANGE OF CONTROL

If a Management Board member’s employment contract terminates due to member’s death, the member’s spouse or life partner is entitled to the fixed monthly salary for the month of death and the 12 months thereafter. In the event of a change in control, Management Board members are entitled to exercise their extraordinary right to terminate their employment contracts and receive any outstanding fixed salary for the remainder of the agreed contract period. Moreover, in such a case, all convertible bonds and performance shares granted will become vested immediately and can be exercised after the expiration of the statutory vesting period. A change of control has occurred when (i) MorphoSys transfers assets or a substantial portion of its assets to unaffiliated third parties, (ii) MorphoSys merges with an unaffiliated company or (iii) a shareholder or third party holds 30 % or more of MorphoSys’s voting rights.

15 TABLE Compensation of the Management Board in 2015 and 2014 (Disclosure in Accordance with the German Corporate Governance Code)

Zoom

Zoom

SUPERVISORY BOARD REMUNERATION

The remuneration of Supervisory Board members is governed by the Company’s Articles of Association and a corresponding Annual General Meeting resolution on Supervisory Board remuneration. In the 2015 financial year, Supervisory Board members received fixed compensation, attendance fees and expense allowances for their participation in Supervisory Board and committee meetings. Since 2014, each Supervisory Board member has received annual fixed compensation (€ 85,400 for Chairpersons, € 51,240 for Deputy Chairpersons and € 34,160 for all other members) for their membership of the Supervisory Board. The Chairperson receives € 4,000 for each Supervisory Board meeting chaired and the other members receive € 2,000 for each Supervisory Board meeting attended. For committee work, the committee Chairperson receives € 12,000 and other committee members each receive € 6,000. Committee members also receive € 1,200 for their participation in a committee meeting. Compensation is paid quarterly on a pro-rated basis. A resolution of the Annual General Meeting on May 8, 2015 made two changes to the rules governing Supervisory Board remuneration: Participation in a Supervisory Board meeting by telephone or video conference results in a 50 % reduction in compensation for meeting participation and, in certain cases, a fixed expense allowance is granted for travel time when a meeting is personally attended. Therefore, Supervisory Board members residing outside of Europe who personally take part in a Supervisory Board or committee meeting are entitled to a fixed expense allowance of € 2,000 (plus any sales tax due) for additional travel time in addition to attendance fees and reimbursed expenses.

Supervisory Board members are also reimbursed for travel expenses and value-added taxes (VAT) on their compensation.

In the 2015 financial year, Supervisory Board members received a total of € 529,270 (2014: € 514,480) excluding the reimbursement of travel expenses. This amount consists of fixed compensation and attendance fees for participating in Supervisory Board and committee meetings.

No loans were granted to Supervisory Board members by the Company.

The table below details the Supervisory Board’s remuneration.

16 TABLE Compensation of the Supervisory Board in 2015 and 2014

Fixed Compensation Attendance Fees3 Total Compensation
in € 2015 2014 2015 2014 2015 2014
Dr. Gerald Möller 93,521 97,400 36,200 38,000 129,721 135,400
Dr. Walter Blättler1 16,188 46,160 13,000 25,200 29,188 71,360
Dr. Daniel Camus1 16,188 46,160 8,400 23,200 24,588 69,360
Dr. Marc Cluzel 50,089 46,160 28,000 32,400 78,089 78,560
Karin Eastham 50,089 46,160 36,800 32,400 86,889 78,560
Dr. Geoffrey Vernon1 20,073 57,240 8,400 24,000 28,473 81,240
Dr. Frank Morich2 37,324 14,200 51,524
Wendy Johnson2 30,099 26,400 56,499
Klaus Kühn2 30,099 14,200 44,299
Total 343,670 339,280 185,600 175,200 529,270 514,480

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on May 8, 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on May 8, 2015.
3 The attendance fee contains expense allowances for the attendance on Supervisory Board and committee meeting.

HOLDINGS OF MANAGEMENT BOARD AND SUPERVISORY BOARD MEMBERS

The members of the Management Board and the Supervisory Board hold more than 1 % of the shares issued by the Company. All shares, performance shares and convertible bonds held by each member of the Management Board and the Supervisory Board are listed below.

17 TABLE Directors’ Holdings

Shares
01/01/2015 Additions Forfeitures Sales 12/31/2015
Management Board
Dr. Simon Moroney 452,885 42,353 0 0 495,238
Jens Holstein 2,000 16,132 0 14,132 4,000
Dr. Arndt Schottelius 2,000 16,132 0 16,132 2,000
Dr. Marlies Sproll 28,620 49,132 0 27,000 50,752
Total 485,505 123,749 0 57,264 551,990
 
Supervisory Board
Dr. Gerald Möller 9,000 2,000 0 0 11,000
Dr. Walter Blättler1 2,019 0 0 0
Dr. Daniel Camus1 0 0 0 0
Dr. Marc Cluzel 500 0 0 0 500
Karin Eastham 1,000 1,000 0 0 2,000
Dr. Geoffrey Vernon1 0 0 0 0
Dr. Frank Morich2 1,000 0 0 1,000
Wendy Johnson2, 3 0 0 0 500
Klaus Kühn2 0 0 0 0
Total 12,519 4,000 0 0 15,000

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on 08. May 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on 08. May 2015.
3 500 shares have been acquired by Wendy Johnson before joining the Supervisory Board of MorphoSys AG.

Convertible Bonds

01/01/2015
Additions Forfeitures Exercises 12/31/2015
Management Board
Dr. Simon Moroney 107,186 0 0 18,800 88,386
Jens Holstein 90,537 0 0 0 90,537
Dr. Arndt Schottelius 60,537 0 0 0 60,537
Dr. Marlies Sproll 93,537 0 0 33,000 60,537
Total 351,797 0 0 51,800 299,997
Performance Shares

01/01/2015
Additions Forfeitures Allocations 12/31/2015
Management Board
Dr. Simon Moroney 54,655 13,062 0 23,553 44,164
Jens Holstein 37,434 8,946 0 16,132 30,248
Dr. Arndt Schottelius 37,434 8,946 0 16,132 30,248
Dr. Marlies Sproll 37,434 8,946 0 16,132 30,248
Total 166,957 39,900 0 71,949 134,908

DIRECTORS’ DEALINGS

Members of MorphoSys AG’s Management Board and Supervisory Board and persons related to such members are required to disclose any trading in MorphoSys shares under Sec. 15a of the German Securities Trading Act (WpHG).

During the reporting year, MorphoSys received the following notifications under Sec. 15a WpHG listed in the table below.

18 TABLE Directors’ Dealings (2015)

Party Subject to the Notification Requirement Function Date of Transaction in 2015 Type of Transaction Number of Stocks/
Derivatives
Average Share Price Transaction Volume
Dr. Simon
Moroney
CEO 12/16/2015 Purchase; convertible bonds were converted into MorphoSys AG shares; Dr. Moroney is holding the shares received 18,800 € 16.79 € 315,652.00
Dr. Marlies
Sproll
CSO 12/16/2015 Sale; convertible bonds were converted into MorphoSys AG shares and subsequently sold 9,500 € 56.1934 € 533,837.30
Dr. Marlies
Sproll
CSO 12/15/2015 Purchase; convertible bonds were converted into MorphoSys AG shares; Dr. Sproll is holding the shares received 14,000 € 16.79 € 235,060.00
Dr. Marlies
Sproll
CSO 12/15/2015 Sale; convertible bonds were converted into MorphoSys AG shares and subsequently sold 9,500 € 56.0253 € 532,240.35
Dr. Arndt
Schottelius
CDO 06/03/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 5,392 € 66.1085 € 356,457.03
Dr. Arndt
Schottelius
CDO 06/03/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 5,370 € 65.6735 € 352,666.70
Dr. Arndt
Schottelius
CDO 06/02/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 5,370 € 66.0633 € 354,759.92
Dr. Marlies
Sproll
CSO 06/04/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 2,667 € 65.6343 € 175,046.68
Dr. Marlies
Sproll
CSO 06/03/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 2,667 € 65.8605 € 175,649.95
Dr. Marlies
Sproll
CSO 06/02/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 2,666 € 65.6746 € 175,088.48
Jens Holstein CFO 06/04/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 3,381 € 65.6343 € 221,909.57
Jens Holstein CFO 06/03/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 5,381 € 65.8605 € 354,395.35
Jens Holstein CFO 06/02/2015 Sale of MorphoSys AG shares; the shares were granted on 06/01/2015 within MorphoSys’s long term incentive (LTI) program 2011 after a four-year waiting period. The shares were subsequently sold. 5,370 € 65.6746 € 352,672.60
Dr. Frank
Morich
Deputy Chairman of the
Supervisory Board
05/12/2015 Purchase of MorphoSys AG shares 1,000 € 63.51 € 63,510.00
Dr. Gerald
Möller
Chairman of the Supervisory Board 03/27/2015 Purchase of MorphoSys AG shares 2,000 € 56.70 € 113,400.00
Karin
Eastham
Member of the Supervisory Board 03/27/2015 Purchase of MorphoSys AG shares 1,000 US$ 61.8129 US$ 61,812.90

AVOIDING CONFLICTS OF INTEREST

Management Board and Supervisory Board members are required to refrain from any actions that could lead to a conflict of interest with their duties at MorphoSys AG. Such transactions or the secondary employment of Management Board members must be disclosed immediately to the Supervisory Board and are subject to the Board’s approval. The Supervisory Board, in turn, must inform the Annual General Meeting of any conflicts of interest and their handling. There were no conflicts of interest in the 2015 financial year.

STOCK REPURCHASES

By resolution of the Annual General Meeting on May 19, 2011 and superseded by the Annual General Meeting resolution on May 23, 2014, MorphoSys is authorized in accordance with Sec. 71 Para. 1 no. 8 AktG to repurchase its own shares in an amount of up to 10 % of the existing common stock. This authorization can be exercised in whole or in part, once or several times by the Company or a third party on the Company’s behalf for the purposes specified in the authorizing resolution. It is at the Management Board’s discretion to decide whether to carry out a repurchase on a stock exchange, via a public offer or through a public invitation to submit a bid.

In April 2015, MorphoSys repurchased a total of 88,670 of its own shares based on the authorization from the year 2014. The Company plans to use these shares for a long-term incentive program for the Management Board and Senior Management Group. The authorization also permits the shares to be used for other lawful purposes.

INFORMATION TECHNOLOGY

During the 2015 financial year, the Information Technology department focused on IT security and optimizing the IT infrastructure. The entire IT infrastructure was tested for vulnerabilities and threat vectors allowing cyber-attacks using a detailed, multistage safety check by external IT experts. The results confirmed that MorphoSys has a state-of-the-art IT security system. The potential for optimization that was identified prompted further improvements.

A decisive factor for maintaining comprehensive IT security is not only technical security testing but also the behavior of employees. As part of an IT security campaign called the “IT Security Awareness Campaign,” employees were made more aware of IT security through a variety of activities.

In the R&D area, the software and databases that support company- specific processes and technologies in antibody selection, characterization and production were developed further during the reporting year. The software used in this area is based on the GeneData Biologics software which is used throughout the industry and allows MorphoSys to quickly and reliably identify the most promising and differentiated drug candidates from the high number of antibody molecules technically available.

INFORMATION ON THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM CONCERNING THE ACCOUNTING PROCESS UNDER SEC. 289 PARA. 5 AND SEC. 315 PARA. 2 NO. 5 HGB

In the 2015 financial year, MorphoSys completed a routine update of the documentation for its existing internal control and risk management system. This update serves to maintain adequate internal control over financial reporting and to ensure the availability of all controls so that financial figures can be reported as precisely and accurately as possible. The COSO (Committee of Sponsoring Organizations of the Treadway Commission) defines the corresponding COSO framework (“Internal Control – Integrated Framework”). This is the framework used by MorphoSys and is the most commonly used for the internal control of financial reporting.

System constraints make it impossible to give absolute assurance that internal controls will always prevent or completely detect all misrepresentations made in the context of financial reporting. Internal controls can only provide reasonable assurance that financial reporting is reliable and verify that the financial statements were prepared in accordance with the IFRS standards for external purposes adopted by the European Union.

The consolidated financial statements are subjected to a number of preparation, review and control processes so that the statements can be reported promptly to the market and shareholders. To accomplish this, the Company’s executives have a coordinated plan for which all internal and external resources are made available. MorphoSys also uses a strict four-eye principle to ensure the accuracy of the key financial ratios reported and the underlying execution of all accounting processes. Numerous rules and guidelines are also followed to ensure the strict separation of the planning, posting and execution of financial transactions. This functional separation of processes is ensured by all of the Company’s operating IT systems through the appropriate assignment of rights. External service providers routinely review the implementation of and compliance with these guidelines as well as the efficiency of the accounting processes. The reporting year’s most recent review showed insignificant cause for action. The appropriate corrective actions are being planned, and their implementation will be reviewed again in the following year.

Predicting future events is not the purpose of MorphoSys’s internal control and risk management system. The Company’s risk management system does, however, ensure that business risks are detected and assessed as soon as possible. The risks identified are eliminated or at least brought to an acceptable level using appropriate corrective measures. Special attention is given to risks that could jeopardize the Company.

The Management Board ensures that risks are always dealt with responsibly and keeps the Supervisory Board informed of any risks and their development. Detailed information on the risks and opportunities encountered by MorphoSys can be found in the “Risk and Opportunity Report”.

ACCOUNTING AND EXTERNAL AUDIT

MorphoSys AG prepares its financial statements in accordance with the provisions of the German Commercial Code (HGB) and the Stock Corporation Act (AktG). The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS), as applicable in the European Union.

For the election of the Company auditor, the Audit Committee of the Supervisory Board submits a nomination proposal to the Supervisory Board. At the 2015 Annual General Meeting, PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft was appointed auditor for the 2015 financial year. As proof of its independence, the auditor submitted a Declaration of Independence to the Supervisory Board. Lead auditors of these consolidated financial statements were Mr. Dietmar Eglauer and Mr. Bodo Kleinschrod. Information on other consulting, audit and valuation services provided by PricewaterhouseCoopers AG to MorphoSys AG during the 2015 financial year can be found in the Notes (Item 7.1).

COMPLIANCE MANAGEMENT SYSTEM

The basic mechanisms of the compliance management system at MorphoSys are presented in the section entitled “Relevant Information on Corporate Governance Practices” on page 62. In addition to this information, the responsibilities within the compliance organization are shown in Figure 17.

17 Figure Compliance Management System (CMS)

INTERNAL AUDIT DEPARTMENT

The Internal Audit Department is a key component of the Company’s compliance management system whose main duty is to provide the MorphoSys Group with a systematic and uniform approach for evaluating and improving the effectiveness of risk management and supporting the management and monitoring activities when meeting set targets. The audit and consulting firm KPMG was reappointed in 2015 to act as a co-sourcing partner in the internal auditing process.

Internal auditing is based on a risk-oriented internal audit plan that is largely based on the results of the most recent risk surveys. The Management Board and Supervisory Board Audit Committee’s audit requirements and recommendations are included in the audit plan.

The Internal Audit Department reports regularly to the Management Board. The Head of Internal Audit and the Chief Executive Officer both report to the Supervisory Board’s Audit Committee twice annually or on an ad hoc basis when necessary.

Four audits were conducted successfully in the course of 2015. A few areas requiring action were identified, and corrections were initiated or performed. Appropriate corrective action was initiated during the reporting year for any complaints. The Internal Audit Department is planning to carry out four audits in 2016.

Disclosures under Sec. 289 Para. 4, Sec. 315 Para. 4 HGB and Explanatory Report of the Management Board under Sec. 176 Para. 1 Sentence 1 AktG

COMPOSITION OF COMMON STOCK

As of December 31, 2015, the Company’s statutory common stock amounted to € 26,456,834.00 and was divided into 26,456,834 no-par-value bearer shares. Except for the 434,670 treasury shares held by the Company, the shares concerned are bearer shares with voting rights with each share carrying one vote at the Annual General Meeting.

RESTRICTIONS AFFECTING VOTING RIGHTS OR THE TRANSFER OF SHARES

The Management Board is not aware of any restrictions that may affect voting rights, the transfer of shares or those that may emerge from agreements between shareholders.

Voting right restrictions may also arise from the provisions of the German Stock Corporation Act (AktG), such as those under Sec. 136 AktG, or the provisions for treasury shares under Sec. 71b AktG.

SHAREHOLDINGS IN COMMON STOCK EXCEEDING 10 % OF VOTING RIGHTS

We have not been notified of or are aware of any direct or indirect interests in the Company’s common stock that exceed 10 % of the voting rights.

SHARES WITH SPECIAL RIGHTS CONFERRING POWERS OF CONTROL

Shares with special rights conferring powers of control do not exist.

CONTROL OVER VOTING RIGHTS WITH REGARD TO EMPLOYEE OWNERSHIP OF CAPITAL

Employees who hold shares in the Company exercise their voting rights directly in accordance with the statutory provisions and the Articles of Association as do other shareholders.

APPOINTMENT AND DISMISSAL OF MANAGEMENT BOARD MEMBERS AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The number of Management Board members, their appointment and dismissal and the nomination of the Chief Executive Officer are determined by the Supervisory Board in accordance with Sec. 6 of the Articles of Association and Sec. 84 AktG. The Company’s Management Board currently consists of the Chief Executive Officer and three other members. Management Board members may be appointed for a maximum term of five years. Reappointments or extensions in the term of office are allowed for a maximum term of five years in each case. The Supervisory Board may revoke the appointment of a Management Board member or the nomination of a Chief Executive Officer for good cause within the meaning of Sec. 84 Para. 3 AktG. If a required member of the Management Board is absent, one will be appointed by the court in cases of urgency under Sec. 85 AktG.

As a rule, the Articles of Association can only be amended by a resolution of the Annual General Meeting in accordance with Sec. 179 Para. 1 sentence 1 AktG. Under Sec. 179 Para. 2 sentence 2 AktG in conjunction with Sec. 20 of the Articles of Association, MorphoSys’s Annual General Meeting resolves amendments to the Articles of Association generally through a simple majority of the votes cast and a simple majority of the common stock represented. If the law stipulates a higher mandatory majority of votes or capital, this shall be applied. Amendments to the Articles of Association that only affect their wording can be resolved by the Supervisory Board in accordance with Sec. 179 Para. 1 sentence 2 AktG in conjunction with Sec. 12 Para. 3 of the Articles of Association.

POWER OF THE MANAGEMENT BOARD TO ISSUE SHARES

The Management Board’s power to issue shares is granted under Sec. 5 Para. 5 through Para. 6e of the Company’s Articles of Association as of December 31, 2015 and the following statutory provisions:

  1. Authorized Capital
    1. According to Sec. 5 Para. 5 of the Articles of Association, with the Supervisory Board’s consent, the Management Board is authorized to increase the Company’s common stock on one or more occasions by up to € 10,584,333.00 for cash contributions or contributions in kind by issuing up to 10,584,333 new, no-par-value bearer shares until and including April 30, 2020 (Authorized Capital 2015-I).

      Shareholders are principally entitled to subscription rights. One or more credit institutions may also subscribe to the shares with the obligation to offer the shares to shareholders for subscription. With the Supervisory Board’s consent, the Management Board is, however, authorized to exclude shareholder subscription rights:

      1. aa) in the case of a capital increase for cash contribution, to the extent necessary to avoid fractional shares; or
      2. bb) in the case of a capital increase for contribution in kind; or
      3. cc) in the case of a capital increase for cash contribution when the new shares are placed on a foreign stock exchange in the context of a public offering.

      The total shares to be issued via a capital increase against contribution in cash and/or in kind, excluding pre-emptive rights and based on the authorizations mentioned above, shall not exceed 20 % of the common stock. The calculation used is based on either the effective date of the authorizations or the exercise of the authorizations, whichever amount is lower. The 20 % limit mentioned above shall take into account (i) treasury shares sold excluding pre-emptive rights after the effective date of these authorizations (unless they service the entitlements of members of the Management Board and/ or employees under employee participation programs), (ii) shares that are issued from other authorized capital existing on the effective date of these authorizations and excluding pre-emptive rights during the effective period of these authorizations, and (iii) shares to be issued during the effective period of these authorizations to service convertible bonds and/or bonds with warrants whose basis for authorization exists on the effective date of these authorizations provided that the convertible bonds and/or bonds with warrants have been issued with the exclusion of the pre-emptive rights of shareholders (unless they service the entitlements of members of the Management Board and/or employees under employee participation programs).

      With the Supervisory Board’s consent, the Management Board is authorized to determine the further details of the capital increase and its implementation.

    2. According to Sec. 5 Para. 6 of the Articles of Association, with the Supervisory Board’s consent, the Management Board is authorized to increase the Company’s common stock on one or more occasions by up to € 2,622,088.00 for cash contributions by issuing up to 2,622,088 new, no-par-value bearer shares until and including April 30, 2019 (Authorized Capital 2014-I).

      Shareholders are principally entitled to subscription rights. One or more credit institutions may also subscribe to the shares with the obligation to offer the shares to shareholders for subscription. With the Supervisory Board’s consent, the Management Board is, however, authorized to exclude shareholder subscription rights:

      1. aa)to the extent necessary to avoid fractional shares; or
      2. bb)if the issue price of the new shares is not significantly below the market price of shares of the same class already listed at the time of the final determination of the issue price and the total number of shares issued against contribution in cash, excluding subscription rights during the term of this authorization, does not exceed 10 % of the common stock on the date this authorization takes effect or at the time it is exercised, in accordance with or in the respective application of Sec. 186 Para. 3 sentence 4 AktG.

      With the Supervisory Board’s consent, the Management Board is authorized to determine the further details of the capital increase and its implementation.

  2. Conditional Capital
    1. The previous Conditional Capital 1999-I under Sec. 5 Para. 6a of the Articles of Association was canceled by a resolution of the Annual General Meeting on May 23, 2014.
    2. According to Sec. 5 Para. 6b of the Articles of Association, the Company’s common stock is conditionally increased by up to € 6,600,000.00, divided into a maximum of 6,600,000 no-parvalue bearer shares (Conditional Capital 2011-I). The conditional capital increase will only be executed to the extent that the holders of warrants or conversion rights resulting from convertible bonds or bonds with warrants, which were conferred by the Company until April 30, 2016 under the authorization of the Annual General Meeting of May 19, 2011, make use of their subscription rights or that the holders of convertible bonds, issued by the Company or one of its direct or indirect domestic or foreign wholly owned subsidiaries until April 30, 2016 and who are subject to a conversion obligation, meet their obligation to convert. The new shares participate in the Company’s profits from the beginning of the financial year in which they were created through the exercise of conversion rights or the fulfillment of conversion obligations.
    3. According to Sec. 5 Para. 6c of the Articles of Association, the Company’s common stock is conditionally increased by up to € 116,848.00 through the issue of up to 116,848 new no-parvalue bearer shares of the Company (Conditional Capital 2003-II). The conditional capital increase will only be executed to the extent that holders of convertible bonds exercise their conversion rights for conversion into ordinary shares of the Company. The new shares are first entitled to dividends for the financial year for which there was no resolution of the Annual General Meeting at the time of issuance as to the appropriation of accumulated income. With the Supervisory Board’s consent, the Management Board is authorized to determine the further details of the capital increase and its implementation.
    4. The previous Conditional Capital 2008-II under Sec. 5 Para. 6d of the Articles of Association was canceled by a resolution of the Annual General Meeting on May 23, 2014.
    5. According to Sec. 5 Para. 6e of the Articles of Association, the Company’s common stock is conditionally increased by up to € 450,000.00 through the issue of up to 450,000 new no-par- value bearer shares of the Company (Conditional Capital 2008-III). The conditional capital increase will only be executed to the extent that holders of the convertible bonds exercise their conversion rights for conversion into ordinary shares of the Company. The new shares participate in the Company’s profits from the start of the financial year, for which there was no resolution at the time of issuance on the appropriation of accumulated income. With the Supervisory Board’s consent, the Management Board is authorized to determine the further details of the capital increase and its implementation.

POWER OF MANAGEMENT BOARD TO REPURCHASE SHARES

The Management Board’s power to repurchase the Company’s own shares is granted in Sec. 71 AktG and by the authorization of the Annual General Meeting of May 23, 2014:

Until and including the date of April 30, 2019, the Company is authorized to repurchase its own shares in an amount of up to 10 % of the common stock existing at the time of the resolution (or possibly a lower amount of common stock at the time of exercising this authorization) for any purpose permitted under the statutory limits. The repurchase takes place at the Management Board’s discretion on either the stock exchange, through a public offer or public invitation to submit a bid. The authorization may not be used for the purpose of trading in the Company’s own shares. The intended use of treasury shares acquired under this authorization may be found under agenda item 9 of the Annual General Meeting of May 23, 2014. These shares may be used as follows:

    1. The shares may be redeemed without the redemption or its execution requiring a further resolution of the Annual General Meeting.
    2. The shares may be sold other than on the stock exchange or shareholder offer if the shares are sold for cash at a price that is not significantly below the market price of the Company’s shares of the same class at the time of the sale.
    3. The shares may be sold for contribution in kind, particularly in conjunction with company mergers, acquisitions of companies, parts of companies or interests in companies.
    4. The shares may be used to fulfill subscription or conversion rights resulting from the exercise of options and/or conversion rights or conversion obligations for Company shares.
    5. The shares may be offered or transferred to employees of the Company and those of affiliated companies, members of the Company’s management and those of affiliated companies and/ or used to meet commitments or obligations to purchase Company shares that were or will be granted to employees of the Company or those of affiliated companies, members of the Company’s management or managers of affiliated companies. The shares may also be used to fulfill obligations or rights to purchase Company shares that are agreed with the employees, members of the senior management of the Company and its affiliates in the context of employee participation programs.

If shares are used for the purposes mentioned above, shareholder subscription rights are excluded, with the exception of share redemptions.

MATERIAL AGREEMENTS MADE BY THE COMPANY THAT FALL UNDER THE CONDITION OF A CHANGE OF CONTROL AFTER A TAKEOVER BID

In 2012, MorphoSys and Novartis Pharma AG extended their original cooperation agreement. Under this agreement, in specific cases of a change of control, Novartis Pharma AG is entitled but not obliged to take various measures that include the partial or complete termination of the collaboration agreement.

Under Sections 29 and 30 of the German Securities Acquisition and Takeover Act (WpÜG), a change of control applies when 30 % or more of the Company’s voting rights are acquired.

COMPENSATION AGREEMENTS CONCLUDED BY THE COMPANY WITH MANAGEMENT BOARD MEMBERS AND EMPLOYEES IN THE EVENT OF A TAKEOVER BID

Following a change of control, Management Board members may terminate their employment contract and demand the fixed salary still outstanding until the end of the contract period. Moreover, in such a case, all stock options, convertible bonds and performance shares granted will become vested immediately and can be exercised after the expiration of the statutory vesting or blackout periods.

Following a change of control, Senior Management Group members may also terminate their employment contract and demand a severance payment equal to one annual gross fixed salary. Moreover, in such a case, all stock options, convertible bonds and performance shares granted will become vested immediately and can be exercised after the expiration of the statutory vesting or blackout periods.

The following cases constitute a change of control: (i) MorphoSys transfers all or a material portion of the Company’s assets to an unaffiliated entity, (ii) MorphoSys merges with an unaffiliated entity or (iii) a shareholder or third party directly or indirectly holds 30 % or more of MorphoSys’s voting rights.

Top Previous Next