Merck 2014 Annual Report Download - page 220

215CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
2012 tranche 2013 tranche 2014 tranche
Performance cycle Jan. 1, 2012 to Dec. 31, 2014 Jan. 1, 2013 to Dec. 31, 2015 Jan. 1, 2014 to Dec. 31, 2016
Term 3 years 3 years 3 years
Reference price of shares in €
(60-day average share price prior to the start of the
performance cycle) 69.57 100.11 122.84
DAX® value
(60-day average of the DAX® prior to the start of the
performance cycle) 5,883.35 7,350.64 9,065.08
Potential number of MSUs
Potential number offered for the first time in 2012 538,235 – –
Expired 30,685 – –
Status on Dec. 31, 2012 507,550 – –
Potential number offered for the first time in 2013 – 389,658 –
Expired 28,101 11,938 –
Status on Dec. 31, 2013 479,449 377,720 –
Potential number offered for the first time in 2014 – – 355,164
Expired 42,215 38,179 21,247
MSUs granted to employees of the
AZ Electronic Materials Group on May 2, 2014 – – 22,865
Status on Dec. 31, 2014 437,234 339,541 356,782
The fair value of the obligations is recalculated on each balance
sheet date using a Monte Carlo simulation based on the previously
described KPIs. The expected volatilities are based on the implicit
volatility of the company shares and the DAX® in accordance with
the remaining term of the LTIP tranche. The dividend payments
incorporated into the valuation model orient towards medium-
term dividend expectations. The value of the provision for the
vesting period already completed was € 144.8 million as of
December 31, 2014 (2013: €63.5 million). The net expense for
fiscal 2014 was €81.3 million (2013: €45.7 million).
The Executive Board members have their own Long-Term
Incentive Plan, the conditions of which largely correspond to the
Long-Term Incentive Plan described here. A description of the
plan for the Executive Board can be found in the compensation
report, which is part of the Statement on Corporate Governance.
Provisions for employee benefits also include obligations for
the partial retirement program and other severance pay that were
not set up in connection with the “Fit for 2018” transformation
and growth program as well as obligations in connection with
long-term working hour accounts and anniversary bonuses.
With respect to provisions for defined-benefit pensions and
other post-employment benefits, see Note [49].
Environmental protection
Provisions for environmental protection mainly existed in Germany
and the United States and were set up particularly for obligations
from soil remediation and groundwater protection in connection
with the discontinued crop protection business.
Other provisions
Other provisions mainly include provisions for purchase commit-
ments, subsequent contract costs stemming from discontinued
research projects, other guarantees, and provisions for uncertain
commitments from contributions, duties and fees.
In 2014, the clinical development program for tecemotide, an
investigational antigen-specific cancer immunotherapy for the
treatment of non-small cell lung cancer, and the development of
plovamer acetate, an active ingredient for the treatment of multi-
ple sclerosis, terminated. In addition, the license rights to the active
ingredient ceraliflimod were returned to Ono PharmaceuticalCo.,
Ltd., Japan, since the compound does not meet the criteria for
further investment. Furthermore, the Biopharmaceuticals division
decided to return the rights to the compound Sym004 to Sympho-
gen A/S Denmark.
Provisions for subsequent costs that are likely to be incurred
for the aforementioned and other discontinued research projects
were recognized during the reporting period.