Ablynx Annual Report 2015

2015 A NNUA L RE P OR T

TAKE A LOOK AT OUR 3D-PRINTED GRAPHS

INDEX ANNUAL REPORT 2015 / ABLYNX

CORPORATE OVERVIEW

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1. INTRODUCTION 7 Ablynx at a glance 9 2015 achievements 10 Letter to our stakeholders 12 Company strategy and outlook for 2016 16 2. NANOBODIES® – POWERFUL PLATFORM GENERATING POTENTIALLY INNOVATIVE MEDICINES Platform advantages Product pipeline Key clinical value drivers Key pre-clinical value drivers

19 20 22 24 30

3. SHAREHOLDERS’ INFORMATION Key figures and performance indicators Shareholder structure The shares in 2015 Financial calendar Analyst coverage Contact the IR department

33 34 36 49 54 55 55

4. GLOSSARY

57

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

61

5. REPORT OF THE BOARD OF DIRECTORS

64

6. RESPONSIBILITY STATEMENT

116

7. FINANCIAL STATEMENTS

120

8. NOTES TO THE FINANCIAL STATEMENTS

124

3.

INDEX

INTRODUCTION

ABLYNX AT A GLANCE

LATE-STAGE CLINICAL DEVELOPMENT COMPANY WITH POWERFUL PROPRIETARY TECHNOLOGY PLATFORM DEDICATED TO CREATING NEW MEDICINES WHICH WILL MAKE A REAL DIFFERENCE TO PATIENTS AND THEIR CAREGIVERS

Ablynx is a clinical-stage biopharmaceutical company engaged in the development of Nanobodies®, proprietary therapeutic proteins based on single-domain antibody fragments.

Due to their small size and unique structure, Nanobodies offer multiple advantages making them ideal building blocks for the generation of novel biological drugs.

>40 PROGRAMMES

UNIQUE AND POWERFUL

in the R&D pipeline

>500 PATENTS granted and pending

technology platform

9 PHARMA PARTNERS across the globe

>€380 MILLION non-dilutive cash received to date from partners

€236 MILLION

€78 MILLION

2015 year-end cash position

2015 revenue (+57% vs. 2014)

350 EMPLOYEES

LISTED ON EURONEXT

15 nationalities

ticker: ABLX

>€7 BILLION in potential milestones

>1,000 PATIENTS

6 PRODUCTS

treated with Nanobodies

in clinical development

PLUS ROYALTIES

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CORPORATE OVERVIEW

2015 ACHIEVEMENTS – EXCELLENT PROGRESS IN ALL AREAS

R&D MILESTONES During the year we initiated one Phase III study and three Phase II studies which together will include a total of over 900 patients worldwide. In addition, we completed recruitment of 35 infants in the Phase I/IIa RSV study with ALX-0171 and 345 patients in the Phase IIb combination study with ALX-0061 in RA patients. Finally, 14 new discovery programmes have been initiated, both proprietary and as part of pharmaceutical collaborations.

Caplacizumab (anti-vWF) • •

Defined the commercial strategy whereby Ablynx will retain direct control over commercialisation in Europe and the United States (August) Initiated the confirmatory international Phase III HERCULES study in patients with acquired TTP (aTTP) (September)

ALX-0061 (anti-IL-6R) • • • •

Initiated a Phase IIb study in RA patients in combination with methotrexate (March); recruitment of 345 patients was completed at year-end, on schedule Initiated a Phase IIb RA monotherapy study (April) and recruitment of 251 patients was completed on schedule post year-end, in February 2016 The first eligible patients from both Phase IIb RA studies rolled-over in the open-label extension study (July) Initiated a Phase II study in patients with systemic lupus erythematosus (SLE) (August)

ALX-0171 (anti-RSV) • •

The Phase I/IIa safety study with inhaled ALX-0171 completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with an RSV infection (December) An independent data monitoring board gave approval to extend this Phase I/IIa study in younger infants, aged 1-5 months, to generate additional data (December)

Immuno-oncology •

Pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the extensive immuno-oncology collaboration with Merck & Co., Inc., which triggered a €3.5 million milestone payment to Ablynx (October)

BI 836880 (anti-VEGF/Ang2) •

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Ablynx’s partner Boehringer Ingelheim presented compelling pre-clinical proof-ofmechanism data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models (November)

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CORPORATE OVERVIEW

FINANCIAL PERFORMANCE

STRATEGIC PARTNERSHIPS We signed three new pharmaceutical partnerships and extended two existing collaborations in 2015:

€236.2 MILLION In March, we announced an extension of our initial two-year research collaboration with Merck & Co., Inc. to develop and commercialise Nanobodies directed towards an undisclosed voltage-gated ion channel. Merck & Co., Inc. will extend their funding to the end of September 2016.

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND OTHER SHORT TERM INVESTMENTS

€24.8 MILLION In May, a research and option agreement was signed with Genzyme to explore the potential of a Nanobody targeting an ion channel that plays a role in multiple sclerosis, triggering an undisclosed exclusivity payment to Ablynx.

CASH INCOME FROM COLLABORATIONS

€100 MILLION In June, we signed an exclusive license agreement with Taisho Pharmaceuticals to develop and commercialise the anti-TNFα Nanobody, ozoralizumab, in Japan.

We received an upfront payment of US$3 million and we are entitled to receive development and commercial milestone payments plus royalties.

In July, we significantly expanded our immuno-oncology partnership with Merck & Co., Inc., which was originally signed in February 2014, to include up to 17 programmes with focus on multi-specific Nanobodies. As part of both the original and expansion agreements, we received €33 million in upfront payments and are entitled to receive up to €5.7 billion in future milestone payments, plus royalties.

In November, we entered into a drug discovery collaboration with Novo Nordisk to investigate multi-specific Nanobodies in an undisclosed indication. We received an upfront payment of €5 million early in 2016, and are entitled to receive €4 million in research funding during the initial three year research term of the collaboration and up to €182 million in potential milestones, plus royalties.

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RAISED THROUGH 5-YEAR CONVERTIBLE BONDS WITH 3.25% COUPON RATE AND 26.5% CONVERSION PREMIUM

95% FREE FLOAT DIVERSIFIED SHAREHOLDER BASE WITH >60% OF INSTITUTIONAL SHAREHOLDING IN UK AND USA

CORPORATE OVERVIEW

LETTER TO OUR STAKEHOLDERS ANNUAL REPORT 2015 / ABLYNX

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CORPORATE OVERVIEW

DEAR SHAREHOLDERS, COLLEAGUES AND BUSINESS PARTNERS, 2015 WAS A YEAR OF EXCELLENT PROGRESS ACROSS OUR ENTIRE BUSINESS. OUR NANOBODY-BASED DRUGS ADVANCED SUCCESSFULLY INTO THE LATER STAGES OF DEVELOPMENT AS WE STARTED A PHASE III STUDY AND THREE PHASE II STUDIES WHICH TOGETHER WILL INCLUDE A TOTAL OF OVER 900 PATIENTS WORLDWIDE. COLLABORATIONS TO EXPLOIT THE FULL POTENTIAL OF OUR NANOBODY TECHNOLOGY CONTINUE TO FORM A CRUCIAL PART OF OUR HYBRID BUSINESS MODEL AS WE SIGNED THREE NEW PHARMACEUTICAL PARTNERSHIPS AND EXTENDED TWO EXISTING COLLABORATIONS, FURTHER FUELLING OUR BROAD PRODUCT PIPELINE, WHICH NOW INCLUDES OVER 40 PROPRIETARY AND PARTNERED PROGRAMMES. WE ALSO SUCCESSFULLY PLACED €100 MILLION OF FIVE-YEAR CONVERTIBLE BONDS – A PARTICULARLY NOTEWORTHY ACHIEVEMENT IN THE EUROPEAN BIOTECH SECTOR – STRENGTHENING OUR BALANCE SHEET TO FACILITATE THE FINANCING AND EXECUTION OF OUR BUSINESS PLAN.

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MATURING PRODUCT PIPELINE

results with caplacizumab, our anti-vWF Nanobody to treat acquired TTP, we are on track to file for conditional approval of caplacizumab in Europe in early 2017 with the first European launch possible in 2018. In parallel with the European regulatory filing preparations, the confirmatory, international Phase III HERCULES study with caplacizumab has been initiated to support a BLA filing in the United States in 2018. The publication of the Phase II TITAN study in The New England Journal of Medicine on 11 February 2016 was a major accomplishment and is another endorsement of the potential of caplacizumab in the treatment of acquired TTP. We are now defining the commercial infrastructure required to lead the commercialisation of caplacizumab ourselves in Europe and the United States and we will announce further details when these plans are finalised.

2015 was a year of outstanding execution with six Nanobodies now in late-stage clinical development.

We significantly expanded our clinical pipeline with the start of a Phase III study with caplacizumab, our first-in-class wholly-owned bivalent Nanobody to treat acquired TTP, as well as three Phase II studies with the anti-IL-6R Nanobody, ALX-0061, in RA and SLE, for which AbbVie has an option for an exclusive global license.

In less than 10 months, we completed recruitment of 345 patients in the Phase IIb RA combination study of ALX-0061 and we completed recruitment of 35 infants in the Phase I/IIa study of our wholly-owned, first-in-class trivalent Nanobody, ALX-0171, to treat RSV, a serious viral respiratory infection. This was the first trial in which a Nanobody was administered to infants by inhalation and could prove to be a very important validation for the platform as a whole, in the general area of inhaled therapeutics, as well as in this particularly challenging indication.

HYBRID BUSINESS MODEL CONTINUES TO FUEL THE PIPELINE It is our ambition to ensure that the unique advantages of our Nanobodies are widely exploited to develop differentiated and innovative medicines which have the potential to make a real difference to patients suffering from severe diseases. To achieve this goal, we are committed to a hybrid business model where we invest directly in our own programmes in specific areas as well as collaborating with pharmaceutical partners at all

PREPARING FOR OUR FIRST PRODUCT LAUNCH 2015 was also the year in which we expanded our expertise beyond R&D, as we began preparing for our first product launch. Following compelling Phase II TITAN

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CORPORATE OVERVIEW

anticipate top line results from two Phase IIb studies with ALX-0061 in patients with RA and then we will await the decision by AbbVie on whether they wish to exercise their option to license this product in this indication. We also expect the initiation of up to four clinical studies by our collaborators (one of which already started early in 2016) which would trigger milestone payments to Ablynx.

stages of discovery and development. These partners are selected for their expertise and experience in certain therapeutic indications as well as having resources which help us advance programmes rapidly. During the past year we have again successfully delivered on this business strategy and initiated four new internal discovery programmes and some 10 new partnered programmes. We broadened our disease scope through partnering with Genzyme (in multiple sclerosis) and Novo Nordisk (in a disease indication that is of strategic importance to them). We significantly expanded our immuno-oncology agreement with Merck & Co., Inc., so that it now includes up to 17 Nanobody programmes for which the first bi-specific Nanobody has already achieved pre-clinical proof-of-concept in in vivo cancer models. We also delivered a breakthrough in our ion channel collaboration with Merck & Co., Inc., resulting in an extension of the research term to September 2016.

THANK YOU To conclude, we would like to thank all of our talented employees for their dedication to achieving our goals, our business partners for their enthusiasm and commitment, and our shareholders for supporting us in the creation of a unique European biotech company with, we believe, very significant potential.

Sincerely yours,

AN EXCITING YEAR AHEAD As we continue to develop and mature, our priorities and objectives remain focused on delivering new hope for patients and sustainable value to all our stakeholders.

We look forward to an exciting year with multiple potentially value-creating catalysts, including the results from the Phase I/IIa study with ALX-0171 in 53 infants who were hospitalised with an RSV infection. We also

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Dr Peter Fellner – Chairman

Dr Edwin Moses – CEO

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CORPORATE OVERVIEW

STRATEGY AND OUTLOOK

CORPORATE STRATEGY Ablynx’s strategy is to use the Company’s unique Nanobody technology to develop therapeutics in areas of high unmet medical need where Nanobodies offer a clear advantage over existing products and technologies.

The Company employs a hybrid business model where it invests directly in its own development programmes as well as collaborating with pharmaceutical partners at all stages of discovery and development, selected for their expertise and experience in key areas. In addition, Ablynx will retain some or all rights to commercialise its products, with the first launch of a wholly-owned Nanobody expected in 2018.

Ablynx’s ambition is to develop differentiated and innovative medicines which have the potential to make a real difference to society, as well as creating sustainable value for all its stakeholders.

OUTLOOK 2016 – AN EXCITING YEAR AHEAD Ablynx remains focused on creating sustainable value, and is well positioned for further growth during the course of 2016 with multiple significant pre-clinical, clinical and commercial catalysts:

Expected clinical study results ALX-0171 (anti-RSV) Phase I/IIa safety results with inhaled ALX-0171 in 53 infants aged 1-24 months who were hospitalised with an RSV infection (Q2 2016) ALX-0061 (anti-IL-6R) Top line results from the Phase IIb RA monotherapy and combination therapy studies (AbbVie has an option for global exclusive license) (Q3 2016) ALX-0761 (anti-IL-17A/F) Phase Ib results in 40 patients with psoriasis (exclusively licensed to Merck KGaA) (H1 2016)

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CORPORATE OVERVIEW

Building the pipeline Caplacizumab (anti-vWF) Recruitment of patients with acquired TTP in the Phase III HERCULES study will continue and a three -year follow-up study will be initiated in Q3 2016 ALX-0171 (anti-RSV) Initiation of a worldwide Phase II dose-ranging study in approximately 120 infants, aged 1-24 months, who are hospitalised with an RSV infection in Q4 2016 Various Start of up to four Phase I studies with partners and multiple pre-clinical data points with partners, triggering milestone payments to Ablynx. Initiate and continue about 40 internal and partnered discovery and pre-clinical programmes

Regulatory & Commercial Caplacizumab (anti-vWF) Continue preparations for the commercialisation of caplacizumab in Europe and the United States, and proceed with the preparations to file the dossier, in early 2017, for conditional approval of caplacizumab in Europe ALX-0061 (anti-IL-6R) Licensing decision in Q4 2016 by AbbVie for ALX-0061 in RA which, in the case of optin, would trigger a US$75 million license payment to Ablynx Various Expand existing collaborations and/or initiate new partnerships

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CORPORATE OVERVIEW

NANOBODIES® – POWERFUL PLATFORM GENERATING POTENTIALLY INNOVATIVE MEDICINES

PLATFORM ADVANTAGES

ABLYNX’S NANOBODIES

Nanobodies are a novel class of proprietary therapeutic proteins based on singledomain antibody fragments that contain the unique structural and functional properties of naturally-occurring heavy chain only antibodies. Due to their small size and unique structure, Nanobodies are ideal building blocks for the generation of novel biological drugs with multiple advantages:

Mix and match Ability to bind multiple targets with one therapeutic Nanobody molecule. These therapeutic molecules may contain Nanobody building blocks combined with each other (up to 7), combined with other protein domains, or with other molecules or drugs.

Multi-specific (binding different targets; currently 2 bi-specific Nanobodies in the clinic), multivalent (binding identical targets; currently 2 Nanobodies in the clinic) and bi-paratopic (binding 2 different epitopes on the same target) Nanobody molecules have been successfully produced and their potential therapeutic effect demonstrated.

Multi-specific/multivalent Nanobodies that address multiple targets in a single drug molecule – flexible GS* linker lengths

Multiple delivery routes

Inhalation

Ocular

The robust nature and stability of Nanobodies allows administration through multiple delivery routes, including intravenous and subcutaneous injection (currently 5 Nanobodies in the clinic) and nebulisation directly into the respiratory tract (currently 1 Nanobody in the clinic), as well as potentially through the ocular route and orally for local treatment in the gut.

Oral-to topical

Able to bind and block challenging targets Nanobodies can interact with epitopes on targets which are hidden or shielded from the much larger conventional antibodies.

Functional selective Nanobodies have been generated against GPCRs as well as against ion-gated, ligand-gate and voltage-gated ion channels (multiple programmes on-going, both internally and with partners including Merck & Co., Inc., Novartis and Genzyme).

Nanobodies against ion channels and GPCRs

* glycine-serine linker

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CORPORATE OVERVIEW

Customised half-life Hours/days/weeks

Albumin-binding Nanobody

Fc

Ability to customise the in vivo half-life of a Nanobody from a few hours to over 3 weeks to achieve the desired properties, such as the use in chronic versus acute indications. Ablynx’s proprietary half-life extension technology is based on a Nanobody that binds to human serum albumin, thereby increasing the in vivo serum half-life of the therapeutic molecule.

Two clinical proof-of-concepts have been achieved in patients with rheumatoid arthritis with two Nanobodies that incorporate this proprietary half-life extension technology.

Manufacturing

High-yield high-concentration, low-viscosity, microbial production

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Nanobodies (including multi-specific, multivalent and bi-paratopic constructs) are encoded by single genes and are efficiently produced with high-yields in prokaryotic and eukaryotic hosts, including bacteria, yeast, and mammalian cells. They can be formulated at high concentrations and maintain low viscosity, enabling multiple routes of administration, including low volume injectables.

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CORPORATE OVERVIEW

THE PRODUCT PIPELINE – MULTIPLE SHOTS ON GOAL >40 R&D PROGRAMMES – 6 NANOBODIES IN CLINICAL DEVELOPMENT

Ablynx’s product pipeline currently includes over 40 wholly-owned and partnered programmes across various stages of development. At the date of this report, six Nanobodies were in clinical development in a wide range of diseases, including haematology, inflammation, respiratory disease and oncology.

Product

Indication

Target

caplacizumab

aTTP

vWF

ALX-0061

RA

IL-6R

RA

IL-6R

SLE

IL-6R

ALX-0171

RSV

RSV

Up to 17 programmes

Immuno-oncology

Various

BI 836880

Oncology

VEGF/Ang2

ozoralizumab

RA

TNFa

RA

TNFa

ALX-0141

Bone disorders

RANKL

ALX-0761

Psoriasis

IL-17A/IL-17F

Pre-clinical

~ 15 wholly-owned and partnered

Various

programmes

The current status and upcoming near term milestones of the Company’s major pre‑clinical and clinical value drivers are described in the following sections. More detailed information is also available on the Ablynx website www.ablynx.com.

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CORPORATE OVERVIEW

Phase I

Phase II

Phase III

Filing

+

Japan Greater China Greater China

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CORPORATE OVERVIEW

KEY CLINICAL VALUE DRIVERS

CAPLACIZUMAB (ANTI-VON WILLEBRAND FACTOR; vWF) FIRST-IN-CLASS BIVALENT NANOBODY FOR THE TREATMENT OF ACQUIRED TTP • • • • • •

Wholly-owned Nanobody with Orphan Drug Status in the United States and Europe Potential to become a critical new component in the current standard of care Filing for conditional approval in Europe in early 2017, based on Phase II study results Worldwide Phase III HERCULES study on-going to support BLA submission in the USA in 2018 Ablynx to lead commercialisation in Europe and in the United States Market potential of approx. €300 million with first potential launch in Europe in 2018

Acquired thrombotic thrombocytopenic purpura Life-threatening, ultra-rare, acute blood clotting disorder ×× Auto-immune disorder characterised by impaired activity of ADAMTS13 (<10% of that in normal plasma) ×× Impaired ADAMTS13 activity leaves ultra-large vWF multimers (UL-vWF) uncleaved ×× UL-vWFs bind to platelets, resulting in severe thrombocytopenia (very low platelet count), and micro-clot formation in the small blood vessels of vital organs ×× Leads to small blood vessel occlusion, tissue ischaemia and organ damage Incidence rate ×× Up to 11 patients per 1 million people Current standard of care ×× Daily plasma exchange plus immunosuppressive treatments High unmet need with no drug specifically approved for this indication ×× Mortality high (10-20%), with vast majority within 2 weeks post diagnosis ×× Approximately 36% of patients have a recurrence ×× Major morbidities after TTP episode, including vital organ damage ×× Impacts life expectancy and quality of life

There remains a high need for a therapeutic that immediately inhibits micro-clot formation in the acute phase of the disease. Caplacizumab has been developed to address that need. It has a unique mode of action by inhibiting the interaction between ultra-large vWF and platelets through binding with the A1 domain of vWF. It thereby immediately prevents platelet aggregation and the formation of micro-clots in the acute, critical phase of acquired TTP.

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CORPORATE OVERVIEW

Three aTTP experts describe the impact of the NEJM publication: “Despite the advances in immunosuppressive therapy, better plasma exchange, better supportive care, the 10% to 15% acute mortality in acquired TTP in an acute episode has not been impacted. I think caplacizumab has the potential to do that.”

“With this drug I can quickly control the patient’s symptoms. I can detach the platelet from the ultralarge von Willebrand Factor and not have the consequences or damage due to microthrombosis, giving me more time to treat the patient. That is fantastic. This is the reason why this paper is very much appreciated by the physician and the patient.”

Dr Flora Peyvandi University of Milan, Italy

“

“The importance of this paper is twofold. Firstly, it’s the method of action of the compound, which is really quite unique. It’s not associated with significant side effects. It doesn’t appear to be immunogenic.

The second important and probably the most important reason for this trial is that we’ve always been stuck in the acute scenario of trying to achieve a rapid increase in the platelet count, which in itself is associated with a better outcome for patients, and that’s exactly what’s been demonstrated in this paper.”

“

“

“

“

Caplacizumab’s effect has been demonstrated in a worldwide, Phase II TITAN study in 75 patients with acquired TTP. Recently published in The New England Journal of Medicine: • Treatment with caplacizumab resulted in a nearly 40% reduction in median time to platelet count normalisation (p=0.005), reduced the use of daily plasma exchange, and prevented further consumption of platelets in the microclots and small blood vessel occlusion.

• Caplacizumab’s clinical effect has been shown by a low number of recurrences requiring re-initiation of daily plasma exchange during treatment with caplacizumab (N=3) versus placebo (N=11).

• Caplacizumab had an acceptable safety profile: manageable mild bleeding tendency; with no requirement for substitution therapy.

“

Dr Spero Cataland Ohio State University, Columbus, USA

Dr Marie Scully University College Hospital, London, UK

2015 achievements In August, the commercial strategy was defined whereby Ablynx retains full control over the commercialisation in Europe and the United States. In September, a confirmatory, international, Phase III HERCULES study of caplacizumab was initiated in patients with acquired TTP. Ablynx plans to recruit 92 patients into this study by 2017.

Potential near term milestones 2017 × Filing of caplacizumab for conditional approval in Europe × Phase III HERCULES top line results

2016 × Prepare filing for conditional approval in Europe × Continue recruitment in Phase III HERCULES study × Define full commercialisation plan × Initiate a three-year follow-up study

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2018 × First launch in Europe × BLA submission in the United States

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CORPORATE OVERVIEW

ALX-0171 (ANTI-RSV) FIRST-IN-CLASS TRIVALENT INHALED NANOBODY FOR THE TREATMENT OF RESPIRATORY SYNCYTIAL VIRUS (RSV) INFECTION • • • • •

Wholly-owned Nanobody delivered through inhalation Potential breakthrough for the treatment of RSV infections Recruitment of first-in-infant Phase I/IIa safety study completed with results expected in Q2 2016 Phase II dose-ranging study to start by end 2016 Opportunity in a multi-billion dollar market

Respiratory syncytial virus infection Major cause of acute upper (colds) and lower (pneumonia and bronchiolitis) respiratory tract infections in infants, young children, and the elderly Leading cause of infant hospitalisation ×× >3 million children (<5 years) hospitalised worldwide each year High incidence rate ×× 60%-70% of children will have been infected by the age of 1 year Current standard of care ×× Only symptomatic treatments available, including corticosteroids and bronchodilators ×× Monoclonal antibody (Synagis®) used as prophylaxis and only approved in high-risk, pre-term infants High unmet need ×× 3,000-8,500 deaths in infants <2 years globally, each year ×× Long-term disease burden (prolonged wheezing and increased risk for asthma development later in life) ×× No specific treatment option available

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CORPORATE OVERVIEW

ALX-0171 has shown a potent anti-viral effect against a broad range of RSV strains and it demonstrated to have a strong therapeutic effect following administration via nebulisation in a neonatal animal model for infant RSV infection. Repeated daily inhalation of ALX-0171 was proven to be well-tolerated in multiple Phase I clinical studies in adult volunteers, including a study in subjects with hyper-reactive airways.

There remains a high need for an effective and specific therapeutic to treat RSV infections. ALX-0171 has been developed to address this unmet need and has firstin-class potential for the treatment of RSV infection. It is administered via nebulisation directly to the site of infection, i.e. the respiratory tract including the lungs, where it inhibits RSV replication and neutralises RSV activity by blocking virus uptake into cells.

2015 achievements In December, the Phase I/IIa safety study of inhaled ALX-0171 completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with an RSV infection.

Also in December, an independent Data Monitoring Committee reviewed safety data available for the first 15 infants from the placebo-controlled part of this Phase I/IIa study and confirmed that the inclusion age for recruitment could be lowered to 1 month of age.

Post year-end, in January 2016, the Phase I/IIa study was expanded to include an expansion cohort of 18 additional infants, aged 1-5 months. Recruitment of this expansion cohort was completed ahead of schedule post year-end, in February 2016.

Potential near term milestones 2016 × Top line Phase I/IIa results in 53 hospitalised RSV infected infants × Start Phase II dose-ranging study in approximately 120 hospitalised RSV infected infants, aged 1-24 months

2017 × Complete recruitment of the Phase II dose-ranging study 2018 × Top line results from the Phase II dose ranging study

References: Nair et al, Lancet 2010; Byington et al, Pediatrics 2014; Shi et al, J Med Econ 2011; Sigurs et al, Thorax 2010; Beckman et al, Acta Pediatr 2014

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CORPORATE OVERVIEW

ALX-0061 (ANTI-IL-6R) HALF-LIFE EXTENDED NANOBODY FOR THE TREATMENT OF AUTO-IMMUNE DISORDERS • • • • •

Compelling Phase IIa results, demonstrating best-in-class potential Results from Phase IIb RA monotherapy and combination therapy studies expected in Q3 2016 Decision by AbbVie for an exclusive, global license in RA expected by the end of 2016 Phase II study in SLE on-going with results anticipated in 2018 Opportunity in multi-billion dollar markets

Rheumatoid arthritis (RA) Chronic, progressive, inflammatory disease of the joints and surrounding tissues ×× RA is an inflammatory disease that occurs when a person’s immune system mistakenly starts attacking healthy joints, causing symptoms that may range in severity from patient to patient. These symptoms may include pain, swelling, stiffness, and loss of physical function ×× Patients with RA may also experience systemic symptoms, such as low-grade fever, fatigue, or weight loss ×× Over time, rheumatoid arthritis symptoms can worsen, everyday tasks may become difficult, and permanent joint damage may occur High incidence rate ×× 1.5 million patients in the United States ×× Approximately 6 million people expected to suffer from RA by 2021 in the 7 major markets Current treatment options ×× Two broad categories: 1) symptomatic treatments (e.g. corticosteroids); 2) disease modifying agents (DMARDs) to halt the destructive course of RA and prevent debilitating joint damage ×× Market-leading drugs include anti-TNFα biological DMARDs ×× RA drugs had >US$500 million in sales in 2014 Unmet need ×× Many patients respond initially to their treatment but relapse between 10 and 13 months ×× >30% of patients do not respond to TNFα inhibitors, the market leading biological DMARDs ×× Need for new, differentiating treatments with fewer treatment failures and fewer inadequate responders ×× Need for disease modifying therapies with substantial efficacy, particularly on higherdemanding measures such as remission, ACR50 and ACR70

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CORPORATE OVERVIEW

There remains a high need for new, differentiating treatment options with substantial efficacy. ALX-0061 has been developed to address this unmet need and the results from the Phase IIa study in 37 patients with RA demonstrated that ALX-0061 has best-in-class potential:

•

• •

Highly efficacious: treatment with ALX-0061 showed ACR20, ACR50 and ACR70 scores of up to 100%, 75% and 63% respectively, with first onset of activity as of week 2.

Convenient dosing: wide therapeutic window with potential to dose subcutaneously once a month.

Favourable safety profile: no dose dependent increase in frequency or severity of adverse events.

2015 achievements In March, Ablynx initiated a Phase IIb study of ALX-0061, in combination with methotrexate, in patients with RA. Recruitment of 345 patients was completed on schedule in December.

In April, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed on schedule post year-end, in February 2016.

In July, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled-over into the open-label extension study.

In August, Ablynx initiated a Phase II study of ALX-0061 in patients with SLE. The Company plans to recruit 300 patients into this study by 2017.

Potential near term milestones 2016 × Results Phase IIb RA monotherapy study (251 patients) × Results Phase IIb RA combination therapy study (345 patients) × AbbVie’s opt-in decision to license ALX-0061 in RA

2017 × Potential start Phase III RA study 2018 × Top line results RA open-label extension study × Top line results Phase II SLE study × AbbVie’s opt-in decision to license ALX-0061 in SLE

Global exclusive licensing option deal with AbbVie In September 2013, Ablynx and AbbVie entered into a global license agreement worth up to US$840 million plus double-digit royalties, to develop and commercialise ALX-0061 in RA and SLE. Ablynx received an US$175 million upfront payment and is responsible for Phase II clinical development of ALX-0061 in both RA and SLE. AbbVie will pay a fee for each indication if they exercise the right to license ALX-0061 after completion of the Phase II studies. AbbVie will then be responsible for Phase III development, registration and commercialisation in each indication.

References: Datamonitor Healthcare; Sagient Research/BioMedTracker; Decision Resources

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CORPORATE OVERVIEW

KEY PRE-CLINICAL VALUE DRIVERS

IMMUNO-ONCOLOGY CHANGING THE CANCER TREATMENT PARADIGM • •

Extensive early-stage pipeline with Merck & Co., Inc., which includes up to 17 fullyfunded programmes Multiple wholly-owned programmes in early development

WHY NANOBODIES? • • • • • •

Ideally suited to bind simultaneously to multiple different epitopes or targets with a single Nanobody construct “Mix and match” approach allows for the rapid generation of multi-specific Nanobody constructs Rapid exploration of combinations: in vivo proof-of-concept in 12-18 months Multi-specific Nanobody combinations have the potential to increase efficacy and avoid escape mechanisms Ease and cost-effective manufacturing Further formatting flexibility: choice of half-life and potential to combine with Fc receptor

Extensive immuno-oncology collaboration with Merck & Co., Inc. In February 2014, Ablynx entered into a research collaboration and licensing agreement with a subsidiary of Merck & Co., Inc., focused on the discovery and development of 5 predefined Nanobody candidates (including multi-specific Nanobody combinations) directed toward so-called immune checkpoint modulators. In July 2015, Ablynx and Merck & Co., Inc. significantly expanded their collaboration to include up to 12 additional Nanobody programmes against individual protein targets and target combinations (mono-specific and multi-specific Nanobodies).

Under the terms of both the original and expansion agreements, Ablynx received €33 million in upfront payments and is potentially entitled to receive up to €5.7 billion in future development, regulatory and sales milestone payments, plus royalties.

Merck & Co., Inc. will be responsible for clinical development, manufacturing and commercialisation of any products resulting from the collaboration.

ANNUAL REPORT 2015 / ABLYNX

30.

CORPORATE OVERVIEW

Immuno-oncology “Immuno” in immuno-oncology refers to a person’s own immune system. Immuno-oncology drugs, known as immunotherapies, target the patient’s own immune system to help fight cancer Cancer is the most common cause of death globally ×× Each year, approximately 14 million people are diagnosed with cancer ×× Approximately 8 million patients die of cancer each year ×× It is expected that in the next 2 decades the number of cancer cases will increase by 70% to approximately 22 million per year Current immuno-oncology treatment options ×× Immunotherapies have a proven substantial survival impact and are expected to treat 60% of cancers ×× First antibody drugs that hit the market target the immune checkpoint modulators CTLA4 and PD1 Next generation ×× The number of targets in immuno-oncology is increasing ×× Combination therapies are the next generation immunotherapies ×× Market in immuno-oncology drugs expected to grow to >US$43 billion by 2020

2015 achievements In July, Ablynx significantly expanded its immuno-oncology collaboration with Merck & Co., Inc., which was originally signed in February 2014, to include up to 12 additional programmes with focus on multi-specific Nanobodies. The expansion agreement triggered a €13 million upfront payment to Ablynx, comprising exclusivity fees and FTE payments.

In October, pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the immuno-oncology collaboration with Merck & Co., Inc. This Nanobody construct is a selective bi-specific molecule that potently binds to two different immune modulators. The results from the pre-clinical study in relevant tumour models demonstrated that this bi-specific Nanobody construct potently inhibits tumour growth.

Potential near term milestones 2016 - 2018 × Pre-clinical milestones (wholly-owned and with Merck & Co., Inc.) × Start of clinical development with the first programme(s) both internally and as part of the collaboration Merck & Co., Inc.

References: BofA Merrill Lynch, July 2015; MSD Belgium & Luxembourg

ANNUAL REPORT 2015 / ABLYNX

31.

CORPORATE OVERVIEW

SHAREHOLDERS’ INFORMATION

KEY FIGURES AND PERFORMANCE INDICATORS

(EUR'000)

2009

2010

2011

2012

2013

2014

2015

R&D income

28,068

29,196

19,861

25,645

33,181

47,710

76,761

1,615

2,263

2,008

1,082

2,761

1,587

779

Total revenue and grant income

29,683

31,432

21,869

26,727

35,942

49,297

77,540

R&D expenses

(42,800)

(48,512)

(56,307)

(46,868)

(43,699)

(54,488)

(83,084)

G&A expenses

(9,044)

(8,882)

(10,423)

(9,409)

(10,044)

(11,052)

(11,405)

Total expenses

(51,844)

(57,394)

(66,730)

(56,277)

(53,743)

(65,540)

(94,495)

Other operating income/(expense)

1

97

(668)

(222)

128

0

0

Operating result

(22,160)

(25,865)

(45,529)

(29,772)

(17,673)

(16,238)

(16,955)

Net financial result

2,165

1,395

1,634

1,264

1,797

3,508

(37,592)

(19,995)

(24,470)

(43,895)

(28,508)

(19,470)

(12,730)

(54,547)

0

0

0

0

0

0

0

Net result of the year

(19,995)

(24,470)

(43,895)

(28,508)

(19,470)

(12,730)

(54,547)

Basic and diluted loss per share

(0.54)

(0.58)

(1.01)

(0.65)

(0.41)

(0.24)

(1.00)

Grants

Result before taxes Income tax expense

ANNUAL REPORT 2015 / ABLYNX

35.

CORPORATE OVERVIEW

TOTA L RE V ENUE A ND GR A N T INCOME (€ MIL L ION)

49

36 30

31

27 22

YEAR 2009

2010

2 0 11

2 012

2013

2014

78

T OTA L RE V E N U E AND G R A NT IN COME

€30 MILLION €31 MILLION €22 MILLION €27 MILLION €36 MILLION €49 MILLION €78 MILLION

2 015

2009 2010 2 0 11 2 012 2013 2014 2 015

NUMBER OF EMPLOYEES

321 2 61

344

284

YEAR 2 012

2013

2014

2 015

NUMBER OF EMPLOYEES

G & A + R & D = T O T A L ...... Y E A R 40 40 41 43

+ 221 + 24 4 + 280 + 301

= = = =

2 61 284 321 344

2 012 2013 2014 2 015

15 D I F F E R E N T N AT I O N A L I T I E S W O R K I N G TOGETHER: AMERICAN, BELGIAN, BRITISH, CANADIAN, DANISH, DUTCH, FRENCH, GERMAN, HUNGARIAN, INDIAN, IRISH, ITALIAN, POLISH, PORTUGUESE AND SENEGALESE G&A R&D TOTAL

PRODUCTS IN THE CLINIC

7

7

6

5* 5 5 4 3

YEAR

*

PRODUCTS IN THE CLINIC

3 4 5 7 5 7 6 5*

2008 2009 2010 2 0 11 2 012 2013 2014 2 015

* N ot inc ludin g ant i - R A NK L Nanob o d y (A L X- 0141) lic en s e d t o Eddingphar m in Gr e at er C hina (in pr e - c linic al de velopment in C hina b u t c omple t e d Pha s e I s t ud y in Eur op e b e f or e i t w a s lic en s e d t o Eddingphar m)

C A SH - INCOME, OPER AT ING E X PENSE S A ND Y E A R- END C A SH P OSI T ION (€ MIL L ION)

OPER ATING EXPENSES & CASH INCOME

10 0

50

0

YEAR 2008

CASH POSITION OPER ATING E XPENSES CASH INCOME

2009

2010

2 0 11

2 012

2013

2014

2 015

CASH POSITION

250

200

CASH INCOME, OPER ATING EXPENSES AND YEAR-END CASH POSITION C A SH & E X PENSE S (€ MIL L ION)

15 0

10 0

50

0

IN 2015, TOTA L C A SH INCOME FROM COL L A BOR A T IONS C A ME IN AT € 24.8 MIL L ION (€ 30.1 MIL L ION IN 2014). TOTA L OPER AT ING E X PENSE S INCRE A SED TO €94.5 MIL L ION (€65.5 MIL L ION IN 2014), M A INLY A S A RE SULT OF HIGHER R& D E X PENSE S W HICH A RE IN L INE W I T H GROW T H IN E X T ERN A L DE V ELOPMEN T COS T S REL AT ED TO CL INIC A L T RI A L S E X PENDI T URE FOR C A PL AC IZUM A B, A L X- 0 0 61 A ND A L X- 0171. A BLY N X ENDED T HE Y E A R 2015 W I T H € 236. 2 MIL L ION IN C A SH, C A SH EQUI VA L EN T S, RES T RIC T ED C A SH A ND OT HER SHOR T T ERM IN V E S TMEN T S (€ 20 6. 2 MIL L ION IN 2014).

N ot e: 2013 c a sh inc ome inc lude s US$175 million up f r ont p ay ment r e c ei ve d f r om A bbV ie.

BREAKDOWN OF SHARE C APITAL

PERCEPTIVE ADVISORS

BOEHRINGER INGELHEIM TAUBE HODSON STONEX AVIVA INVESTORS

JP MORGAN ASSET MANAGEMENT OPPENHEIMER FUNDS POL AR CAPITAL FUNDS PLC

FIDELIT Y MANAGEMENT RESEARCH

ABINGWORTH MANAGEMENT

OTHER SHAREHOLDERS

BREAKDOWN OF SHARE C APITAL

5% 5% 5% 4% 4% 4% 3% 3% 3%

A B I N G W O R T H M A N A G E M E N T UK F I D E L I T Y M A N A G E M E N T R E S E A R C H USA AV I VA I N V E S T O R S UK TA U B E H O D S O N S T O N E X UK B O E H R I N G E R I N G E L H E I M DE P E R C E P T I V E A D V I S O R S USA J P M O R G A N A S S E T M A N A G E M E N T UK O P P E N H E I M E R F U N D S USA P O L A R C A P I TA L F U N D S P L C UK

64%

OTHER SHAREHOLDERS

% OF INSTITUTIONAL SHAREHOLDERS BY GEOGRAPHY (REPRESENTING 70% OF TOTAL SHARES OUTS TANDING)

USA

OTHER UK

FRANCE SC ANDINAVIA

BENELUX

PERCENTAGE OF INSTITUTIONAL SHAREHOLDERS BY GEOGRAPHY

35% 28% 27% 3% 2% 5%

USA BENELUX UK FRANCE SC ANDINAVIA OTHER

THE SHARES IN 2015

On 31 December 2015, there were 54,812,374 shares representing a total share capital of the Company of €102,442,297. The total number of rights (warrants) to subscribe to not yet issued securities conferring voting rights currently was 2,675,031 at 31 December 2015. This number equals the total number of voting rights that may result from the exercise of these warrants. Currently 1,000 convertible bonds are outstanding entitling the holders thereof to 7,733,952 shares of the Company in the aggregate, upon conversion of such convertible bonds. The total number of fully diluted shares of the Company at 31 December 2015 was 65,221,357.

Ablynx’s shares are traded on Euronext Brussels, under the ticker symbol ABLX.

2011

2012

2013

2014

2015

Average daily volume

69,642

116,296

190,926

121,006

165,910

Average daily value

353,980

503,372

1,343,892

1,045,748

1,914,721

Total traded volume

17,975,216

29,771,718

48,686,030

30,795,240

42,472,998

Total traded value

90,972,838

128,863,121

342,692,372

265,619,949

490,168,666

ANNUAL REPORT 2015 / ABLYNX

49.

CORPORATE OVERVIEW

A B S O L U T E P E R F O R M A N C E I N 2 015

+7 5 . 9 4 %

MONTH JANUARY

JUNE

DECEMBER

ABSOLUTE PERFORMANCE I N 2 015

80% 60% 40% 20% 0%

1.5M 1.0M 0.5M 0.0M

R E L AT I V E P E R F O R M A N C E I N 2 015

MONTH JANUARY JUNE

A BLY N X

BEL PHARMA BIO

NEXT BIOTECH

BEL MID

DECEMBER

REL ATIVE PERFORMANCE I N 2 015 80% 60% 40% 20% 0%

+7 5 . 9 4 % +40.72% +3 8 . 5 7 % +2 1. 6 5 %

A BLY N X NEXT BIOTECH BEL PHARMA BIO BEL MID

FINANCIAL CALENDAR 2016 • • • • •

31 March – online publication annual report 2015 28 April – annual general meeting 2016 12 May – results Q1 2016 25 August – half year results 2016 23 November – results Q3 2016

SHAREHOLDERS’ CLUBS AT ABLYNX Ablynx organises frequent shareholders’ clubs at its headquarters in Ghent during which individual investors have the opportunity to meet with the CFO and IR, and to visit the laboratories. The events in 2016 will be held in the Dutch language and are scheduled on the following days: • • •

18 May at 5.45pm 14 September at 5.45pm 7 December at 5.45pm

To attend an event, please register via email: investors@ablynx.com, stating your name and preferred day.

ANNUAL REPORT 2015 / ABLYNX

54.

CORPORATE OVERVIEW

ANALYST COVERAGE At present, Ablynx is covered by six analysts: Broker Berenberg Bank Bryan Garnier Jefferies KBC Securities Kempen & Co Degroof Petercam

Analyst Alistair Campbell Hugo Solvet Peter Welford Jan De Kerpel Sachin Soni Roderick Verhelst

Rating Buy Buy Buy Buy Buy Buy

INVESTOR RELATIONS CONTACT Marieke Vermeersch Associate Director Investor Relations Ablynx nv Technologiepark 21 9052 Zwijnaarde (Ghent) Belgium Email: marieke.vermeersch@ablynx.com Tel: +32 9 262 00 82 Website: www.ablynx.com

ANNUAL REPORT 2015 / ABLYNX

55.

CORPORATE OVERVIEW

GLOSSARY

Ang2 angiopoietin-2 (Ang2) - an important protein involved in the formation of new blood vessels from pre-existing vessels (angiogenesis), a vital mechanism in the growth of tumours

and possibly even a non-redundant role in vivo.

IL-6R receptor of interleukin-6 (IL-6R) - a cytokine involved in a wide range of biological activities

Bi-specific Nanobody Nanobody construct which binds to two different targets

Multi-specific Nanobody Nanobody construct which binds to multiple different targets

Bivalent Nanobody Nanobody construct comprising two Nanobodies that bind with the same targets

Nanobody® protein that is composed of one or more binding domains with the structural and functional characteristics of naturally occurring heavy chain variable domains (VHH’s) from Camelidae. Nanobody® is a registered trademark of Ablynx

BLA Biologics License Application - request for permission to introduce, or deliver for introduction, a biologic product into interstate commerce

Orphan drug drug treating a rare disease - the grant of orphan drug status by the authorities provides certain privileges, intended to stimulate the research, development and commercialisation of orphan drugs including market exclusivity of ten years in Europe and seven years in the USA

DMARDs disease modifying anti-rheumatic drugs (defined by their use in RA to slow down disease progression) Free float Free float is defined as the outstanding capital less shareholdings exceeding 5%, except where such interests are held by (a) collective investment schemes/ mutual funds or (b) pension funds. In addition, certain insider holdings (e.g. shares held by directors, employees, founders and family), government holdings and holdings of the company itself (including subsidiaries) are not considered free float, irrespective of the size

Phase I first stage of testing in human subjects. Normally, a small (20-100) group of healthy volunteers will be selected.

This phase includes trials designed to assess the safety (pharmacovigilance), tolerability, pharmacokinetics, and pharmacodynamics of a drug Phase II once the initial safety of the study drug has been confirmed in Phase I trials, Phase II trials are performed on larger patient groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments in a larger group of patients

IL-17A/F T Helper 17 (Th17) cells and interleukine-17 (IL-17) are associated with the pathology of many human inflammatory and autoimmune disorders like psoriasis, rheumatoid arthritis and multiple sclerosis and have proved to play an important role in animal models mimicking these and other auto-immune disorders.

Although IL-17A is the most characterised family member, its closest relative IL-17F has similar biological activity

ANNUAL REPORT 2015 / ABLYNX

Phase III Phase III studies are randomised controlled multi-centre trials on large patient groups (300-3,000 or more

58.

GLOSSARY

TTP thrombotic thrombocytopenic purpura - a rare thrombotic disorder

depending upon the disease/medical condition studied) and are aimed at being the definitive assessment of how effective the drug is in comparison with current ‘gold standard’ treatment. Because of their size and comparatively long duration Phase III trials are the most expensive, time-consuming and difficult trials to design and run, especially in therapies for chronic medical conditions

UL-vWF ultra-large vWF multimers VEGF vascular endothelial growth factor (VEGF), an important protein involved in the formation of new blood vessels from pre-existing vessels (angiogenesis), a vital mechanism in the growth of tumours

Pre-clinical involves in vitro (test tube or cell culture) and in vivo (animal) experiments using wide-ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information

vWF von Willebrand factor - a blood glycoprotein involved in haemostasis

Proof-of-concept study clinical trial to demonstrate the product is effective in patients RA rheumatoid arthritis - autoimmune disease that causes chronic inflammation of the joints, the tissue around the joints, as well as other organs in the body RANKL Receptor Activator of Nuclear factor Kappa-B Ligand - a key regulator in bone remodelling RSV respiratory syncytial virus – virus that infects the respiratory tract SLE systemic lupus erythematosus (SLE) - complex, multiorgan, autoimmune disorder characterised by the production of pathogenic autoantibodies and tissue deposition of immune complexes, which result in widespread tissue damage TNFα protein named Tumour Necrosis Factor-alpha - a cytokine involved in systemic inflammation

ANNUAL REPORT 2015 / ABLYNX

59.

GLOSSARY

TABLE OF CONTENTS ANNUAL REPORT 2015 / ABLYNX

01. REPORT OF THE BOARD OF DIRECTORS 64 1.1.

Strategic Highlights 1.2. Analysis of Results of Operations 1.3. Balance Sheet Analysis 1.4. Cash Flow Analysis 1.5. Outlook 2016 1.6. Corporate Governance Statement 1.7. Transactions within the Authorised Capital 1.8. Acquisition of Own Securities 1.9. Use of Financial Instruments by the Company 1.10. Circumstances that could considerably affect the Development of the Company 1.11. Research and Development 1.12. Conflicting Interests of Directors (Art. 523 of the Belgian Companies Code) 1.13. Independence and Expertise of at least one Member of the Audit Committee 1.14. Justification of the Valuation Rules 1.15. Appropriation of Results 1.16. Important Events subsequent to the Accounting Reference Date 1.17. Grant of Discharge to the Directors and the Statutory Auditor 02. RESPONSIBILITY STATEMENT

116

03. STATUTORY AUDITOR’S REPORT

117

04. BALANCE SHEET

120

05. STATEMENT OF COMPREHENSIVE INCOME

121

06. CASH FLOW STATEMENTS

122

07. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

123

08. NOTES TO THE FINANCIAL STATEMENTS 8.1. General Information 8.2. Summary of Significant Accounting Policies 8.3. Financial Risk Management

124

62.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.4. Critical Accounting Estimates and Judgements 8.5. Segment Information 8.6. Intangible Fixed Asset 8.7. Property, Plant and Equipment 8.8. Restricted Cash 8.9. Non-current R&D tax incentive receivables 8.10. Trade Receivables and Other Current Assets 8.11. Other Short-term Investments 8.12. Cash and Cash Equivalents 8.13. Financial Instruments by Category 8.14. Share Capital 8.15. Share-Based Payments 8.16. Borrowings 8.17. Trade Payables and Other Current Liabilities 8.18. Deferred Income Tax 8.19. Retirement Benefit Obligations 8.20. Revenue Recognition 8.21. Research and Development Expenses 8.22. General and Administrative Expenses 8.23. Other Income and Expenses 8.24. Employee Benefit Expense 8.25. Operating Leases 8.26. Finance Income and Expenses 8.27. Income Tax Expense 8.28. Loss Per Share 8.29. Contingencies and Arbitrations 8.30. Commitments 8.31. Related Party Transactions 8.32. Events after the Balance Sheet Date

09. DISCLOSURE AUDIT FEES

189

10. CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX

190

11. SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION 11.1. Principles 11.2. Specific Rules

195

ANNUAL REPORT 2015 / ABLYNX

63.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

01. REPORT OF THE BOARD OF DIRECTORS

Dear Shareholders, We are pleased to present the financial statements for the fiscal year ended 31 December 2015 which have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.

1.1. STRATEGIC HIGHLIGHTS In 2015, total revenues and grant income increased by 57% to €77.5 million (2014: €49.3 million) driven by increased funding for full-time equivalents and increased recognised income, mainly from the upfront payment by AbbVie made in 2013. Total research and development costs increased to €83.1 million (2014: €54.5 million) in line with growth in external development costs, which are largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171. General and administrative costs remained broadly unchanged at €11.4 million (2014: €11.0 million). The operating loss increased to €17.0 million (2014: €16.2 million). The net loss for the period was €54.5 million (2014: €12.7 million). The net cash burn in 2015 (excluding the net proceeds of €97.2 million from the convertible bonds, announced on 20 May 2015) was €67.2 million. The Company ended the year with €236.2 million in cash, cash equivalents, restricted cash and other short-term investments.

Pipeline update At the end of 2015, there were five Nanobodies in clinical development, both internally and as part of collaborations.

In March 2015, Ablynx initiated a Phase IIb study of the anti-IL-6R Nanobody (ALX‑0061), in combination with methotrexate, in patients with rheumatoid arthritis (RA).

Recruitment of 345 patients was completed on schedule at year-end.

In April 2015, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed in February 2016, also on schedule.

In July 2015, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled over into the open-label extension study.

In August 2015, Ablynx initiated a Phase II study with ALX-0061 in patients with systemic lupus erythematosus (SLE). The Company plans to recruit 300 patients in this study by 2017.

In September 2015, Ablynx initiated the confirmatory, international Phase III

ANNUAL REPORT 2015 / ABLYNX

64.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

HERCULES study of the anti-vWF Nanobody, caplacizumab, in patients with acquired TTP (aTTP). The Company plans to recruit 92 patients into this study by 2017. In February 2016, the Phase II TITAN study of caplacizumab was published in the New England Journal of Medicine.

In October 2015, pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the extensive immuno-oncology collaboration with Merck & Co., Inc., which triggered a €3.5 million milestone payment to Ablynx.

In November 2015, Ablynx's partner Boehringer Ingelheim presented compelling preclinical proof-of-mechanism data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models. A Phase Ib study with this anti-VEGF/Ang2 Nanobody in patients with solid tumours was initiated by Boehringer Ingelheim in January 2016, triggering a €8 million milestone payment to Ablynx. Boehringer Ingelheim expects to recruit 80 patients in this study with top line efficacy results expected in 2018. In addition, a Phase II study with this Nanobody is expected to start in 2017, which would trigger a milestone payment to Ablynx.

In December 2015, the Phase I/IIa safety study with the inhaled anti-RSV Nanobody, ALX-0171, completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with a respiratory syncytial virus (RSV) infection. Also in this month, an independent Data Monitoring Committee reviewed safety data available for the first 15 infants from the placebo-controlled part of this Phase I/IIa study and confirmed that the inclusion age for recruitment could be lowered to 1 month. The Company then decided to generate additional data during the current RSV season in the Northern Hemisphere by expanding the Phase I/IIa study to include up to 18 additional infants, aged 1-5 months. Recruitment of this expansion cohort was completed ahead of schedule in February 2016.

Partnerships update In March 2015, Ablynx announced an extension of its initial two-year research collaboration with Merck & Co., Inc. to develop and commercialise Nanobodies directed towards an undisclosed voltage gated ion channel. Merck & Co., Inc. extended their funding to the end of September 2016. This ion channel collaboration was announced in October 2012 and included a €6.5 million upfront payment and €2 million in initial research funding.

In May 2015, a research and option agreement was signed with Genzyme to explore the potential of a Nanobody targeting an ion channel that may play a role in multiple sclerosis, triggering an undisclosed exclusivity payment to Ablynx.

In June 2015, Ablynx and Taisho Pharmaceuticals signed an exclusive license

ANNUAL REPORT 2015 / ABLYNX

65.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

agreement to develop and commercialise the anti-TNFα Nanobody, ozoralizumab, in Japan. Ablynx received an upfront payment of US$3 million and is entitled to receive development and commercial milestone payments plus royalties.

In July 2015, Ablynx significantly expanded its immuno-oncology partnership with Merck & Co., Inc. which was originally signed in February 2014, to include a total of up to 17 programmes with a focus on multi-specific Nanobodies. As part of both the original and expansion agreements, Ablynx received €33 million in upfront payments and is entitled to receive up to €5.7 billion in future milestone payments, plus royalties.

In November 2015, Ablynx and Novo Nordisk entered into a drug discovery collaboration to investigate multi-specific Nanobodies in an undisclosed indication.

Ablynx received an upfront payment of €5 million in early 2016, and is entitled to receive €4 million in research funding during the initial three-year term of the collaboration and up to €182 million in potential milestones, plus royalties.

Corporate developments In November 2015, Ablynx announced that Dr Robert K. Zeldin had joined the Company as the new Chief Medical Officer (CMO), effective 1 December 2015, to lead the Company’s global clinical development, regulatory and medical affairs activities.

Dr Zeldin brings significant industry experience, having held senior level clinical development positions with Merck & Co., Inc. and Novartis Pharmaceuticals Corp. Dr Zeldin replaces Dr Dominique Tersago who previously held the CMO position.

1.2. ANALYSIS OF RESULTS OF OPERATIONS Total income Total revenues and grant income increased by 57% to €77.5 million (2014: €49.3 million), driven by increased FTE funding and increased recognised income, mainly from the upfront payment by AbbVie made in 2013.

Research and development expenses Total research and development costs increased to €83.1 million (2014: €54.5 million) in line with growth in external development costs, which are largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171.

ANNUAL REPORT 2015 / ABLYNX

66.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

General and administrative expenses General and administrative costs remained broadly unchanged at €11.4 million (2014: €11.0 million).

Operating result As a result of the foregoing, the operating loss increased to €17.0 million (2014: €16.2 million).

Net financial result The net financial loss of €37.6 million comprises finance income of €1.8 million, which relates to interest income and exchange gains, and finance costs of €39.4 million.

These finance costs mainly include non-cash expenditure resulting from the fair value calculation and amortisation of the convertible bond components (as a result of the higher share price at year-end compared to the share price at the time of the convertible bonds issuance), and the semi-annual interest paid on the convertible bonds of €1.6 million.

Net result As a result of the foregoing, the net loss for 2015 increased to €54.5 million (2014: €12.7 million).

Loss for the period As the Company incurred losses in all of the relevant periods, the Company had no taxable income and therefore paid no income taxes.

1.3. BALANCE SHEET ANALYSIS The Company’s intangible assets include a portfolio of patents, which are fully amortised, and technology licenses which are being amortised over 5, 18 and 20 years.

The intangible assets also include software licenses. The Company expenses all its research and development activities.

The Company’s non-current tangible assets include the Company’s laboratory and office equipment, the investments in its facilities, tax receivables and €1.6 million restricted cash, which is a cash pledge that the Company has provided for the lease of its headquarter building. The Company owns one small facility (which it previously rented) and continues to invest in equipment for its research activities. Non-current tax

ANNUAL REPORT 2015 / ABLYNX

67.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

receivables include an R&D tax credit receivable of €14.5 million.

The Company’s current assets of €246.1 million consist mainly of cash and cash equivalents and other short-term financial investments. Current tax receivables include an R&D tax receivable of €1.2 million.

Shareholders’ equity decreased from €75.5 million at the end of 2014 to €27.9 million at the end of 2015, mainly as a result of the incorporation of the loss for the period.

Non-current liabilities relate to the senior unsecured bonds due on 27 May 2020 with a principal value of €100 million.

Current liabilities consist mainly of trade payables and deferred income related to the upfront payments received from partners.

1.4. CASH FLOW ANALYSIS Cash flow from operating activities represented a net outflow of €69.0 million in 2015 compared to a net outflow of €32.3 million in 2014. The difference primarily relates to the higher number of clinical trials being run by the Company.

Cash flow from investing activities represented a net outflow of €39.7 million compared to a net outflow of €6.2 million in 2014. The net cash outflow comprises primarily the net movements in cash and cash equivalents (on deposit with a term of less than 1 month) and other short-term financial investments (on deposit with a term greater than 1 month).

Cash flow from financing activities represented a net inflow of €100.6 million compared to a net inflow of €39.7 million in 2014. The difference primarily relates to €97.2 million net proceeds from the issuance of convertible bonds and €5.2 million from the exercise of warrants.

The Company ended the period with a total liquidity position of €236.2 million (2014: €206.2 million) which consists of cash and cash equivalents of €3.6 million, other short-term financial investments of €231.0 million and restricted cash of €1.6 million.

1.5. OUTLOOK 2016 In the second quarter of 2016, the Company expects to report Phase I/IIa results from its study of the wholly-owned, inhaled anti-RSV Nanobody, ALX-0171, in 53 infants, who had been hospitalised with an RSV infection.

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In the first half of 2016, it is expected that the results will be announced from the Phase Ib study of the bi-specific anti-IL-17A/F Nanobody (ALX-0761), exclusively licensed to Merck KGaA (Merck Serono), in patients with moderate to severe psoriasis.

In the third quarter of 2016, the Company expects that the first patients from the Phase III HERCULES study of its wholly-owned anti-vWF Nanobody, caplacizumab, will have rolled-over into a three-year follow-up study to evaluate the long term safety and clinical effect of caplacizumab.

In the third quarter of 2016, Ablynx expects to communicate top line results from the monotherapy and combination therapy studies with the anti-IL-6R Nanobody, ALX‑0061, in patients with RA. Following a review of the complete RA data package, AbbVie is expected to decide before the end of 2016 whether it wishes to exercise its option to license ALX-0061 in RA. If AbbVie decides to exercise its option, Ablynx will receive a US$75 million milestone payment and AbbVie will then be responsible for providing all the resources to further develop and commercialise ALX-0061 in this indication. Ablynx will then be eligible to receive regulatory and sales milestones plus double-digit royalties.

In the fourth quarter of 2016, Ablynx intends to initiate a worldwide, Phase II dose ranging study with inhaled ALX-0171 in approximately 120 infants, aged 1-24 months, who are hospitalised with an RSV infection.

During 2016, the Company expects that up to 4 new partnered programmes could enter the clinic (Boehringer Ingelheim already started a Phase Ib trial with the antiVEGF/Ang2 Nanobody in January 2016) and additional pre-clinical data with partners may be obtained, thereby triggering milestone payments to Ablynx.

The net cash burn for the full year 2016 is expected to be in the range of €65-75 million, not including the potential licensing payment of US$75 million by AbbVie for ALX-0061 in RA.

1.6. CORPORATE GOVERNANCE STATEMENT 1.6.1. REFERENCE CODE – COMPLY OR EXPLAIN The Corporate Governance of the Company has been organised pursuant to the Belgian Companies Code and the Company’s Articles of Association. The Company’s Corporate Governance Charter is available on the Ablynx website via the following link: http://www.ablynx.com/investors/corporate-governance/principles-codes-andguidelines/. The Company’s Corporate Governance Charter and this Corporate

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Governance Statement have been adopted in accordance with the recommendations set out in the Belgian Corporate Governance Code (the “CGC”) that was issued on 9 December 2004 by the Belgian Corporate Governance Committee and subsequently amended on 12 March 2009.

The Charter is regularly updated and the date of modification is mentioned each time.

The Company has opted for a two-tier governance structure. As a result, the governance structure of Ablynx is based on a distinction between: • The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and within the framework of the general strategy defined by, and under the supervision of the Board of Directors; and • The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Company’s Articles of Association and the Company’s Corporate Governance Charter, which fall within the powers of the Board of Directors.

All transactions involving conflicts of interests were in line with the precisions of the Corporate Governance Charter and are listed in the annual report under point 1.12.

The Company’s Board of Directors complies with the Corporate Governance Charter (CGC), and believes that certain deviations from its provisions are justified in view of the Company’s particular situation. These deviations include the following: • Provision 2.1 CGC: gender diversity. Since the IPO, the Board was mainly composed of men. The Company commits to build a diverse list of candidates for new positions in the future.

• Provision 2.9 CGC: the Company has no Company Secretary. The CFO acts as Company Secretary with the assistance of external counsels.

• Provision 5.2 CGC: the Company has no overall formal internal auditor because of the size of the Company. However, the Audit Committee regularly evaluates the need for this function and/or commissions external parties to conduct specific internal audit missions and report back to the Audit Committee.

• Provision 7.7 CGC: only the independent Directors shall receive a fixed remuneration in consideration of their membership to the Board of Directors and their attendance in the meetings of the committees of which they are members.

In principle, they will not receive any performance-related remuneration, nor will any options or warrants be granted to them in their capacity as Director. However, upon recommendation of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders Meeting to deviate from that

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principle in application of Art. 554 BCC, if, to the Board of Directors’ reasonable opinion, the granting of options or warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise.

1.6.2. CAPITAL AND SHARES The following capital increases took place in 2015: On 19 January 2015, the Company issued 115,946 new shares in exchange for €909,426.07 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €216,819.02 and €692,607.05 respectively.

On 16 March 2015, the Company issued 174,302 new shares in exchange for €1,292,682.18 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €325,944.74 and €966,737.44 respectively.

On 17 April 2015, the Company issued 20,165 new shares in exchange for €112,425.70 as a result of the exercise of warrants by some employees and consultants of the Company.

The par value and share premium amounted to €37,603.55 and €74,822.15 respectively.

On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds were placed through an accelerated book building placement with qualified investors outside the United States, in accordance with Regulation S under the Securities Act. The bonds will mature on 27 May 2020 (5 years), are in dematerialised form in the denomination of €100,000 each, are issued at par and will be redeemed at par at maturity. The bonds will pay a coupon of 3.25% per annum, payable semi-annually in arrears on 27 November and 27 May of each year, beginning on 27 November 2015. The annual yield to maturity of the bonds is 3.25%. The initial price for the conversion of the bonds into ordinary shares of the Issuer shall be €12.93, representing approximately a 26.5% premium above the reference price of €10.2219, being the VWAP of the ordinary shares on Euronext Brussels on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid-up ordinary shares of the Issuer. Conversion of the convertible bonds in Ablynx ordinary shares is at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. As the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash).

Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39, not an own equity instrument (cf. IAS 32.26).

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On 3 June 2015, the Company issued 83,000 new shares in exchange for €410,955 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €155,210 and €255,745 respectively.

On 17 July 2015, the Company issued 79,885 new shares in exchange for €600,491.30 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €149,384.95 and €451,106.35 respectively.

On 29 July 2015, the Company issued 24,967 new shares in exchange for €199,086.96 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €46,688.29 and €152,398.67 respectively.

On 19 October 2015, the Company issued 5,200 new shares in exchange for €41,249 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €9,724 and €31,525 respectively.

On 7 December 2015, the Company issued 7,250 new shares in exchange for €61,390 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,557.50 and €47,832.50 respectively.

On 15 December 2015, the Company issued 287,500 new shares in exchange for €1,532,750 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €535,000 and €997,750 respectively.

The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share.

• Number of shares on 31 December 2014 • Number of new shares (exercise of warrants) • Number of shares on 31 December 2015

54,014,159 798,215 54,812,374

During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted, of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/warrant for consultants).

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Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the shares on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month).

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period.

Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).

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The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee Contract or the Consulting Agreement, all the vested warrants need to be exercised during the first fifteen days of the quarter in which the end of the employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

The Company had a total of 2,675,031 outstanding warrants at the end of 2015.

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1.6.3. SHAREHOLDERS AND SHAREHOLDER STRUCTURE As at 31 December 2015, the shareholding structure is as follows (based on the most recent transparency declarations):

Shareholder

Address

Voting rights

% of voting rights

Aviva Investors Global Services Limited

No 1, Poultry London, EC2R 8EJ UK

2,442,496

4.50%

Abingworth Management Limited and Abingworth LLP

38, Jermyn Street London, SW1Y 6DN UK

2,632,150

4.80%

C.H. Boehringer Sohn AG & Co. KG

Binger Strasse 173 55216, Ingelheim am Rhein Germany

2,142,857

3.90%

Perceptive Advisors

51, Astor Place 10th floor New York, NY 10003 USA

2,077,590

3.80%

Polar Capital Funds Plc (UK)

4, Matthew Parker Street London, SW1H9NP UK

1,654,827

3.00%

FMR LLC (US)

245, Summer Street Boston, MA 02210 USA

2,753,606

5.00%

Taube Hodson Stonex Partners LLP (UK)

Cassini House, 57-59, St. James’s Street London, SW1A 1LD UK

2,410,681

4.40%

Oppenheimer Funds, Inc. (OFI) (US)

225, Liberty Street 11th Floor New York, NY 10281 USA

1,672,262

3.10 %

JP Morgan Asset Management Holdings Inc.

270, Park Avenue New York, NY 1007 USA

1,813,725

3.30%

35,212,180

64.20%

Other

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1.6.4. BOARD OF DIRECTORS

1.6.4.1. COMPOSITION OF THE BOARD The Board of Directors consists of eight members, one of whom is an executive Director, seven of whom are independent non-executive Directors.

From left to right: Dr Peter Fellner, Dr Edwin Moses, Dr Russell G. Greig, Dr Bo Jesper Hansen, Dr William Jenkins, Mrs Catherine Moukheibir, Mr Remi Vermeiren, Prof Dr Lutgart Van den Berghe

Peter Fellner Chairman of the Board Dr Peter Fellner is Chairman of the Boards of the medical technology company Consort Medical plc, and the biotech companies Vernalis plc and Mereo BioPharma Group. He was also, until recently a member of the Novo A/S Advisory Group. He was Chairman of Optos plc until its acquisition by Nikon Corporation during 2015, and served as Vice Chairman of Astex Pharmaceuticals Inc. until its acquisition by Otsuka Pharmaceuticals in 2013. He was a Director of the global biopharmaceutical company UCB SA from 2005 to 2014. Dr Fellner previously served as Chairman of Acambis plc from 2006 until its acquisition by Sanofi in 2008, and of Premier Research Group plc from 2007 to 2008 when it was acquired by a private equity-backed group. He was Chairman of Celltech Group plc from 2003 to 2004, when it was acquired for €2.3 billion by UCB having been CEO from 1990 onwards. During this time he oversaw the company’s growth from a small research-based company into the UK’s largest biotech company.

Before joining Celltech, he was CEO of Roche UK from 1986 to 1990. He was appointed as Chairman of the Board of Ablynx in November 2013.

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Edwin Moses Member of the Board of Directors and Chief Executive Officer After completing his post-doctoral research in Germany, Dr Edwin Moses began a successful commercial career at Amersham International, Enzymatix and RaggioItalgene. From 1993-2001, first as CEO and later as Chairman, he was responsible for the growth of Oxford Asymmetry (OAI) through a series of venture rounds cumulating in a flotation (LSE) in 1998 at a value of £120 million. This was followed by a sale of the company to Evotec Biosystems in 2000 for £316 million. During this period, OAI grew from four people to over 250. Over the past fourteen years, Dr Moses has played an important role at Board level (primarily as Chairman) in over 15 European life science companies. During this time he has been involved in a number of financing rounds, a series of M&A transactions and four IPOs. He was Chairman of Ablynx from 2004 till 2013, and was appointed Chief Executive Officer of the Company in 2006.

Apart from and in addition to his duties as CEO of the Company, Edwin Moses is the Chairman of the Board of Capricorn Health-tech Fund (Belgium). Furthermore, in addition to Ablynx, he has held Board memberships with the following companies: Clinphone Group plc (UK), Fusion IP plc (formerly Biofusion plc) (UK), Phoqus Pharmaceuticals Ltd (UK), Pharmaceutical Profiles Ltd (UK), Proimmune Ltd (UK), Paradigm Therapeutics Ltd (UK), Avantium Technologies (The Netherlands), Ionix Pharmaceuticals Ltd (UK), Evotec OAI AG (Germany), Bioimage A/S (Denmark), Inpharmatica Ltd (UK), Prolysis Ltd (UK), ProPharma Ltd (UK), Lectus Therapeutics Ltd. (UK) and European Biopharmaceutical Enterprises.

Russell G. Greig Independent Director Dr Russell Greig, permanent representative of Greig Biotechnology Global Consulting Inc. has more than 35 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma (The Netherlands), Mint Solutions (The Netherlands), Bionor (Norway) and Sanifit (Spain), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium). He also acts as Venture Partner to Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He was a member of the Scottish Scientific Advisory Committee, reporting to the First Minister. He was also Chairman of Syntaxin (UK), which was acquired by Ipsen (France), Novagali (France) sold to Santen (Japan), and of Isconova (Sweden), acquired by Novavax (USA).

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Remi Vermeiren Independent Director Before Remi Vermeiren became an independent Director of Ablynx, he had a 43year long career at Kredietbank nv, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. In the earlier years, he was mainly involved in Asset Management, Trading and Administration of Securities, Treasury and International and Investment banking. From 1989 on, he was a member of the Executive Committee responsible for the day-to-day management of the bank. From 1998 until 2003, he held the function of Chairman of the KBC Bank and Insurance Group and of KBC Bank. During this period, he was mainly involved in defining the strategy of the new group, integration of the banking and insurance activities, implementation of the merger of the two banks and the cost reduction going with it, and expansion of KBC into Central Europe where it became one of the most important Western European investors in the banking and insurance industry. Currently, Mr Vermeiren is also member of a number of non-quoted companies and of charitable organisations, such as Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board of ACP II SCA (Luxembourg) (Liquidator).

In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Devgen nv (Belgium), Afinia Plastics nv (Belgium), IFB SPA (Italy), Cumerio nv (Belgium) and MCS nv.

Remi Vermeiren holds a degree in Commercial and Financial Sciences.

Catherine Moukheibir Independent Director Catherine Moukheibir has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategies appropriate to various stages of a biotech’s development, on the continuum from venture capital funding to public market or M&A. She is currently a non-executive Board member of Creabilis, a non-executive Board member at Zealand Pharma and Chair of the Audit Committee, non-executive Board member and member of the Audit Committee at Cerenis and Ablynx and Advisory Board member at the Imperial College Business School.

She is also a member of the three-person management Board at Innate Pharma where she is responsible for financial and corporate strategy.

Catherine Moukheibir holds an MBA from Yale University.

Bo Jesper Hansen Independent Director Dr Bo Jesper Hansen, M.D., PhD, permanent representative of Orfacare Consulting, currently serves as executive Chairman of the Board of SOBI AB (Swedish Orphan Biovitrum AB). He is Chairman of Karolinska Development AB and is also non-executive

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Director of a number of biotech and pharma companies including Orphazyme ApS, Newron Pharmaceuticals SpA, CMC AB, Genspera Inc. and Azanta A/S. Dr Hansen served as CEO and President and as Director to the Board of Swedish Orphan International AB until the merger with Biovitrum, forming Swedish Orphan Biovitrum AB (SOBI AB). He also was non-executive Director of Gambro until its acquisition by Baxter, and of Zymenex, until its acquisition by Chiesi. Dr Hansen was the Executive Chairman of Topotarget and in this role led the merger with BioAlliance forming OnXeo. He founded Scandinavian Medical Research during which he served as Medical Advisor for Synthélabo, Pfizer, Pharmacia and Yamanouchi Pharmaceutical.

William J. Jenkins Independent Director Dr William J. Jenkins, M.D., is Principal of William Jenkins Pharma Consulting and has been advising a wide range of pharma and biotech companies and investment and venture capital firms in the healthcare sector since 1999. Formerly, he was Head of Worldwide Clinical and Regulatory Affairs for Novartis Pharma and held a similar position with Glaxo Group Research Limited. He is currently Senior Independent Director of Consort Medical, a member of the Board of Allecra Therapeutics AG and of Allocyte Pharmaceuticals AG, and a member of the Strategic Advisory Board of Chiesi Farmaceutici. In addition, he is a member of the Scientific Advisory Boards of BB Biotech Ventures II and III funds.

Lutgart Van den Berghe Independent Director Lutgart Van den Berghe is executive Director of GUBERNA (Belgian Governance Institute) and Extra-Ordinary Professor in Corporate Governance at the University of Ghent. She is a Partner of the Vlerick Business School where she served as Chairman of the Competence Center “Entrepreneurship, Governance and Strategy” for many years.

She has an extensive governance experience gained as member of the Belgian Commission for Corporate Governance and non-executive Director in several companies, such as Proximus and Belfius. At EcoDA (European Confederation of Directors’ Association), she is a Member of the Board and chairman of its policy committee.

Formerly she served as a non-executive Director of Electrabel (Belgium, 20032014), the ING Group (The Netherlands, 1991-2003), KLM (The Netherlands, 20012004), Solvay (Belgium, 2003-2007), CSM (The Netherlands, 1998 -2010), SHV (The Netherlands, 1997-2013), Capco nv (Belgium, 2000-2003), DVV (Belgium, 19951997), member of the Audit Committee of the Flemish Government (2000-2004) and Chairman of the Proximus Foundation (until 2005). She was also a Member of the Advisory Board of Lazard (Benelux, 2007-2010).

Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent.

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Name

Year of Birth

Position

Term(1)

Board Committee Memberships

Dr Peter Fellner

1943

Independent Director and Chairman

2017

Dr Edwin Moses(2)

1954

Director and Chief Executive Officer

2019

Member of the Research and Development Committee

Remi Vermeiren

1940

Independent Director

2019

Chairman of the Audit Committee

Greig Biotechnology Global Consulting Inc. represented by its permanent representative, Dr Russell Greig

1952

Independent Director

2016

Chairman of the Nomination and Remuneration Committee Member of the Audit Committee

Catherine Moukheibir

1959

Independent Director

2017

Member of the Audit Committee

William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins

1947

Independent Director

2017

Chairman of the Research and Development Committee Member of the Nomination and Remuneration Committee

Orfacare Consulting GmbH represented by its permanent representative, Dr Bo Jesper Hansen

1958

Independent Director

2017

Member of the Nomination and Remuneration Committee Member of the Research and Development Committee

Feadon nv represented by its permanent representative, Baroness Prof Dr Lutgart Van den Berghe

1951

Independent Director

2019

(1) The term of the mandate of the Director will expire immediately after the Annual General Meeting of Shareholders held in the year indicated.

(2) First appointed as independent Director by the Extraordinary General Meeting of Shareholders held on 21 October 2004. He has been re-appointed as executive Director by the Extraordinary General Meeting of Shareholders held on 23 August 2006 and by the Annual General Meeting of Shareholders held on 30 April 2015. Dr Moses has taken up the position of CEO on 6 June 2006. Dr Moses was also Chairman of the Board until November 2013.

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1.6.4.2. ACTIVITY REPORT In 2015, seventeen Board meetings have been held.

In four of these meetings, the strategy and/or the company results have been discussed. All members of the Board were present at these meetings.

All other Board meetings were related to the exercise of warrants, the issuance of the convertible bond and the preparation of General Assemblies.

1.6.4.3. PERFORMANCE EVALUATION OF THE BOARD Under the lead of the Chairman, the Board regularly evaluates its performance to determine whether the Board and its Committees are functioning effectively. The evaluation process has the following objectives: assessing how the Board operates; verifying that important issues are adequately prepared and discussed; evaluating the actual composition of each Director’s work, the Director’s presence in the Board and Committee meetings and his/her constructive involvement in discussions and decisionmaking and verifying the Board’s current composition against the Board’s desired composition.

The non-executive Directors will assess their interactions with the Executive Committee. At least once a year, they meet in the absence of the CEO. No formal Board decision can be taken in such a meeting.

The Board has discussed its composition and performance on several occasions during 2015.

At the time of their re-election, the Directors’ commitments and contributions are evaluated within the Board, and the Board ensures that any appointment or re-election allows an appropriate balance of skills and experience to be maintained in the Board.

The same applies at the time of the appointment or the re-election of the Chairman (of the Board and of the Board’s Committees). The Board shall act on the results of the performance evaluation by recognising its strengths and addressing its weaknesses.

Where appropriate, this will involve proposing new members for appointment, proposing not to re-elect existing members or taking any measure deemed appropriate for the effective operation of the Board.

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1.6.5. AUDIT COMMITTEE As of 8 January 2009 (the date on which the Law of 17 December 2008 with regard to the incorporation of an Audit Committee in listed companies and financial companies entered into effect), “large” listed companies (as defined in Art. 526bis of the Belgian Companies Code) are legally obliged to establish an Audit Committee within their Boards of Directors.

The Board of Directors has set up an Audit Committee. In 2015 the Audit Committee was composed of three members, which are exclusively non-executive Directors. All of its members are independent Directors and two of its members have an expertise in the field of accounts and audit. The Chairman of the Audit Committee is not the Chairman of the Board of Directors.

1.6.5.1. COMPOSITION The following Directors are members of the Audit Committee: Remi Vermeiren (Chairman), Dr Russell Greig, permanent representative of Greig Biotechnology Consulting Inc. and Catherine Moukheibir. Remi Vermeiren and Catherine Moukheibir have expertise in the field of accounts and audit and are both independent Directors.

1.6.5.2. ACTIVITY REPORT The Audit Committee met four times in 2015. During these meetings the financial results, budgets, treasury, topics related to risk management and the financial press releases were discussed.

The attendance was as follows: Remi Vermeiren (100 %), Dr Russell Greig (100%) and Catherine Moukheibir (75%).

The Audit Committee is responsible for the financial reporting, the internal control and risk management, the internal audit and the external audit, and for the reporting and communication between the statutory auditor and the Board. More detailed information on the responsibilities can be found on Ablynx’ website in the Corporate Governance Charter and in the Terms of Reference of the Audit Committee.

1.6.6. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee is appointed by the Board of Directors of Ablynx to advise the Board in its duties and responsibilities relating to the

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Nomination and the Compensation and Benefit programmes of executive & nonexecutive Directors, the Chief Executive Officer and the Executive Committee including other terms of employment for the CEO and the Executive Committee. The Nomination and Remuneration Committee at the same time reviews possible warrant plans for employees.

The basic principle is that the level of remuneration should be sufficient to attract, retain and motivate on each level the most talented individuals for the job.

1.6.6.1. COMPOSITION The Nomination and Remuneration Committee consists of three members: Greig Biotechnology Global Consulting Inc, represented by its permanent representative, Dr Russell Greig, William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins, and Orfacare Consulting GmbH represented by its permanent representative Dr Bo Jesper Hansen.

These Directors are all members of Boards of other companies and as a result have broad knowledge of remuneration policies.

All members of the Nomination and Remuneration Committee are also a member of the Board of Directors.

All members are independent non-executive Directors. Each member of the Committee has appropriate knowledge and experience in compensation- and benefitrelated matters, since they are associates of Boards of other companies and as a result have knowledge of remuneration policies across the world.

The CEO and the Vice President Human Resources are invited to attend the meetings of the Nomination and Remuneration Committee in an advisory and nonvoting capacity on all matters. They do not attend discussions concerning their own remuneration.

The Chairman leads all meetings of the Committee, coordinates the evaluation of the performance of the CEO and acts as Secretary, although he can delegate this duty or parts thereof to the Vice President Human Resources.

The members of the Committee declare that they dedicate a significant amount of their time to the Committee’s activities.

The Remuneration & Nomination Committee of Ablynx advises the Board of Directors on all aspects of the Compensation and Benefit programmes for the executive and

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non-executive Directors, the CEO and the Executive Committee and other terms of employment for the CEO and the Executive Committee. The Committee makes recommendations to the Board on appropriate Compensation and Benefit programmes (in respect of both amounts and composition) of: • The CEO and the other members of the Executive Committee, upon proposal by the CEO (except when it concerns his own remuneration), such as: (i) the principal contractual terms and arrangements for the termination of employment; and (ii) the principal components of the remuneration package (including, the relative importance of each component, the performance criteria applying to the variable elements, the benefits in kind, bonuses and long-term incentives, whether stockrelated or not, in the form of stock options or other financial instruments); as well as Directors; • Drawing up the policy regarding warrant plans and overseeing the general policy for the granting of warrants to employees, executive and non-executive Directors and members of the Executive Committee. The CEO shall propose the identity of the beneficiaries and the number of warrants to be allocated to each of them (individually in the case of members of the Executive Committee, and individually or per category in the case of other Employees) to the Nomination and Remuneration Committee. The Nomination and Remuneration Committee shall evaluate such proposals. In the case of grants of warrants to the CEO, the initial proposal shall be made by the Committee itself.

• Ensuring that remuneration levels take into account risks involved, demands and time requirements of each role, and relevant industry benchmarks.

• Preparing the annual remuneration report.

• Explaining the remuneration report during the Statutory General Meeting.

As it is the Nomination and Remuneration Committee’s duty to oversee the search for appropriate candidates for appointment to the Executive Committee or non-executive Director membership to the Board of Directors, the Committee receives detailed and regular updates (while diligently respecting any confidentiality and conflict of interest issues) on the hiring of Executive Committee members from the CEO and is given the opportunity (or designated members) to interview the final candidate(s) before their appointment.

The Nomination & Remuneration Committee is, together with the Executive Committee, engaged in the Succession Planning of Executive Committee members, including the CEO. In the latter case the Nomination & Remuneration Committee coordinates closely with the Chairman any and all activities involved in planning for CEO succession.

Any recommendations made in respect of the recruitment or succession planning requires discussion and endorsement by the Board of Directors before becoming effective.

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The Nomination & Remuneration Committee (or designated members) has the option to schedule exit interviews with departing members of the Executive Committee.

The Nomination & Remuneration Committee, with the input of the Executive Committee, annually reviews and presents the annual goals/objectives for the Board of Directors in order to finalise and approve the final goals and objectives by the Board of Directors.

The Nomination & Remuneration Committee also advises the Board of Directors on the accomplishment of the targets set earlier and consequently initiates a discussion on the Board which finally adjusts and/or approves the recommendations of the Nomination & Remuneration Committee.

1.6.6.2. ACTIVITY REPORT In 2015 the Nomination & Remuneration Committee officially met three times to fulfill its functions. Meeting minutes circulated after the meeting among all members of the Board of Directors.

During the meetings, the goals of the Company, the performance against the goals of the Company and the goals of the Executive Committee, the warrant plans, the salary evolution, the minutes of the previous meetings, the benchmark of salaries in general and more specifically of the Executive Committee members and the independent Directors and the nomination of new members of the Board of Directors were discussed.

On top of these meetings, the Nomination & Remuneration Committee held several teleconferences to discuss ad hoc nomination and remuneration topics.

1.6.7. THE RESEARCH AND DEVELOPMENT COMMITTEE The Research and Development Committee of the Board advises the Board on its duties and responsibilities related to the long term Research and Development strategy of the Company in general and the development of the Company’s Nanobody platform and programmes in particular.

1.6.7.1. COMPOSITION The Research and Development Committee consists of three members: William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins

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(Chairman), Orfacare Consulting GmbH, represented by its permanent representative Dr Bo Jesper Hansen, and Dr Edwin Moses. Dr Jenkins and Dr Hansen are independent Directors.

All the members of the Committee have relevant scientific, research, medical or other related expertise.

1.6.7.2. ACTIVITY REPORT The Research and Development Committee officially met four times in 2015. During these meetings the projects in research and development were discussed in detail and strategic decisions were prepared to be discussed at the Board Meeting.

1.6.8. EXECUTIVE COMMITTEE

1.6.8.1. COMPOSITION

From left to right: Dr Edwin Moses, Dr Robert K. Zeldin, Dr Antonin de Fougerolles, Mr Johan Heylen, Mr Wim Ottevaere, Mr Guido Gielen, Mr Gerrit Franciscus Landolt

The Board of Directors has established an Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and Art. 24 of the Company’s Articles of Association.

The Executive Committee consists of eight members: the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Scientific Officer (CSO), the Chief Medical Officer (CMO), the Chief Commercial Officer (CCO), the Chief Operations Officer (COO), the VP Human Resources and the VP IP and Legal.

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The current members of the Executive Committee are listed in the table below.

Name

Function

Year of Birth

Nationality

Edwin Moses

Chief Executive Officer

1954

British

Johan Heylen

Chief Commercial Officer

1967

Belgian

Wim Ottevaere(1)

Chief Financial Officer

1956

Belgian

Antonin Rollet de Fougerolles

Chief Scientific Officer

1965

Canadian

Kim Simonsen(2)

Chief Operations Officer

1957

Danish

Dominique Tersago (3)

Chief Medical Officer

1962

Belgian

Robert K. Zeldin(4)

Chief Medical Officer

1963

American

Guido Gielen

VP Human Resources

1960

Belgian

Gerrit Franciscus Landolt

VP IP and Legal

1964

Dutch

(1) Mr Ottevaere acts as the permanent representative of Woconsult BVBA (2) Mr Simonsen left the company on 31 May 2015 (3) Dr Tersago has left the company on 31 March 2016 (4) Dr Zeldin is CMO from 1 December 2015

1.6.8.2. ACTIVITY REPORT In principle, the Executive Committee meets at least once every month. Additional meetings may be called at any time by the CEO or at the request of two members. The Executive Committee shall constitute a quorum when all members have been invited and the majority of the members are present or represented at the meeting. The resolutions of the Executive Committee shall be passed unanimously. If unanimity cannot be reached, the matter shall be referred to the Board of Directors, which shall decide upon the matter in its next meeting.

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1.6.9. REMUNERATION REPORT

1.6.9.1. DIRECTORS Procedure applied in 2015 in order to create a remuneration policy and to determine the individual remuneration The Nomination and Remuneration Committee recommends the level of remuneration for Directors, including the Chairman of the Board, which is subject to approval by the Board and, subsequently, by the Annual Shareholders Meeting.

The Nomination and Remuneration Committee benchmarks the Directors’ compensation against peer companies to ensure competitiveness. Without prejudice to the powers granted by law to the Shareholders Meeting, the Board sets and revises at regular intervals the rules and the level of compensation for Directors executing a special mandate or having a seat in one of the committees, as well as the rules for reimbursement of the Directors’ business-related out-of-pocket expenses.

Apart from the remuneration for independent Directors, all Directors will be entitled to a reimbursement of out-of-pocket expenses actually incurred as a result of their participation in meetings of the Board of Directors.

The remuneration of the Directors will be disclosed to the Company’s shareholders in accordance with the applicable laws and regulations.

The level of remuneration should be sufficient to attract, retain and motivate Directors who match the profile determined by the Board.

Only independent Directors received a fixed remuneration in consideration of their membership of the Board and the Committees of which they are members. They have not received, any performance-related remuneration, nor have any options or warrants been granted to them.

Given the fact that the company acts in a highly competitive and international environment and is at the same time cost-conscious because it does not yet generate profits, the Board has — until the end of 2013 and upon advice of the Nomination and Remuneration Committee — proposed to the Shareholders Meeting to deviate from the latter principle and grant warrants in order to attract and retain highly qualified independent Directors.

The CEO as member of the Board did not receive any compensation for serving as member of the Board.

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Executive Committee members receive no additional compensation when invited to the Board.

The Directors’ mandate may be terminated ad nutum (at any time) without any form of compensation.

There are no employment or service agreements that provide for notice periods or indemnities between the Company and the members of the Board of Directors who are not a member of the Executive Committee. In respect of the members of the Board of Directors who are a member of the Executive Committee, reference is made to the section Executive Committee below.

Remuneration policy applied during 2015 During 2015 Ablynx obtained salary market data for the members of the Board via its own research.

The fixed annual remuneration of the Chairman of the Board is €100,000. No additional remuneration is foreseen for membership of other Board committees.

The fixed annual remuneration of independent Directors as part of their membership of the Board of Directors is €30,000, and the additional fixed annual remuneration of the Chairman of the Nomination and Remuneration Committee, the Chairman of the Audit Committee and the Chairman of the Research and Development Committee is €10,000.

For other independent non-executive Directors the additional fixed remuneration related to the membership of the Nomination and Remuneration Committee, the Audit Committee or the Research and Development Committee remains at €5,000 per committee.

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The total amount of the remunerations and the benefits to which the independent Directors (in such capacity) were entitled in 2015 was €327,500 (gross, excluding VAT), see table below.

Committee Name

Board

Dr Peter Fellner

100,000

Remi Vermeiren

30,000

10,000

Greig Biotechnology Global Consulting Inc. represented by its permanent representative Dr Russell Greig

30,000

5,000

Catherine Moukheibir

30,000

5,000

William Jenkins Pharma Consulting represented by its Principal Dr William J. Jenkins

30,000

10,000

5,000

45,000

Orfacare Consulting represented by its permanent representative Dr Bo Jesper Hansen

30,000

5,000

5,000

40,000

Feadon nv represented by its permanent representative Prof Dr Lutgart Van den Berghe

22,500

272,500

R&D

Audit

Remuneration

Total 100,000 40,000

10,000

45,000

35,000

22,500

15,000

20,000

20,000

327,500

There is no performance-related remuneration for non-executive Directors.

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The table below provides an overview of the shares and warrants held by the members of the Board. This overview should be read together with the notes listed below.

Total shares and warrants(1)

Shares

Name

Number

%(3)

Number

Dr Peter Fellner

50,000

0.08

Dr Edwin Moses

682,936

1.05

184,200

Remi Vermeiren

28,571

0.04

25,000(8)

Catherine Moukheibir

5,028

Greig Biotechnology Global Consulting Inc., represented by its permanent representative Dr Russell Greig

Warrants(1) %(3)

Number

%(3)

50,000(2)

0.08

0.28

498,736(5)

0.76

0.04

3,571(6)

0.01

0.01

5,028(2)

0.01

6,434

0.01

6,434(7)

0.01

William Jenkins Pharma Consulting represented by its Principal Dr William J. Jenkins

4,781

0.01

4,781 (4)

0.01

Orfacare Consulting represented by its permanent representative Dr Bo Jesper Hansen

4,781

0.01

4,781 (4)

0.01

(1) Reflecting the number of shares of the Company to which such warrants give right to subscription 2) Warrants granted in 2013 with an exercise price of €7.32 (3) Percentage on a fully diluted basis (4) Warrants granted in 2013 with an exercise price of €7.32 (5) Warrants granted from 2006 onwards with an exercise price between €2 and €10.22 (6) Warrants granted in 2007 with an exercise price of €7.00 (7) Warrants granted in 2012 with an exercise price of €5.44 (8) of which 7,500 held by spouse

With respect to the following two years, Ablynx does not foresee changes in its remuneration policy.

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1.6.9.2. EXECUTIVE COMMITTEE Procedure applied in 2015 in order to create a remuneration policy and to determine the individual remuneration The remuneration of the members of the Executive Committee is determined by the Board of Directors upon recommendation of the Nomination and Remuneration Committee and subsequent to the CEO’s recommendation to this Committee (except for his own remuneration). Ablynx strives to be competitive in the European biotech market.

Remuneration policy applied during 2015 In the compensation strategy of Ablynx, the starting salary is primarily based on input from the market and the merit increase on individual performance. Via own research, Ablynx obtained mid 2015 salary market data for the members of the Executive Committee, in order to understand the compensation market. The data confirm the remuneration policy is in line with the market practice.

The level and structure of the remuneration of the members of the Executive Committee is such that qualified and expert professionals can be recruited, retained and motivated taking into account the nature and scope of their individual responsibilities.

An appropriate proportion of the remuneration package of a member of the Executive Committee shall be structured so as to link rewards to corporate and individual performances, thereby aligning on an annual basis the interests of a member of the Executive Committee with the interests of the Company and its shareholders.

Since any Short Term Compensation component should include a maximum award limit, an Executive Committee member can receive maximum 30% of the annual base remuneration as a performance-driven bonus. Given the competitive landscape, the CEO’s bonus will be maximum 50% of the annual base salary.

The Extraordinary General Meeting of 26 April 2012 has approved that the CEO’s variable remuneration, which is part of his yearly remuneration, will be spread over a period of one year. This means that the bonus is spread over a period that is shorter than the periods determined in Art. 520ter, second paragraph of the Belgian Companies Code. This deviation has been incorporated in Art. 25 bis of the Ablynx Articles of Association.

The corporate and individual goals are based on the operation performance of the Company as measured by a.o. financial indicators, progress in the pipeline, the

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completion and/or extension of important collaborations and other measures.

More specifically the following areas, not disclosed in great level of detail because of the competitive nature of the business, are part of the corporate goals and subsequently part of the individual goals of the members of the Executive Committee: • Control of the cash burn versus a predefined target; • Completion of new discovery deal(s) generating an upfront defined income; • Control of expenditure of internal development programs while delivering on time and against earlier agreed standards; • Initiation of new internal discovery programmes and access to complementary technologies.

The above goals and the criteria for the variable remuneration of the CEO and members of the Executive Committee are in advance and explicitly spelled out in a software system, which automates the performance management and appraisal process at Ablynx and binds the Company and the individuals. The variable remuneration will only be paid when the KPIs are effectively met. The Remuneration Committee evaluates the performance and makes a proposal to the Board.

Schemes under which members of the Executive Committee are remunerated in shares, warrants or any other rights to acquire shares, shall be subject to prior shareholder approval by way of a resolution taken by the General Meeting of Shareholders (except for warrants issued under the authorised capital). The approval shall relate to the scheme itself and not to the grant to individuals of share-based benefits under the scheme. As a rule, plans issued until September 2015 stated that 25% of the warrants granted vested after 1 year, 2.08% vested additionally after each full month, however, vested warrants would in principle not be exercisable within less than three full calendar years.

From September 2015 new plans state that as a rule, 28% of the warrants will vest after 1 year from the date of the offer, 9% vest additionally after each full quarter, however vested warrants shall in principle not be exercisable within less than three full calendar years.

In order to avoid a subjective and discretionary benefit, the grant of warrants to Executive Committee members (similar to the grant to certain levels of employees) is based on a formula. Whereas the Short Term Incentive (bonus) is based on contributing to the corporate goals, the Long Term Incentive plan is based on the performance against the key responsibilities in the job description of the individual or group of individuals as well as based on the observed attitude versus the values of the Company. The outcome of this yearly evaluation can vary between 2 (low) and 10 (high) points. Based on the ultimate performance score between 6 and 10 points, based on the share price and the yearly base salary of the individual, the exact number of

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warrants is calculated (number of warrants= (yearly salary/grant price)*performance coefficient). A performance score below 6 does not qualify for a Long Term Incentive.

The CEO presents his proposal regarding performance against key responsibilities and values to the Nomination and Remuneration Committee, which submits a final proposal regarding the offering of warrants to members of the Executive Committee and the CEO to the Board of Directors which takes a final decision.

The remuneration policy for the Executive Committee shall at least include the main contractual terms including the main characteristics of pension schemes, termination arrangements and the key elements for determining the remuneration, including (i) the relative importance of each component of the remuneration, (ii) the performance criteria chosen for the variable elements and (iii) the fringe benefits.

In 2015 the total amount of remunerations and benefits paid to the CEO and the other members of the Executive Committee and to the persons they are represented by, amounted to €2,261,942.97 (gross, excluding VAT and share-related payments), of which a detailed breakdown is shown in the table below: Total

of which CEO

Basic Salary

1,616,275.19

484,520.40

Variable Remuneration(1)

411,323.39

190,944.00

Group Insurance (pension, invalidity, life)

155,539.55

49,836.36

Other (car, cell phone, hospitalisation insurance)(2)

78,804.84

14,696.04

2,261,942.97

739,996.80

Total (1) paid in cash (2) not including share based payments mentioned under point 8.15

The insurance plan, for which the above amounts have been paid, is a defined contribution plan for which 10 % of the base salary is contributed on a yearly basis.

Given the nature of the contract of the Executive Committee members there is no liability for the Company regarding the defined interest rate or total benefit during or at the end of the collaboration.

With respect to the two financial years to come, Ablynx does not foresee changes in its remuneration policy regarding the Executive Committee.

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The table below provides an overview of the shares and warrants held by the members of the Executive Committee, including the Executive Director.

Name

Function

Shares

Warrants

Edwin Moses

Chief Executive Officer

184,200

673,736 warrants giving the right to subscribe for 498,736 shares

Johan Heylen

Chief Commercial Officer

Wim Ottevaere/Woconsult BVBA

Chief Financial Officer

Antonin Rollet de Fougerolles

Chief Scientific Officer

189,508 warrants giving the right to subscribe for 189,508 shares

Dominique Tersago

Chief Medical Officer

46,416 warrants giving the right to subscribe for 46,416 shares

Gerrit Franciscus Landolt

VP IP and Legal

134,558 warrants giving the right to subscribe for 134,558 shares

Guido Gielen

VP Human Resources

131,475 warrants giving the right to subscribe for 131,475 shares

175,000 warrants giving the right to subscribe for 175,000 shares 21,605

393,952 warrants giving the right to subscribe for 288,952 shares

During 2015 Edwin Moses CEO exercised 575,000 warrants and sold 332,500 shares; Wim Ottevaere, permanent representative of Woconsult BVBA and CFO, exercised 18,750 warrants and sold 18,750 shares. Guido Gielen, VP HR, exercised 18,750 warrants and sold 18,750 shares and Frank Landolt, VP IP & Legal, exercised 50,000 warrants and sold 50,000 shares.

The most important characteristics of the warrants, which were allocated in 2015, are detailed below.

During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be

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sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month).

The duration of the warrants is 7 years as of the issue date of the warrants. In order to focus on sustainable, long term growth and alignment with shareholders interest, the warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as of 1 January 2019 until 15 January 2022). In case of a normal termination of the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).

The duration of the warrants is 7 years form the date of the issue. In order to focus on sustainable, long term growth and alignment with shareholders interest, the warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such Exercise Period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such

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exercise will exclusively be borne by the relevant Warrant holder. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

Severance payments Currently, all members of the Executive Committee are employed on the basis of a service agreement, which can be terminated at any time provided that a previously determined term of notice is observed, which, at the Company’s discretion, can be replaced by a corresponding termination allowance. No other termination remunerations are foreseen. All service agreements contain non-competition clauses, as well as confidentiality obligations and obligations relating to the transfer of intellectual property.

The Corporate Governance Charter requires that every contractual settlement agreed upon before or after 1 July 2009 concerning the remuneration of the CEO or any other member of the Executive Committee, clearly states that the amount of the exit remuneration, which is granted when the contract is prematurely terminated, should not exceed the basic and variable remuneration of twelve months. All existing contractual settlements reached with the CEO, or any other member of the Executive Committee, do not contain any exit remuneration higher than 12 months. Except for Dr Edwin Moses, who is entitled to an exit remuneration which is equal to one (1) time his fixed annual compensation, all other Executive Committee members (Mr Ottevaere, permanent representative of Woconsult BVBA, CFO; Dr Robert K Zeldin, CMO; Dr Antonin Rollet de Fougerolles; CSO; Mr Johan Heylen, CCO; Mr Gielen, VP HR and Mr Gerrit Franciscus Landolt, VP IP and Legal) are entitled to an exit remuneration of one quarter (1/4) of their fixed annual compensation.

Claw-back provisions There are no provisions allowing the Company to reclaim any variable remuneration paid to the executive management based on incorrect financial information.

Miscellaneous Furthermore the company has no intention to compensate in a subjective or discretionary manner.

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1.6.10. MOST IMPORTANT CHARACTERISTICS OF THE COMPANY’S INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT The Executive Committee should lead the Company within the framework of prudent and effective control, which enables to assess and manage risks. The Executive Committee should develop and maintain adequate internal control systems so as to offer a reasonable assurance concerning the realisation of the goals, the reliability of the financial information, the observance of applicable laws and regulations and to enable the execution of internal control procedures. The Audit Committee assists the Board of Directors in the execution of its task to control the Executive Committee.

The Company has opted for a “two-tier” governance structure. As a result, the principal governance structure of Ablynx is based on a distinction between: • The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code, within the framework of the general strategy defined by, and under the supervision of the Board; and • The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Articles of Association and the Corporate Governance Charter which fall within the powers of the Board.

Control Environment The Executive Committee has organised the internal control environment, based upon “COSO’s internal Control-integrated Framework of 2013” which is monitored by the Audit Committee. The role of the Audit Committee is stipulated in the Corporate Governance Statement and in the terms of reference of the Audit Committee.

The Audit Committee decided not to create an internal audit role for the time being, since the scope of the business does not justify a full-time role.

The role of the Audit Committee shall be to assist the Board in fulfilling its monitoring responsibilities in respect of control in the broadest sense, including responsibilities for the financial reporting process, the system of internal control and risk management (including the Company’s process for monitoring compliance with laws and regulations) and the external audit process.

Risk analysis During 2015, the management of the Company assessed its operational risks and challenged and compared these with the COSO 2013 risk intelligence framework. Following this exercise, appropriate actions will be proposed to the Executive Committee.

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The Company is potentially subject to the following inherent risks: • Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market.

• Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Company’s ability to achieve regulatory approval and commence product sales as currently contemplated.

• The Company’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval; the drugs will be subject to ongoing regulation. To date, one of the Company’s drug candidates has reached the stage of submission or evaluation for regulatory approval.

• The Company has a history of operating losses and an accumulated deficit; the Company may never become profitable or may not be able to sustain profitability in subsequent periods.

• The Company is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates.

• The Company’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively.

• The Company may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming.

• The Company faces, and will continue to face, significant competition and rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates.

• The Company relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management.

• The Company may not have adequate insurance cover, particularly in connection with product liability risk.

• The commercial success of the Company will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Company has not yet commercialised any product.

• If the Company fails to attract and retain qualified personnel, it may be unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates.

• The Company may need additional funding, which may not be available on acceptable terms when required, if at all.

• The revenue is generated by a limited number of clients.

• Tax legislation in Belgium might change over time.

• Fair value measurements that cannot be fully based on market parameters are based on judgment and could potentially affect the fair value estimation, including the embedded derivative linked to the convertible bond issued in May 2015.

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Our financial risk management consists of: Liquidity risk management The Company makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year.

The Company has €1.6 million restricted cash related to a cash pledge.

On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% payable semi-annually.

The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26).

Interest rate risk As the Company has no other significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates.

Credit risk The credit risk arises from outstanding transactions with customers. It is the Company’s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The credit risk is highly concentrated around a limited number of customers.

The financial institutions have credit ratings varying from A+, over A to A-.

Available liquidities are placed with several banks.

No cash credit lines were available.

Foreign exchange risk The Company has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in AUD, CAD, CHF, DKK, GBP, JPY, MXN, RUB, SEK and USD. The Company did not enter into any currency hedging arrangements in order to cover this risk.

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Control activities The Board of Directors yearly approves the strategy and the goals. Each year, a business plan is elaborated for the next three years, as well as a detailed budget for the next year, which is submitted to the Board of Directors for approval. The budget is systematically followed up at each Audit Committee and Board of Directors meeting, and regularly adjusted to changing prospects.

A process is in place which enables the finance department to prepare financial statements on a quarterly basis.

ERP support systems have been implemented generating consistent financial and operational information.

Systems are in place in order to verify the accuracy of the reporting figures and are compared with the previous year, budgets and forecasts.

Supervision and monitoring Supervision and monitoring activities are performed by the senior management on a daily basis.

1.6.11. STATUTORY AUDITOR Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA/SC s.f.d. SCRL, a civil company having the form of a co-operative company with limited liability (“burgerlijke vennootschap onder de vorm van een coöperatieve vennootschap met beperkte aansprakelijkheid”) and existing under the laws of Belgium, with registered offices at Berkenlaan 8b, 1831 Diegem, Belgium, represented by Gert Vanhees, was reappointed as Statutory Auditor of Ablynx on 24 April 2014 for a term of three years ending immediately after the Shareholders Meeting to be held in 2017.

1.6.12. STATEMENTS REQUIRED BY ART. 34 OF THE ROYAL DECREE OF 14 NOVEMBER 2007 All shares are ordinary shares and represent the entire capital. There are no preference shares.

Some of the important agreements that Ablynx has entered into may be amended or terminated in the event of a change of control over Ablynx.

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1.6.12.1. BOEHRINGER INGELHEIM AGREEMENTS The Boehringer Ingelheim Alzheimer’s disease agreement signed in January 2007 states that in the event of a change of control over Ablynx, Boehringer Ingelheim is entitled to terminate the research (as a result of which each party is released from paying any research license fees and Ablynx is no longer entitled to the research license from Boehringer Ingelheim), and is no longer held to participate in joint committees or to share its development and commercialisation plans. This clause was approved by the Company’s Annual Shareholders Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code.

However, this clause is no longer applicable as the Company announced on 28 August 2014 that, following the termination of the Phase I study with BI 1034020 in Alzheimer’s disease, and after a full review of the programme, Boehringer Ingelheim (BI) decided not to move forward with the development of this anti-Abeta Nanobody, thereby ending the collaboration in Alzheimer’s disease that both companies entered into in January 2007.

Under the Boehringer Ingelheim Strategic Alliance agreement signed in September 2007, it is stated that in the event of a change of control over Ablynx, Boehringer Ingelheim is also entitled to terminate the research (without being released from the obligation to pay royalties on licensed products, if any) and is no longer held to participate in joint committees, to share its development and commercialisation plans or to start new programmes. However, Boehringer Ingelheim is entitled to continue the research independently, and Ablynx’ option to co-promotion rights expires. This clause was approved by the Extraordinary Shareholders Meeting of 12 October 2007 in accordance with Art. 556 of the Belgian Company Code. The Agreement was extended with two years in March 2012 and the same change of control clause was approved by the Company’s Annual Shareholders Meeting of 26 April 2012. On 21 August 2014 the agreement was extended one last time until 31 December 2014, being the end of the Discovery Term of this Agreement.

1.6.12.2. MERCK KGaA AGREEMENTS The Merck KGaA agreement signed in September 2008 states that a change of control may result automatically, in the case of early joint research and development programmes, in a full opt-out by Ablynx. In the event of further advanced joint research and development programmes, Merck KGaA may at its sole discretion invite the controlling shareholder of Ablynx to continue to contribute to such joint research and development programme. If Merck KGaA does not extend such invitation or if Ablynx's controlling shareholder does not accept such invitation, the change of control results in a full opt-out by Ablynx. This clause was approved by the Company’s Annual

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Shareholders Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code.

The Merck KGaA agreement signed in October 2010 states that (i) in the event of a change of control over Ablynx during the research term, Merck KGaA is entitled to terminate the programmes and to assume sole responsibility for further discovery, development and commercialisation; and (ii) in the event of a change of control over Ablynx (a) in respect of early programmes, Ablynx will be deemed to have exercised its opt-out right in full (if the first opt-out point had been reached; if the first opt-out point had not yet been reached, as of the time that the first opt-out point will have been reached); and (b) in respect of further advanced programmes, Ablynx will be deemed to have exercised its opt-out right under the agreement in full, provided that Merck KGaA, at its sole discretion, invites the new controlling shareholder of Ablynx to continue to contribute to such programme. If Merck KGaA does not extend such invitation or if Ablynx's new controlling shareholder does not accept such invitation, the change of control results in an opt-out in full by Ablynx (in which case, however, the entitlement to royalties will be replaced by an entitlement to a share of net income calculated according to the percentage of resources provided by Ablynx to a programme until the first commercial sale). The clauses under (ii) cease to have effect, on a programme-by-programme basis, as of the first commercial sale of a product resulting from a programme. This clause was approved by the Company’s Extraordinary General Meeting of Shareholders of 11 January 2011 in accordance with Art. 556 of the Belgian Company Code.

In November 2011, a third agreement with Merck KGaA was signed with the same change of control clause as mentioned above. This clause was approved by the Company’s Annual Shareholders Meeting held on 26 April 2012 in accordance with Art. 556 of the Belgian Company Code.

The Merck KGaA collaboration agreement which was signed in September 2013 states that in certain cases of change of control of the Company Merck KGaA is entitled at their option either to (i) proceed with the relevant collaboration, it being understood that Merck KGaA shall have the right to unilaterally decide upon the composition and the continued existence of the joint committees in respect of this collaboration agreement, or (ii) terminate the collaboration agreement and to oblige the Company to transfer all or parts of the ongoing programmes under this collaboration agreement, in which case the Company and Merck KGaA shall enter into separate agreements in respect of these programmes and Merck KGaA shall be exempted from further payments (without any right, however, to reimbursement by the Company). This clause was approved by the Company’s Extraordinary General Shareholders Meeting on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.

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1.6.12.3. MERCK & CO., INC. AGREEMENTS The agreement Ablynx entered into in 2012 with Merck & Co., Inc. (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx's involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target), to terminate the agreement. The clause was approved during the Extraordinary General Meeting of Shareholders of 5 August 2013 in accordance with Art. 556 of the Belgian Company Code.

The agreement Ablynx entered into in February 2014 with Merck & Co., Inc. (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx's involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target or combination of targets), to terminate the agreement.

The clause was approved during the Extraordinary General Meeting of Shareholders of 4 April 2014 in accordance with Art. 556 of the Belgian Company Code.

In July 2015, Ablynx significantly expanded its immuno-oncology partnership with Merck & Co., Inc. which was originally signed in February 2014, to include a total of up to 17 programmes with a focus on multi-specific Nanobodies.

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1.6.12.4. ABBVIE AGREEMENT The agreement with AbbVie which was signed in September 2013, states that in certain cases of a change of control over the Company, and depending on the stage of the research of the programmes under this collaboration agreement AbbVie is entitled to: • terminate the joint committees in respect of these programmes and assume their tasks; • oblige the Company to take the appropriate measures to avoid the disclosure of confidential information; • terminate co-promotion rights; • decide to either (i) assume or (ii) allow the Company to continue, the initial development activities in respect of the programme; • oblige the Company to either transfer or terminate the ongoing clinical trials.

This clause was approved by the Company’s Extraordinary General Meeting of Shareholders on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.

1.6.12.5. ISSUANCE OF A 3.25% CONVERTIBLE BOND The Terms and Conditions of the 3.25% Convertible Bond issued by the Company on 27 May 2015 and maturing on 27 May 2020 (ISIN BE 6278650344) state that in case of a change of control over the Company: • the conversion price will be adjusted in proportion to the already elapsed time since the issue date (ie 27 May 2015) and • the bondholders may request the early redemption of their bonds at the redemption price plus accrued interest.

This clause was approved by the Company’s Special General Shareholders Meeting on 10 July 2015 in accordance with Art. 556 of the Belgian Company Code.

1.6.12.6. NOVO NORDISK AGREEMENT The agreement with Novo Nordisk signed on 25 November 2015 states that during the research programme, Novo Nordisk will have the right to terminate the agreement in full or on a programme-by-programme basis in the event of a change of control of Ablynx.

This clause will be submitted for approval to the shareholders during the General Meeting of 28 April 2016 in accordance with Art. 556 of the Belgian Company Code.

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1.7. TRANSACTIONS WITHIN THE AUTHORISED CAPITAL In 2015, two transactions have occurred within the framework of the authorised capital that are required to be reported in accordance with Art. 608 of the Belgian Companies Code.

In May 2015, Ablynx completed the placement of €100 million senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ Ordinary Shares on the Brussels Stock Exchange on 20 May 2015.

At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx.

During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered (thus starting as from 1 January 2019 until 15 January 2022). In the case of a normal termination of the Employee Contract or the Consulting Agreement, all the vested warrants need to be exercised during the first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

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1.8. ACQUISITION OF OWN SECURITIES Neither Ablynx nv nor any direct affiliate or any nominee acting in his own name but on behalf of the Company or of any direct affiliate, have acquired any of the Company’s shares. Ablynx nv has not issued profit-sharing certificates or any other certificates.

1.9. USE OF FINANCIAL INSTRUMENTS BY THE COMPANY In May 2015, Ablynx raised gross €100 million through the placement of 1000 senior unsecured convertible bonds due May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above the reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ Ordinary Shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx.

1.10. CIRCUMSTANCES THAT COULD CONSIDERABLY AFFECT THE DEVELOPMENT OF THE COMPANY No special events have occurred that could considerably affect the development of the Company.

1.11. RESEARCH AND DEVELOPMENT The Company is committed to fully exploiting its technology platform to develop a diverse and broad portfolio of therapeutic Nanobodies, and to exploring next generation Nanobody-based technologies. It will continue to leverage the advantages of the Company’s Nanobody technology in view of identifying potential drug candidates across a range of therapeutic areas and exploring and developing the potential of Nanobodies in areas where they have specific advantages. It will invest in further advancing the technology platform in terms of performance, applicability and scale.

The Company expects that research and development expenditures for the discovery, development and commercialisation of drug candidates will continue to increase as the Company progresses its clinical and pre-clinical programmes into the next phase.

In addition, Ablynx intends to initiate new discovery programmes and is committed to seek to maintain and expand its proprietary Nanobody technology and intellectual property position.

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1.12. CONFLICTING INTERESTS OF DIRECTORS (ART. 523 OF THE BELGIAN COMPANIES CODE) The Directors report that since the last General Meeting three decisions have been taken which fall within the provisions of Art. 523 of the Belgian Companies Code.

As required by Art. 523 of the Belgian Companies Code, the full minutes of said meeting of the Board of Directors relating to such conflict of interests are to be reproduced hereunder: Meeting of the Board of Directors of 26 March 2015 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.

Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 20 March 2015, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “In accordance with Art. 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee.

The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2014 fiscal year.

As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2014 fiscal year, while the Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company.

The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility.

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However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks.

The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.”

The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee.

The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers.

The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks.

In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company.

After deliberation on the basis of the draft of the annual accounts and the annual report of the fiscal year 2014, which counts as “Annual Activity Report” as described in the Charter of the Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2014.

Meeting of the Board of Directors of 24 February 2016 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.

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Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 22 February 2016, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: "Dear Mr. Vanhees and Board members, I write to you in my capacity as member of the Board of Directors (the “Board”) of Ablynx nv (the “Company”).

I refer to the meeting of the Board scheduled for 24 February 2016, which will resolve on the issue of warrants for the benefit of certain employees and consultants of the Company (the “Stock Option Plan”).

In accordance with Article 523 of the Belgian Company Code, I would like to report that I have a financial conflict of interest in respect of this agenda item. In my capacity of member of the Executive Committee of the Company, I am selected as one of the beneficiaries of the Stock Option Plan and will accordingly be offered a certain number of warrants.

However, I believe that the approval by the Board of the Stock Option Plan is in the interest of the Company, given the limited financial consequences for the Company (as the issue of the warrants shall have no immediate financial impact on the Company), as well as the purpose thereof.

The purpose of this Stock Option Plan is (i) to create a long-term incentive for the selected employees and consultants who are able to contribute substantially to the success and growth of the Company; (ii) to provide the Company with the necessary means to recruit and retain competent and experienced staff members; and (iii) to create a common interest between the selected participants on the one hand and the shareholders of the Company on the other, aimed at an increase in the value of the Company’s shares.

The consequences of the Stock Option Plan for the existing shareholders and warrant holders, and more in particular the dilution that would result from the exercise of all offered warrants, are clearly indicated in the special report of the Board in accordance with Article 583 of the Belgian Company Code."

Meeting of the Board of Directors of 25 March 2016 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.

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Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 20 March 2016, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “In accordance with Art. 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee.

The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2015 fiscal year.

As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2015 fiscal year, while the Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company.

The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility.

However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks.

The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.”

The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim

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against the (members of the) Executive Committee.

The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers.

The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks.

In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company.

After deliberation on the basis of the draft of the annual accounts and the annual report of the fiscal year 2015, which counts as “Annual Activity Report” as described in the Charter of the Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2015.

1.13. INDEPENDENCE AND EXPERTISE OF AT LEAST ONE MEMBER OF THE AUDIT COMMITTEE Remi Vermeiren Remi Vermeiren is an independent Director of Ablynx. He is Chairman of the Audit Committee and holds a degree in Commercial and Financial Sciences. Before he became an independent Director of Ablynx, he had a 43-year long career at Kredietbank nv, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Company. Currently, Mr Vermeiren is also member of a number of non-quoted companies and of charitable organisations, such as Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of ACP II SCA (Luxembourg) (Liquidator). In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Devgen nv (Belgium), Afinia Plastics nv (Belgium), IFB SPA (Italy), Cumerio nv (Belgium) and MCS nv.

Russell Greig Greig Biotechnology Global Consulting Inc., represented by its permanent representative, Dr Russell Greig has been appointed as independent Director of Ablynx in 2012 and joined the Audit Committee in February 2013. Dr Greig has more than 35 years experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a

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number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr. Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma (The Netherlands), Mint Solutions (The Netherlands), Bionor (Norway), and Sanifit (Spain), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium). He also acts as Venture Partner to Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He was a member of the Scottish Scientific Advisory Committee, reporting to the First Minister. He was also Chairman of Syntaxin (UK), which was acquired by Ipsen (France), Novagali (France) sold to Santen (Japan), and of Isconova (Sweden), acquired by Novavax (USA).

Catherine Moukheibir Catherine Moukheibir has been appointed as independent Director of Ablynx on 2 September 2013 and joined the Audit Committee on 12 November 2013. She has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategy appropriate to various stages of a biotech’s development, on the continuum from venture capital funding to public market or M&A. She is currently a non-executive Board member of Creabilis, non-executive Board member at Zealand Pharma and Chair of the Audit Committee, non-executive Board member and member of the Audit Committee at Cerenis and Ablynx and Advisory Board member at the Imperial College Business School.

She is also a member of the three-person management Board at Innate Pharma where she is responsible for financial and corporate strategy. Catherine Moukheibir holds an MBA from Yale University.

1.14. JUSTIFICATION OF THE VALUATION RULES Ablynx, established in 2001, is a biotechnology company. For the further successful expansion of the research and development activities, the Company is, among others, dependent on sufficient financial funding, the results obtained from research and the Company’s capacity to obtain and maintain adequate protection of its intellectual property.

In addition, several clinical tests are planned in the next years, which will increase the operational costs. On the other hand, major commercial deals were closed which have already generated and which will generate important revenues as milestones have been achieved. In view of the above, the Company initiated an IPO on Euronext in November 2007 and raised €85.2 million and initiated an SPO on Euronext in March 2010 and raised €50 million.

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On 28 February 2013 the Company raised an additional €31.5 million through a private placement of new shares via an ABO (accelerated bookbuilding procedure).

In June 2014 the Company raised another €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure.

In May 2015, Ablynx raised €100 million gross through the placement of 1,000 senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of € 12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx's Ordinary Shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx.

The cash position at 31 December 2015 of €236.2 million, which includes cash, other short-term investments, restricted cash and cash equivalents, will allow the Company to keep up with the financial obligations for at least the following 12 months.

Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.

The Company’s equity under IFRS amounted to €27.9 million at 31 December 2015.

Based on the projected cash burn for 2016 and the volatility of the share price which impacts the fair value of the embedded derivate of the convertible bond, the equity could substantially change. On the other hand the Company’s equity could be positively impacted by the licensing fee that would be paid by AbbVie if they decide to exercise their option to license ALX-0061 in RA, as well as the conversion of the bonds into equity.

1.15. APPROPRIATION OF RESULTS Ablynx nv ended the financial year 2015 with a net loss of €13,447,008.39.

The Board of Directors proposed to appropriate the loss of the year of €13,447,008.39 to retained losses, the latter amounting to €111,534,698.34.

This brings the total amount of retained losses to €124,981,706.73.

1.16. IMPORTANT EVENTS SUBSEQUENT TO THE ACCOUNTING REFERENCE DATE On 21 January 2016, Ablynx announced the issuance of an additional 288,170 common shares in exchange for €1,192,292.70 as the result of the exercise of warrants by some

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employees and consultants of the Company.

On 29 January 2016, Ablynx announced that Boehringer Ingelheim had administered the first dose in a Phase I dose escalation study with the half-life extended bi-specific anti-VEGF/Ang2 Nanobody in adult patients with advanced solid tumours, which triggered a €8 million milestone payment to Ablynx. The aim of the study is to evaluate the safety profile and dosing schedule for this Nanobody.

On 23 February 2016, Ablynx announced the issuance of an additional 7,521 common shares in exchange for €34,726.41 as the result of the exercise of warrants.

During the Board Meeting of 24 February 2016, the issuance of a maximum number of 590,000 warrants for the benefit of certain employees and consultants was approved.

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered.

On 22 March 2016, Ablynx announced the issuance of an additional 210,741 common shares in exchange for € 740,375.82 as the result of the exercise of warrants.

As a result of this transaction, Ablynx now has 55,318,806 shares outstanding.

1.17. GRANT OF DISCHARGE TO THE DIRECTORS AND THE STATUTORY AUDITOR You are requested, for Ablynx nv, in accordance with the law and the Articles of Association, to grant discharge to the Directors and the Statutory Auditor for the duties carried out by them during the financial year ending 31 December 2015.

This report will be deposited according to the legal requirements and can be consulted at the Company’s address.

Ghent, 25 March 2016 For the Board of Directors, Dr Peter Fellner Chairman

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02. RESPONSIBILITY STATEMENT ANNUAL REPORT 2015 / ABLYNX

We hereby certify that, to the best of our knowledge, the financial statements as of 31 December 2015, prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the Company and that the management report includes a fair review of the development and the performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board of Directors, Ghent, 25 March 2016

Dr Peter Fellner

Woconsult BVBA represented by

Chairman

Wim Ottevaere, CFO

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03. STATUTORY AUDITOR’S REPORT

Statutory Auditor's Report to the Shareholders' Meeting on the Financial Statements for the year ended 31 December 2015 To the Shareholders, As required by law, we report to you in the context of our appointment as the Company’s statutory auditor. This report includes our report on the financial statements together with our report on other legal and regulatory requirements. These financial statements comprise the balance sheet as at 31 December 2015, the statement of comprehensive income, the statement of changes in shareholders’ equity and the cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes.

Report on the financial statements – Unqualified opinion We have audited the financial statements of Ablynx nv (“the Company”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. The balance sheet shows total assets of 265,272 (000) EUR and the statement of comprehensive income shows a loss for the year then ended of 54,547 (000) EUR. Board of Directors’ responsibility for the preparation of the financial statements The Board of Directors is responsible for the preparation and fair presentation of financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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Statutory auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the Company’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements. We have obtained from the Company’s officials and the Board of Directors the explanations and information necessary for performing our audit.

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

Unqualified opinion In our opinion, the financial statements of Ablynx nv give a true and fair view of the Company’s net equity and financial position as of 31 December 2015, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.

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Report on other legal and regulatory requirements The Board of Directors is responsible for the preparation and the content of the directors’ report on the financial statements.

As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we make the following additional statement, which does not modify the scope of our opinion on the financial statements: • The Directors’ report on the financial statements includes the information required by law, is consistent with the financial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate.

Diegem, 25 March 2016 The statutory auditor

DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Gert Vanhees

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04. BALANCE SHEET

As at 31 December (€'000)

2015

2014

Non-current assets

19,124

16,550

339

439

(Note 8.6)

Property, plant and equipment

2,620

2,301

(Note 8.7)

Restricted cash

1,648

1,980

(Note 8.8)

R&D tax credit receivable

14,517

11,830

(Note 8.9)

246,148

206,796

Trade receivables

6,782

19

(Note 8.10)

Other current assets

1,976

571

(Note 8.10)

Tax receivables

1,766

454

(Note 8.10)

Accrued income and deferred charges

1,030

1,549

(Note 8.10)

230,992

192,542

(Note 8.11)

3,602

11,661

(Note 8.12)

Total assets

265,272

223,346

Equity attributable to equity holders

27,909

75,474

Share capital

96,287

91,975

Share premium account

187,316

183,645

6,610

7,615

Retained earnings

(262,304)

(207,761)

Non-current liabilities

134,828

0

Borrowings

134,828

0

Current liabilities

102,535

147,872

0

141

(Note 8.16)

Trade payables

11,656

10,408

(Note 8.17)

Other current liabilities

4,756

4,826

(Note 8.17)

Deferred income

86,123

132,497

(Note 8.17)

Total liabilities

237,363

147,872

Total equity and liabilities

265,272

223,346

Intangible fixed assets

Current assets

Other short-term financial investments Cash and cash equivalents

Share-based payment reserve

Borrowings

(Note 8.16)

The notes from point 8.1 to point 8.31 are an integral part of these financial statements.

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05. STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December (€ '000)

2015

2014

76,761

47,710

779

1,587

Total revenue and grant income

77,540

49,297

Research and development expenses

(83,084)

(54,488)

(Note 8.21)

General and administrative expenses

(11,405)

(11,052)

(Note 8.22)

Total operating expenses

(94,489)

(65,540)

Other operating income

0

14

(Note 8.23)

Other operating expenses

(6)

(9)

(Note 8.23)

Operating result

(16,955)

(16,238)

Financial result (net)

(37,592)

3,508

1,768

4,294

(Note 8.26)

Finance cost

(39,360)

(786)

(Note 8.26)

Loss before taxes

(54,547)

(12,730)

Loss for the year

(54,547)

(12,730)

Total comprehensive income for the period

(54,547)

(12,730)

Loss attributable to equity holders

(54,547)

(12,730)

Total comprehensive loss attributable to equity holders

(54,547)

(12,730)

(1.00)

(0.25)

Revenue: Research and development Grants

Finance income

Basic and diluted loss per share

(Note 8.20)

(Note 8.28)

The notes from point 8.1 to point 8.31 are an integral part of these financial statements.

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06. CASH FLOW STATEMENTS

Year ended 31 December (€'000)

2015

2014

(54,547)

(12,730)

Amortisation

201

183

(Note 8.6)

Depreciation

1,140

1,354

(Note 8.7)

Share-based payment expense

1,821

1,540

Net financial income

(1,100)

(1,534)

Net loss arising on the convertible bond designated as at fair value through profit and loss

34,646

Finance expense recognised in respect of the convertible bond

4,623

Net movement in trade and other receivables

(11,648)

(3,955)

Net movement in trade and other payables

(45,197)

(18,730)

Cash used in/provided by operations

(70,061)

(33,872)

(1)

(88)

(Note 8.26)

1,101

1,622

(Note 8.26)

(68,961)

(32,338)

(1,459)

(1,261)

(Note 8.7)

(101)

(294)

(Note 8.6)

Sale / (Purchase) of short-term financial investments

(38,118)

(4,683)

(Note 8.11)

Net cash (used in)/provided by investing activities

(39,678)

(6,238)

Cash flows from operating activities Loss before income tax Adjustments for:

Interest paid Interest received Net cash (used in)/provided by operating activities

(Note 8.26)

Cash flows from investing activities Purchases of property, plant and equipment Purchases of intangible assets

Cash flows from financing activities Proceeds from issuance of ordinary shares

39,926

Proceeds from exercise of warrants

5,160

Proceed from issue of convertible bond (net of issue costs)

97,185

Interest paid convertible bond

(1,625)

Repayments of borrowings

566

(141)

(786)

Net cash generated from financing activities

100,579

39,706

Net (decrease)/increase in cash and cash equivalents

(8,060)

1,130

Cash and cash equivalents at beginning of the period

11,661

10,531

Cash and cash equivalents at end of the period

3,601

11,661

The notes from point 8.1 to point 8.31 are an integral part of these financial statements.

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07. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

(€'000)

Share capital

Share premium

Sharebased payments

Retained loss

Total Equity

Balance at 31 December 2013

84,004

150,747

6,736

(195,314)

46,173

Loss of the period

(12,730)

Warrant plans Share-based payments

1,257

283

Transactions with owners Capital increase

9,178

Issuance costs

(1,795)

Exercise of warrants Balance at 31 December 2014

32,542

588

356

(378)

91,975

183,645

7,615

Loss of the period

(207,761)

75,474

(54,547)

Warrant plans Share-based payments

1,817

4

Transactions with owners Exercise of warrants Balance at 31 December 2015

4,311

3,671

(2,821)

96,286

187,316

6,611

(262,304)

27,909

The notes from point 8.1 to point 8.31 are an integral part of these financial statements.

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08. NOTES TO THE FINANCIAL STATEMENTS

8.1. GENERAL INFORMATION Ablynx is a biopharmaceutical company engaged in the development of Nanobodies, proprietary therapeutic proteins based on single-domain antibody fragments, which combine the advantages of conventional antibody drugs with some of the features of small-molecule drugs. Ablynx is dedicated to creating new medicines which will make a real difference to society. Today, the Company has more than 40 proprietary and partnered programmes in development in various therapeutic areas including inflammation, haematology, immuno-oncology, oncology and respiratory disease.

The Company was incorporated on 4 July 2001 under the name “MatchX”. It changed its name to “Ablynx” on 12 June 2002. Ablynx is a public limited liability company (“naamloze vennootschap” or “nv”) organised and existing under the laws of Belgium with registered offices at Technologiepark 21, 9052 Zwijnaarde, Belgium (company number 0475.295.446 (RPR Ghent). At 31 December 2015, the Company employed 344 people at its headquarters in Zwijnaarde.

The Company has on-going collaborations with various pharmaceutical companies including AbbVie, Boehringer Ingelheim, Eddingpharm, Merck & Co., Inc., Merck KGaA (Merck Serono), Novartis, Genzyme, Taisho Pharmaceuticals and Novo Nordisk, which today have generated over €380 million in non-dilutive cash to the Company.

To date, the Company has raised €71.5 million in private equity, including the exercise of warrants, raised an additional €85.2 million as a result of its IPO on Euronext in November 2007, and raised €50.0 million resulting from its SPO on Euronext in March 2010.

On 28 February 2013 the Company raised an additional €31.5 million through a private placement of new shares via an ABO (accelerated bookbuilding procedure).

On 30 June 2014 the Company again raised €41.7 million through a private placement of new shares via an ABO (accelerated bookbuilding procedure).

In May 2015, Ablynx raised gross €100 million through the placement of 1,000 senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219.

8.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

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8.2.1. BASIS OF PREPARATION The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and Belgian legal requirements applicable to the Company. The financial statements are presented in thousands of euro (unless stated otherwise). The financial statements for the financial year ended 31 December 2015 have been approved for issue by the Board of Directors on 25 March 2016.

The financial statements have been prepared under the assumption that the Company is a going concern and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS, as adopted by the EU, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 8.4.

Changes in accounting policy and disclosures without impact for the company: Standards and interpretations applicable for the annual period beginning on 1 January 2015 • Improvements to IFRS (2011-2013) (applicable for annual periods beginning on or after 1 January 2015) • IFRIC 21 Levies (applicable for annual periods beginning on or after 17 June 2014) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2015 • IFRS 9 Financial Instruments and subsequent amendments (applicable for annual periods beginning on or after 1 January 2018, but not yet endorsed in the EU) • IFRS 15 Revenue from Contracts with Customers (applicable for annual periods beginning on or after 1 January 2018, but not yet endorsed in EU) • IFRS 16 Leases (applicable for annual periods beginning on or after 1 January 2019, but not yet endorsed in EU) • Improvements to IFRS (2010-2012) (applicable for annual periods beginning on or after 1 February 2015) • Improvements to IFRS (2012-2014) (applicable for annual periods beginning on or after 1 January 2016)

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• Amendments to IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU) • Amendments to IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (the effective date has been deferred indefinitely, but not yet endorsed in the EU) • Amendments to IAS 1 Presentation of Financial Statements – Disclosure Initiative (applicable for annual periods beginning on or after 1 January 2016) • Amendments to IAS 16 and IAS 38 Property, Plant and Equipment and Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortisation (applicable for annual periods beginning on or after 1 January 2016) • Amendments to IAS 19 Employee Benefits - Employee Contributions (applicable for annual periods beginning on or after 1 February 2015) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2015, and mainly new IFRS 15 Revenue from contracts with customers (applicable for annual periods beginning on or after 1 January 2018, but not yet endorsed by EU), and IFRS 16 Leases (applicable for annual periods beginning on or after 1 January 2019, but not yet endorsed by EU), could have an impact on our future financials. The evaluation of this impact is currently under assessment.

8.2.2. CONSOLIDATION SCOPE Ablynx controlled a sole 100%-owned subsidiary (Ablynx SA with registered offices in Rua do Campo Alegre 1021, 4150-180 Porto, Portugal) up until February 2014, the date on which the liquidation of the subsidiary was closed.

The financial statements of Ablynx nv are presented in euro and rounded to the nearest thousand.

8.2.3. SEGMENT REPORTING The Company operates as a single operating segment.

8.2.4. FOREIGN CURRENCY TRANSLATION Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (functional currency). The financial statements are presented in euro, which is the functional and presentation currency of the Company.

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Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in other comprehensive income (OCI).

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

The following foreign exchange rates have been used for the preparation of the accounts: 1 Euro = X foreign currency

Closing rate

Average rate

2015

2014

2015

2014

US Dollar

1.087

1.211

1.113

1.335

GB Pound

0.736

0.777

0.727

0.808

8.2.5. REVENUE RECOGNITION The Company generates revenue from research collaboration agreements and from government grants.

The Company recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Company’s activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Research collaboration agreements These research agreements typically contain license fees, non-refundable upfront access fees, research and development service fees and milestone payments. The revenue recognition policy for research projects can be summarised as follows:

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• License fees are recognised when the Company has fulfilled all conditions and obligations. The license fee will not be recognised if the amount cannot be reasonably estimated and if the payment is doubtful. As the Company has a continuing involvement during the license period, license fees are recognised rateably over the term of the agreement.

• Non-refundable upfront fees for access to prior research results and databases are recognised when earned, if the Company has no continuing performance obligations and all conditions and obligations are fulfilled (this means after the delivery of the required information). If the Company has continuing performance obligations towards the client, the fee will be recognised pro rata the costs incurred (with adjustment to the actual performance period at the end of the contract or at the actual termination date).

• Research and development service fees are recognised as revenue over the life of the research agreement as the required services are provided and costs are incurred. These services are usually in the form of a defined number of full-time equivalents (FTE) at a specified rate per FTE. • Commercial collaborations resulting in a reimbursement of research and development (R&D) costs are recognised as revenue as the related costs are incurred. The corresponding research and development expenses are included in research and development expenses in the consolidated financial statements.

• Milestone payments are recognised as revenue upon the achievement of the milestone, when all conditions attached have been fulfilled.

Deferred revenue represents amounts received prior to revenue being earned.

As at 31 December (€'000)

2015

2014

Upfront fees

58,559

33,772

R&D Service fees

14,403

13,784

Milestone payments

3,500

License fees

100

100

Grants

780

1,587

Royalties

198

54

77,540

49,297

Total

8.2.6. GOVERNMENT GRANTS Grants related to research projects received from governmental agencies are recognised at their fair value over the period necessary to match them with the costs

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that they are intended to compensate, and when there is reasonable assurance the Company will comply with the conditions attached to the grants, but not prior to the formal grant approval. These grants are separately presented in the income statement as and included in the operating income.

8.2.7. INTANGIBLE FIXED ASSETS Internally generated intangible assets Research expenses are charged to the profit and loss statement as incurred.

Development costs are only capitalised if the following conditions are met: • the internally developed intangible asset is identifiable and controlled by the entity; • the asset will generate future economic benefits; • the development costs can be reliably measured.

At present, the current stage of development activities does not allow any capitalisation of intangible assets. The existing regulatory and clinical risks constitute an important uncertainty with respect to the capitalisation of development costs. In contrast to Belgian GAAP, the R&D expenses are not capitalised because the criteria under IFRS are not met.

As no internally generated assets are recognised, all costs with respect to the protection of intellectual property are expensed as R&D expenses.

Purchased intangible assets Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives of maximum three years.

Acquired knowledge in the form of licenses and patents is recorded at cost less accumulated amortisation and impairment. It is amortised on a straight-line basis over the shorter of the term of the license agreement and its estimated useful life.

The Company does not have intangible fixed assets with an indefinite useful life.

8.2.8. PROPERTY, PLANT AND EQUIPMENT An item of property, plant and equipment is carried at historical cost less accumulated depreciation and impairment. Costs relating to the day-to-day servicing of the item are recognised in the income statement as incurred. Gains and losses on the disposal of

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property, plant and equipment are recognised in other income or expense.

A pro rata straight-line depreciation method is used to reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. However, land is not depreciated. The residual value and the useful life of an asset is reviewed each financial year-end for possible impairment. Depreciation is charged to the income statement on the following basis:

Buildings

10 year

Equipment

3 year

Hardware

3 year

Furniture

5 year

Equipment under leasing

The shorter of the useful life or the minimum leasing term

Leasehold improvements

The shorter of the useful life or the minimum leasing term

Property, plant and equipment under construction are not depreciated.

8.2.9. IMPAIRMENT OF NON-FINANCIAL ASSETS Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

8.2.10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Company has no derivative financial instruments, in all material respect, to hedge interest rates and foreign currency risks.

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8.2.11. R&D TAX CREDITS INCENTIVES As a company that carries extensive research and development activities, the Company benefits from various grants and R&D incentives from certain governmental agencies. These grants and R&D incentives generally aim to partly reimburse approved expenditures incurred in research and development efforts of the Company and are credited to the income statement, in minus of the related R&D expenses, when the relevant expenditure has been incurred and there is reasonable assurance that the grants or R&D incentives are receivable.

Research and development incentives receivables Non-current research and development incentives receivables are discounted over the period until maturity date according to the appropriate discount rates.

8.2.12. TRADE RECEIVABLES Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables.

8.2.13. OTHER SHORT-TERM INVESTMENTS Term deposits with an initial term of more than three months are held to maturity and measured at amortised cost.

8.2.14. CASH AND CASH EQUIVALENTS The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits with an initial term not exceeding three months.

8.2.15. EQUITY INSTRUMENTS Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.

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8.2.16. TRADE PAYABLES Payables after and within one year are measured at amortised cost, i.e. at the net present value of the payable amount. Unless the impact of discounting is material, the nominal value is taken.

8.2.17. CONVERTIBLE BONDS The convertible bond is considered as a financial liability with an embedded derivative liability consistent with IAS 32 based on the net share settlement, accounted for as follows: • Debt component recognised at amortised cost; • Embedded derivative accounted for at fair value.

The fair value of the conversion feature needs to be determined at each reporting date and the fair value changes are recognised in profit or loss.

As the fair value of the convertible bond as a whole can reliably be estimated, as well as the fair value of the host debt, the fair value of the embedded derivative is calculated as the difference between these two elements.

The fair value of the convertible bond is obtained from public sources (e.g. Bloomberg) which are deemed sufficiently representative of prices for actual market transactions.

The fair value of the host debt is determined by discounting the contractual cash flows using a market benchmark rate plus a market credit spread for a corresponding plain vanilla bond issued by Ablynx with same cash flows and same remaining term to maturity.

8.2.17.1. FAIR VALUE MEASUREMENT IFRS 7 requires disclosure of fair value measurements by level of the following hierarchy: • Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; • Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; • Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

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The characteristics of the convertible bond issued in May 2015 are such that, in accordance with “IAS 39, Financial Instruments: Recognition and Measurement”, it is broken down into two components in the balance sheet: (1) the host contract or plain vanilla debt (i.e. without the conversion option), which is measured at amortised cost and (2) the embedded derivative, i.e. the conversion option, which is measured at fair value through profit or loss. The fair value of the host contract is determined by discounting the contractual cash flows with the reference swap rate plus the appropriate credit spread and the transaction costs allocated to the host debt component. This fair value at inception is also the initial amortised cost of the plain vanilla debt. The fair value of the embedded derivative (i.e. the conversion option) is determined as the difference between the fair value of the total convertible debt and the fair value of the plain vanilla debt.

8.2.17.2. ADDITIONAL INFORMATION WITH REGARD TO FAIR VALUE OF THE FINANCIAL INSTRUMENTS The table below lists the different classes of financial assets and liabilities with their carrying amounts in the balance sheet and their respective fair value and analysed by their measurement category in accordance with “IAS 39, Financial Instruments”.

Cash and cash equivalents, short-term deposits, trade and other receivables, loans and receivables primarily have short terms to maturity; hence, their carrying amounts at the reporting date approximate the fair values. Trade and other payables also generally have short times to maturity and, hence, their carrying amounts also approximate their fair values.

The following categories and abbreviations are used in the table below: Abbreviation

Category in accordance with IAS 39

FLMaAC

Financial Liabilities Measured at Amortised Cost

FLFVTPL

Financial Liabilities at Fair Value Through Profit or Loss

FVTPL

Fair Value Through Profit or Loss

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Carrying amount

Amounts recognised in balance sheet

(€'000)

Amortised cost

Fair value

FVTPL

At 31 December 2015 Financial liabilities Convertible bond Host debt

FLMaAC

80,682

80,682

84,798

Embedded derivative

FLFVTPL

54,146

Trade payables

FLMaAC

11,664

11,664

11,664

Other current liabilities

FLMaAC

4,756

4,756

4,756

Financial liabilities measured at amortised cost

FLMaAC

97,102

97,102

97,102

Financial liabilities at fair value through profit or loss

FLFVTPL

54,146

Borrowings

FLMaAC

141

141

141

Trade payables

FLMaAC

10,408

10,408

10,408

Other current liabilities

FLMaAC

4,826

4,826

4,826

FLMaAC

15,375

15,375

15,375

54,146

54,146

Aggregated by category in accordance with IAS 39

54,146

54,146

At 31 December 2014 Financial liabilities Convertible bond

Aggregated by category in accordance with IAS 39 Financial liabilities measured at amortised cost

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8.2.17.3. OVERVIEW MUTATIONS OF LEVEL 3 FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE IN THE BALANCE SHEET At the balance sheet date, the quotation of the convertible bond on Bloomberg was deemed reliable as a fair value measurement. The loss in fair value of the embedded derivative amounted to €34.6 million.

8.2.17.4. DERIVATIVE LIABILITY W.R.T. THE CONVERSION OPTION (€’000) At issue of the convertible bond (Gain)/loss in fair value At 31 December 2015

19,500 34,646 54,146

8.2.18. INCOME TAXES Income taxes are accrued for in the same period as the related revenues and expenses. The taxable result can differ from the net profit or loss, because of revenues and expenses which are taxable in another fiscal year or that will never be taxable or deductible.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

As such, a deferred tax asset for the carry forward of unused tax losses will be recognised to the extent that it is probable that future taxable profit will be available.

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8.2.19. EMPLOYEE BENEFITS The Company offers several post-employment, death, disability and healthcare benefit schemes. All employees have access to these schemes. The death, disability and healthcare benefits granted to employees of the Company are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred.

The post-employment pension plans granted to employees of the Company are based on defined contributions for which the insurance company guarantees a defined interest until retirement (type 'branche 21/tak21').

As a consequence of the law of 18 December 2015, minimum returns are guaranteed by the employer as follows: • for the contributions paid as from 1 January 2016, a new variable minimum return based on OLO rates, with a minimum of 1.75% and a maximum of 3.75%. In view of the low rates of the OLO in the last years, the return has been initially set to 1.75; • for the contributions paid until end December 2015, the previously applicable legal returns (3.25% and 3.75% respectively on the employer and employee contributions) continue to apply until retirement date of the participants.

In view of the minimum returns guarantees, those plans qualify as Defined Benefit plans.

In 2014, under the previous legal framework, the application of the PUC method was considered problematic, and there was uncertainty with respect to the future evolution of the minimum guaranteed rates of return. As a consequence, the Group adopted a retrospective approach whereby the net liability recognised in the statement of financial position was based on the sum of the positive differences, determined by individual plan participant, between the minimum guaranteed reserves and the accumulated contributions based on the actual rates of return at the closing date.

Based on the limited difference of €2,944, the Company has concluded that the application of the PUC method would have an immaterial impact.

In 2015, the sum of the positive differences per plan participant between the minimum guaranteed reserves (€6,256,832.58) and the accumulated reserves (€6,243,661.6) as of 31 December 2015 is €13,170.98.

As a consequence, in view of the immaterial difference between the accumulated reserves and the minimum reserves as of 31 December 2015, no provision has been recognised.

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8.2.20. PROVISIONS A provision is recognised only when: the Company has a present obligation to transfer economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made.

When the impact is likely to be material (for long-term provisions), the amount recognised as a provision is estimated on a net present value basis (discount factor). The increase in provision due to the passage of time is recognised as an interest expense.

A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation (a constructive obligation exists when the Company has an established pattern of past practice that indicates to other parties that it will accept certain responsibilities and as a result has created a valid expectation on the part of those other parties that it will discharge those responsibilities). An obligating event leaves the Company no realistic alternative to settling the obligation, independently of its future actions.

Provisions for decommissioning costs and restoring sites are recorded as appropriate in application of the above.

Provisions for future operating losses are strictly prohibited.

If the Company has onerous contracts (the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligations under the contract are recognised as a provision.

A provision for restructuring is only recorded if the Company demonstrates a constructive obligation to restructure at the balance sheet date. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.

8.2.21. LEASES A financial lease is a lease that substantially transfers all the risks and rewards incident to ownership of an asset.

The cost of assets acquired by way of a finance lease is measured at the lower of the fair value of the leased asset and the present value of the minimum lease payments,

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using the interest rate implicit in the lease as the discount rate, both determined at the inception of the lease. Initially incurred costs, directly attributable to the arrangement of the finance lease, are added to the amount recognised as an asset.

Assets acquired under financial leases are depreciated over the shorter of the lease term and their estimated useful life, if it is not reasonably certain that the entity will obtain ownership of the asset by the end of the lease term.

Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

8.2.22. SHARE-BASED PAYMENT TRANSACTIONS The Company has offered equity-settled, share-based compensation plans to its employees, executive management and consultants. The cost with respect to the employee services received in compensation for the grant of these warrants is recognised as an expense.

The total amount of the expense is recognised over the vesting period and determined on the basis of the fair value of the warrants at grant date. The fair value of each warrant is estimated on the date of grant using the Black-Scholes model. The total cost is initially estimated on the basis of the number warrants that will become exercisable.

At each balance date, the Company revises its estimates of the number of warrants that will become exercisable. The impact of the revision is recognised in the income statement over the remaining vesting period with a corresponding adjustment to equity.

8.2.23. EARNINGS PER SHARE Basic net profit/(loss) per share is computed on the basis of the weighted average number of ordinary shares outstanding during the period, excluding treasury shares.

Diluted net profit/(loss) per share is computed based on the weighted-average number of ordinary shares outstanding including the dilutive effect of warrants and bonds. Warrants and bonds should be treated as dilutive, when and only when their conversion to ordinary shares would decrease the net profit per share from continuing operations.

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8.3. FINANCIAL RISK MANAGEMENT 8.3.1. FINANCIAL RISK FACTORS Liquidity risk management The Company makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year.

The Company has €1.6 million restricted cash related to a cash pledge.

On 27 May 2015, the company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually.

The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39, not an own equity instrument (cf. IAS 32.26).

Interest rate risk The Company has a significant interest-bearing liability related to the private placement of €100 million senior unsecured bonds with a 3.25% coupon rate and a conversion price of €12.93. However, operating cash flows are independent of changes in market interest rates.

Credit risk The credit risk arises from outstanding transactions with customers. It is the Company’s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The credit risk is highly concentrated around a limited number of customers.

Available liquidities are placed with several financial institutions.

The financial institutions have credit ratings varying from A+, over A to A-.

No cash credit lines were available.

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Credit quality of financial assets (€’000)

Rating(1)

2015

2014

A+

3,522

11,345

A

38

143

A-

41

173

3,601

11,661

A+

56,026

50,870

A

73,500

84,000

A-

101,469

57,672

230,995

192,542

Cash and cash equivalents

Total

Short-term investments

Total (1) source at 11 February 2016: Standard & Poor’s.

Foreign exchange risk The Company has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in AUD, CAD, CHF, DKK, GBP, JPY, MXN, RUB, SEK and USD. The Company did not enter into any currency hedging arrangements in order to cover this risk.

As per 31 December 2015, if the EUR had weakened 10% against the GBP and strengthened 10% against the USD with all other variables held constant, the loss of the period would have been €196,385 (2014: €610,456) higher. Conversely, if the EUR had strengthened 10% against the GBP and weakened 10% against the USD with all other variables held constant, the loss of the period would have been €191,835 (2014: €662,848) lower.

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The table below provides an indication of the Company’s open net foreign currency position as per year end: (€’000)

2015

2014

Liabilities denominated in USD

142

0

Liabilities denominated in GBP

76

59

Assets denominated in USD

2,678

6,687

8.3.2. CAPITAL RISK MANAGEMENT The Company manages its capital to ensure that it will be able to continue as a going concern. The capital structure of the Company consists of limited financial debt, cash and cash equivalents, restricted cash and short-term investments and equity attributed to the holders of equity instruments of the Company, such as capital, reserves and results carried forward as mentioned in the statements of changes in equity. The Company makes the necessary adjustments in the light of changes in the economic circumstances, risks associated to the different assets and the projected cash needs of the current and projected research activities. The current cash situation and the anticipated cash generation are the most important parameters in assessing the capital structure. The Company objective is to maintain the capital structure at a level to be able to finance its activities for at least twelve months. Cash income from existing and new partnerships is taken into account and, if needed and possible, the Company can issue new shares or enter into financing agreements.

8.4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS At each reporting date, the Company makes assumptions and estimates with respect to the impact of past events on the future resulting in a number of accounting estimates, which at present have a limited impact.

8.4.1. CONVERTIBLE BOND On 27 May 2015 Ablynx issued Senior Unsecured Convertible Bonds due May 2020 for an amount of €100.000.000 at an issue price of 100%. The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder.

In case of conversion, a cash alternative election is available at the option of the issuer including a number of restrictions. Because the issuer has the cash alternative election,

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it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26).

An estimate of the value for the convertible bond is available on Bloomberg, the embedded derivative has been valued as the difference between the value of the convertible bond and the value of the bond floor.

The fair value is based on indicative (i.e. non-executable) quotes provided by 9 market participants resulting in indicative prices. The number of participants (and thus the Bloomberg reliability score) may still fluctuate overtime and impact the level of subjectivity of this method.

As long as no observable data (and grades) are available, a credit spread provided by Ablynx’ bank (i.e. JP Morgan –“JPM”) is being applied. This spread is to be updated for every valuation date.

As of the issue date, JPM uses a spread of 700bp for Ablynx. JPM bases the spread of 700bp on observations of debt issued by a number of comparable companies but considerable judgement remains.

8.4.2. TAX CREDIT The Company has accounted for a total tax receivable of €15.7 million following an R&D incentive scheme in Belgium under which the tax can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards. Beginning of 2016 €1.2 million has been refunded. The remaining amount of €14.5 million is expected in the following years. (€’000) Fiscal year

ANNUAL REPORT 2015 / ABLYNX

Year amount can be claimed

Year amount should be reimbursed

Amount

2011

2016

2017

1,879

2012

2017

2018

2,450

2013

2018

2019

2,940

2014

2019

2020

3,340

2015

2020

2021

3,859

Total

14,468

142.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

The collection of the outstanding non-current R&D tax credit receivable remains dependent upon the completeness of the necessary formalities and the quality of the documentation available to support tax credit claimed.

8.4.3. DEFERRED TAXES The total temporary differences amount to €337.0 million which may result in a potential deferred tax asset of €115.0 million.

Based upon the tax planning this deferred tax asset was not recognised as the midterm planning demonstrated significant uncertainty to realise taxable profits in the foreseeable future.

8.4.4. SHARE-BASED COMPENSATION The Company used the Black & Scholes model for share-based payment calculation purposes and based the volatility parameter on the volatility of the Ablynx share.

Rotation of employees as a parameter for share-based payment calculations is considered to be limited.

8.4.5. GOING CONCERN For the further successful expansion of the research and development activities, Ablynx is, among others, dependent on sufficient financial funding, the results obtained from research and Ablynx capacity to obtain and maintain adequate protection of its intellectual property. In addition, further progress of the clinical tests is planned in the next years, which will increase the operational costs.

On the other hand, commercial deals were closed which have already generated and which will generate important revenues as milestones are earned.

Going concern is assured as no liquidity problems are expected because the convertible bonds are convertible in Ablynx ordinary shares at the option of the issuer.

In case of conversion, a cash alternative election is available at the option of the issuer, including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash).

The Company has not identified at reporting date any sources of estimation uncertainty, which involve a significant risk of material adjustment to the financial statements in the following year.

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The current cash position of €236.2 million including cash, other investments, restricted cash and deposits will allow the Company to keep up with the financial obligations for at least the following 12 months.

Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.

8.5. SEGMENT INFORMATION The Company does not distinguish different operating segments.

The income stems from nine pharmaceutical partners, namely Boehringer Ingelheim, Merck KGaA, Merck & Co., Inc., Novartis, AbbVie, Eddingpharm, Genzyme, Taisho Pharmaceuticals and Novo Nordisk. Moreover, in 2015, more than 90% of the income originated from 3 parties, one party was responsible for more than 50% of the income, two other parties represented between 15% and 25% each.

In 2014, 1 party represented more than 40% of the revenues, two other parties represented between 20% and 25% each.

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8.6. INTANGIBLE FIXED ASSET (€’000)

Patents

Software

Total

101

227

328

294

294

Year ended 31 December 2014 Opening net book amount Additions Amortisation charge

(7)

(176)

(183)

Closing net book amount

94

345

439

2,174

2,473

4,647

(2,080)

(2,128)

(4,208)

94

345

439

94

345

439

101

101

As at 31 December 2014 Cost Accumulated amortisation and impairment Net book amount

Year ended 31 December 2015 Opening net book amount Additions Amortisation charge

(7)

(193)

(200)

Closing net book amount

87

253

340

2,174

2,574

4,748

(2,087)

(2,321)

(4,408)

87

253

340

As at 31 December 2015 Additions Accumulated amortisation and impairment Net book amount The intangible fixed assets mainly consist of a portfolio of acquired patents and software licences.

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8.7. PROPERTY, PLANT AND EQUIPMENT (€’000)

Land and Buildings

Equipment

Furniture

Equipment under leasing

Leasehold improve-­ ments

709

208

1,396

81

2,394

Additions

2,350

323

64

2,737

Disposals acquisition value

(3,331)

(1,476)

(675)

(5,482)

Disposals accumulated depreciation and impairment

3,331

1,474

675

5,480

Depreciation charge

(1,848)

(363)

Transfer costs

(188)

275

(87)

Transfer Depreciations

22

(72)

50

Closing net book amount

1,045

371

793

92

2,301

11,418

2,049

2,181

847

16,495

Accumulated depreciation and impairment

(10,373)

(1,678)

(1,388)

(755)

(14,194)

Net book amount

1,045

371

793

92

2,301

1,045

371

793

92

2,301

36

1,459

PPE under construction

Total

Year ended 31 December 2014 Opening net book amount

(601)

(16)

(2,828)

As at 31 December 2014 Cost

Year ended 31 December 2015 Opening net book amount Additions

413

960

50

Depreciation charge

(24)

(642)

(223)

(230)

(23)

(1,142)

Closing net book amount

389

1,363

198

563

105

2,618

Cost

413

12,378

2,099

2,181

883

17,954

Accumulated depreciation and impairment

(24)

(11,015)

(1,901)

(1,618)

(778)

(15,336)

Net book amount

389

1,363

198

563

105

2,618

146.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

As at 31 December 2015

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8.8. RESTRICTED CASH Restricted cash is related to a cash pledge the Company has provided in respect of the service agreement with nv Bio-Versneller (see point 8.30.3).

As at 31 December (€’000)

2015

2014

Restricted cash

1,648

1,980

8.9. NON-CURRENT R&D TAX INCENTIVE RECEIVABLES As at 31 December (€’000)

2015

2014

Tax credit related to research expenditure capitalised under BE GAAP (>1 year)

14,468

11,830

The Company has accounted for an R&D tax credit receivable of €15.7 million following an R&D incentive scheme in Belgium under which the tax incentive can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards.

Beginning of 2016 €1.2 million has been refunded. The remaining amount of €14.5 million is expected in the following years.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.10. TRADE RECEIVABLES AND OTHER CURRENT ASSETS As at 31 December (€'000)

2015

2014

Trade receivables

6,762

0

Invoices to be made

20

19

6,782

19

VAT receivables

626

553

Other receivables

1,350

18

Total

1,976

571

Witholding taxes on interest income

576

454

R&D tax credit receivable (< 1 year)

1,238

Total

1,814

454

Accrued income

568

1,070

Deferred expenses

461

479

1,029

1,549

Trade receivables

Total

Other current assets

Tax receivables

Accrued income and deferred expenses

Total

Trade receivables consist of amounts due from research collaboration partners. The nominal amount of both trade and other receivables approximates the fair value.

Other current assets and tax receivables mainly consist of taxes to be recovered and prepayments for ordered tangible assets.

Trade receivables that were past due are not impaired. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. Currently there are no past due trade receivables.

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All carrying amounts of the Company’s trade and other receivables are denominated in euro.

Accrued income consists mainly of earned income from government grants for which no payments have been received but for which the relating expenditures have been incurred.

8.11. OTHER SHORT-TERM INVESTMENTS As at 31 December (€'000) Term deposits in Euro

2015

2014

230,992

185,936

Term deposits in foreign currency Term deposits > 3 months

6,606 230,992

192,542

These are term deposits with banks with an initial term between 3 and 12 months.

8.12. CASH AND CASH EQUIVALENTS As at 31 December (€'000)

2015

2014

Cash at bank and on hand

3,604

11,661

924

11,579

2,680

82

3,604

11,661

Cash at bank and on hand in Euro Cash at bank and on hand in foreign currency Total

The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits with an initial term not exceeding three months.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.13. FINANCIAL INSTRUMENTS BY CATEGORY (€ '000)

2015

Loans and Receivables

Total

1,648

1,648

Trade receivables - other current assets

25,040

25,040

Other short-term deposits

230,992

230,992

Cash and cash equivalents

3,604

3,604

Trade payables

11,656

11,656

Loans and Receivables

Total

Restricted cash

1,980

1,980

Trade receivables - other current assets

12,874

12,874

Other short-term deposits

192,542

192,542

Cash and cash equivalents

11,661

11,661

(10,408)

(10,408)

Restricted cash

(€ '000)

2014

Trade payables

8.14. SHARE CAPITAL 8.14.1. CAPITAL TRANSACTIONS DURING THE YEAR The following capital increases took place in 2015: On 19 January 2015, the Company issued 115,946 new shares in exchange for €909,426.07 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €216,819.02 and €692,607.05 respectively.

On 16 March 2015, the Company issued 174,302 new shares in exchange for €1,292,682.18 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €325,944.74 and €966,737.44 respectively.

On 17 April 2015, the Company issued 20,165 new shares in exchange for €112,425.70 as a result of the exercise of warrants by some employees and consultants of the Company.

The par value and share premium amounted to €37,603.55 and €74,822.15 respectively.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds were placed through an accelerated book building placement with qualified investors outside the United States, in accordance with Regulation S under the Securities Act. The bonds will mature on 27 May 2020 (5 years), are in dematerialised form in the denomination of €100,000 each, are issued at par and will be redeemed at par at maturity. The bonds will pay a coupon of 3.25% per annum, payable semi-annually in arrears on 27 November and 27 May of each year, beginning on 27 November 2015. The initial price for the conversion of the bonds into ordinary shares of the issuer is €12.93, representing approximately a 26.5% premium above the reference price of €10.2219, being the VWAP of the ordinary shares on Euronext Brussels on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid-up ordinary shares of the issuer.

Conversion of the convertible bonds in Ablynx ordinary shares is at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. As the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26).

On 3 June 2015, the Company issued 83,000 new shares in exchange for €410,955 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €155,210 and €255,745 respectively.

On 17 July 2015, the Company issued 79,885 new shares in exchange for €600,491.30 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €149,384.95 and €451,106.35 respectively.

On 29 July 2015, the Company issued 24,967 new shares in exchange for €199,086.96 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €46,688.29 and €152,398.67 respectively.

On 19 October 2015, the Company issued 5,200 new shares in exchange for €41,249 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €9,724 and €31,525 respectively.

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On 7 December 2015, the Company issued 7,250 new shares in exchange for €61,390 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,557.50 and €47,832.50 respectively.

On 15 December 2015, the Company issued 287,500 new shares in exchange for €1,532,750 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €535,000 and €997,750 respectively.

The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share.

• Number of shares on 31 December 2014 54,014,159 • Number of new shares (exercise of warrants) 798,215 • Number of shares on 31 December 2015 54,812,374

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Shareholder

Address

Voting rights

% of voting rights

Aviva Investors Global Services Limited

No 1, Poultry London, EC2R 8EJ UK

2,442,496

4.50%

Abingworth Management Limited and Abingworth LLP

38, Jermyn Street London, SW1Y 6DN UK

2,632,150

4.80%

C.H. Boehringer Sohn AG & Co. KG

Binger Strasse 173 55216, Ingelheim am Rhein Germany

2,142,857

3.90%

Perceptive Advisors

51, Astor Place 10th floor New York, NY 10003 USA

2,077,590

3.80%

Polar Capital Funds Plc (UK)

4, Matthew Parker Street London, SW1H9NP UK

1,654,827

3.00%

FMR LLC (US)

245, Summer Street Boston, MA 02210 USA

2,753,606

5.00%

Taube Hodson Stonex Partners LLP (UK)

Cassini House, 57-59, St. James’s Street London, SW1A 1LD UK

2,410,681

4.40%

Oppenheimer Funds, Inc. (OFI) (US)

225, Liberty Street 11th Floor New York, NY 10281 USA

1,672,262

3.10 %

JP Morgan Asset Management Holdings Inc.

270, Park Avenue New York, NY 1007 USA

1,813,725

3.30%

35,212,180

64.20%

Other

8.14.2. AUTHORISED CAPITAL In January 2013, the Board of Directors issued a new warrant plan with a total number of 467,500 warrants and 391,330 were granted at an exercise price of €6.43 and €6.44 per warrant.

In February 2013, the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure.

The Extraordinary General Meeting of Shareholders of 18 July 2013, authorised the

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Board of Directors to increase the share capital, including by way of the issue of warrants and convertible bonds, in one or more transactions with a total amount equal to the total share capital of the company, i.e., ninety million six hundred ninety-five thousand four hundred and six euro, twelve cents (€90,695,406.12).

In June 2014, the Company raised again €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure.

In May 2015, Ablynx completed the placement of €100 million senior unsecured convertible bonds due May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ ordinary shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid up ordinary shares of Ablynx.

During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise Ppriod precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of

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their creation become null and void.

As per 31 December 2015, the authorised capital amounts to €66,520,042.13

AUTHORISED CAPITAL ABLYNX nv in € Authorised capital 31/12/2012 Issue of January 2013

Shares

Par Value

467,500

1.87

4,377,919

1.87

79,695,739.59 (874,225) 78,821,514.59

ABO of February 2013

(8,186,709) 70,634,806.06

Renewal E.O. General Assembly of 18/7/2013

90,695,406.12

for five years from 8/8/2013 till 07/8/2018

publication in BS 8/8/2013

ABO of July 2014

(9,178,581)

4,908,332

1.87

Authorised capital 31/12/2014

81,516,825.28

Convertible bond May 2015

(14,454,772)

7,733,952

1.87

Issue of September 2015

(542,012)

290,000

1.87

Authorised Capital 31/12/2015

66,520,042.13

8.14.3. VOTING RIGHTS Each share gives right to one vote. If the share is encumbered by usufruct, the voting rights attached to the share shall be exercised by the usufructuary. The voting rights attached to pledged shares shall be exercised by the owner-pledgor.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.14.4. DIVIDENDS AND MINIMUM SHARE CAPITAL The Company has never distributed any dividends to its shareholders. According to Belgian company law, the Company is required to deduct at least 5% from its profit to constitute the legal reserve until it reaches one-tenth of the Company’s statutory share capital. As of 31 December 2015, no profits were available for distribution. In accordance with Belgian company law, the minimum share capital of a public limited liability company is €61,500.

8.15. SHARE-BASED PAYMENTS 8.15.1. WARRANTS ISSUED ON 24 APRIL 2014 FOR CERTAIN EMPLOYEES AND CONSULTANTS During the Extraordinary General Shareholders Meeting of 24 April 2014, the issuance of a maximum number of 725,000 warrants was approved and 327,224 warrants have subsequently been issued on 17 July 2014 and on 28 October 2014 (133,556 warrants at €8.85/warrant, 28,000 warrants at €9.18/warrant and 12,500 warrants at €8.25/ warrant for employees and 153,168 warrants at €9.09/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month).

The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as of 1 January 2018 until 15 January 2019 for consultants and as from 1 January 2018 until 15 January 2021 for employees). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period.

Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed.

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All non-vested warrants become lapsed at the moment of termination of the agreement. The duration of the warrants is 5 years for consultants and 7 years for employees as of the issue date of the warrants. Warrants that have not been exercised within 5 or 7 years of their creation become null and void.

8.15.2. WARRANTS ISSUED ON 16 MARCH 2015 FOR CERTAIN EMPLOYEES AND CONSULTANTS During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month).

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period.

Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

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8.15.3. WARRANTS ISSUED ON 14 SEPTEMBER 2015 FOR CERTAIN EMPLOYEES AND CONSULTANTS During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/warrant for consultants).

Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as of 1 January 2019 until 15 January 2022). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such Exercise Period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant Warrant holder. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 7 years of their creation become null and void.

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8.15.4. EXTENSION OF CERTAIN WARRANT PLANS The General Shareholders Meeting of 30 April 2009 and the Board of Directors meeting of 22 June 2009 approved the five-year extension of certain warrant plans in accordance with Art. 583 of the Belgian Company Code and in accordance with Art. 21 of the “Economische Herstelwet”.

Because of this extension, the fair value of the warrants has changed. The incremental fair value was calculated as the difference between the fair value with and without extension at the date of extension.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Warrants

2008

2009

2009

2009

2009

2010

2010

2011

54,314

68,500

85,000

249,973

80,500

333,892

62

14,925

19,500

95,833

523

235,048

61,000

238,059

10

44

2,084

4,511

18

329,381

60

21,800

157

45

At 31 December 2013 Outstanding

200,833

Non-vested Exercisable

200,833

54,314

68,500

85,000

Granted Forfeited Exercised

32,916

19,000

17,750

15,578

Expired

72,892

10,416

161,459

68,000

At 31 December 2014 Outstanding

167,917

35,314

50,750

85,000

Non-vested Exercisable

167,917

35,314

50,750

85,000

161,459

68,000

307,581

93,167

35,314

43,300

75,000

161,377

32,250

207,307

Granted Forfeited Exercised Expired

82

882

At 31 December 2015 Outstanding

74,750

7,450

10,000

35,750

121,192

Non-vested Exercisable

2 74,750

7,450

10,000

35,750

121,192

The weighted average price at the date of exercise for warrants exercised during 2014 was €6.02 per share and for warrants exercised during 2015 was €7.51 per share

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607

160.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

58

2012

2012

2012

2013

2013

27,661

46,875

11,434

312,330

8,337

312,330

3,845

03,816

46,875

Total number

Average Exercise price (in Euro)

302,778

2,374,090

5.99

302,778

1,277,548

5.41

8,047

2015

1,096,542

6.68

399,286

8.51

31,917

5.05

85,244

6.02

83,308

7.67

50,000

327,224

46,875

46,875

11,434

305,099

324,840

50,000

327,224

2,572,907

6.34

5,497

157,203

216,560

31,944

327,224

917,524

6.89

5,937

147,896

108,280

18,056

1,655,383

6.03

525,801

10.34

67,569

7.16

647,715

7.51

964

8.59

442,801 1,660

7,954

4,960

46,875

21,808

86,146

2015

7,231

7,296

52,318

2014

3,097

22,062

09,614

2014

46,875

44,897

83,000

16,052

11,434

300,139

279,943

50,000

311,172

442,801

83,000

2,382,460

6.88

2,620

77,954

102,017

15,278

177,711

442,801

83,000

923,189

9.10

8,814

222,185

177,926

34,722

133,461

1,459,271

5.48

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Warrants

2012

2012

2012

Number of warrants granted

748,750

162,500

17,868

Number of warrants not vested at 31/12/2015

21,808

0

2,620

3.21

3.23

5.44

0

0

0

55%

55%

49%-56%

5

Risk-free interest rate

2.35%-2.84%

2.83-3.65%

1.09%-1.78

1

Expected duration

5.00-7.00

5.00-7.00

5.00-7.00

Fair value (in €) at grant date

1.38-1.64

1.47-1.74

2.15-2.89

Exercise price (in €)(1)

Expected dividend yield Expected stock price volatility

(1) Equals the fair market value of the underlying shares on the grant date.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

2013

2013

2013

2014

2015

2015

391,330

302,778

50,000

327,224

442,801

83,000

77,954

102,017

15,278

177,711

442,801

83,000

6.46

6.79

7.27

8.81

9.98

12.29

0

0

0

0

0

0

53.4% - 54.0%

52.7%-53.8%

52.7%-53.8%

40.9%

40.6%

40.9%

1.54% - 1.88%

1.56%-2.08%

1.56%-2.08%

0.91%-1.50%

0.22%

0.57%

6.60-7.00

6.70-7.00

6.70-7.00

5.00-7.00

7.00

7.00

3.18-4.04

3.86-4.07

3.86-4.07

3.06-3.80

3.71-3.92

5.20

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.16. BORROWINGS

As at 31 December (€’000)

2015

2014

0

0

Non-current Secured Non-secured

134,828

Total

134,828

0

0

141

0

141

Current Secured Non-secured Total

Borrowings relate to the senior unsecured bonds due on 27 May 2020 with a principal value of €100 million. The financial leasing amounts were fully paid back in the course of 2015.

8.16.1. MATURITY TABLE The maturity of non-current borrowings (including financial lease) is as follows: As at 31 December (€’000)

2015

2014

Between 1 and 2 years

0

141

Between 2 and 5 years

134,828

0

134,828

141

Borrowings

Over 5 years Total

On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26).

As at 31 December (€’000)

2015

2014

Within one year

0

142

In the second to the fifth year

0

0

Total

0

142

Less future finance charges

0

(1)

Present value of lease obligations

0

141

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165.

Finance lease obligations Future lease payments

After five years

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.17. TRADE PAYABLES AND OTHER CURRENT LIABILITIES Trade payables

As at 31 December

(€'000)

2015

2014

Trade payables

4,263

3,004

Accruals for invoices to be received

7,393

7,404

Total

11,656

10,408

Other current liabilities

As at 31 December

(€'000)

2015

2014

Social security

561

1,106

Payroll accruals

4,194

3,615

Other liabilities

1

105

4,756

4,826

Total

Deferred income

As at 31 December

(€'000)

2015

2014

Deferred income

86,123

132,308

Within one year

55,738

68,188

In the second to the fifth year

30,385

64,120

Accrued expenses

189

Total

86,123

132,497

Deferred income mainly relates to cash received from research collaboration agreements prior to completion of the earnings process.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.18. DEFERRED INCOME TAX Sources of temporary differences (assets)/liabilities As at 31 December (€’000)

2015

2014

Tax loss carried forward

(162,691)

(144,768)

Notional interest deduction(1)

(15,371)

(21,319)

Other temporary differences

5,631

7,439

(165,061)

(129,786)

0

(1)

Total temporary differences

(337,492)

(288,435)

Unrecognised deferred tax asset (33,99%)

(114,714)

(98,039)

Net book value of capitalised R&D assets Depreciation of tangible assets

(1) The application of Notional Interest Deduction is restricted as it has an expiry term of 7 years

The Company has unused tax losses carry forward, without expiry date. This, combined with the other temporary differences, results in a net deferred tax asset position.

The Company has accounted for a total R&D tax credit receivable of €15.7 million following an R&D incentive scheme in Belgium under which the tax incentive can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards.

Due to the uncertainty surrounding the Company’s ability to realise taxable profits in the near future, the Company did not recognise any deferred tax assets.

8.19. RETIREMENT BENEFIT OBLIGATIONS The Company offers several post-employment, death, disability and healthcare benefit schemes. All employees have access to these schemes. The death, disability and healthcare benefits granted to employees of the Company are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

The post-employment pension plans granted to employees of the Company are based on defined contributions for which the insurance company guarantees a defined interest until retirement (type 'branche 21/tak21').

As a consequence of the law of 18 December 2015, minimum returns are guaranteed by the employer as follows: • for the contributions paid as from 1 January 2016, a new variable minimum return based on OLO rates, with a minimum of 1.75% and a maximum of 3.75%. In view of the low rates of the OLO in the last years, the return has been initially set to 1.75; • for the contributions paid until end December 2015, the previously applicable legal returns (3.25% and 3.75% respectively on the employer and employee contributions) continue to apply until retirement date of the participants.

In view of the minimum returns guarantees, those plans qualify as Defined Benefit plans.

In 2014, under the previous legal framework, the application of the PUC method was considered problematic, and there was uncertainty with respect to the future evolution of the minimum guaranteed rates of return. As a consequence, the Group adopted a retrospective approach whereby the net liability recognized in the statement of financial position was based on the sum of the positive differences, determined by individual plan participant, between the minimum guaranteed reserves and the accumulated contributions based on the actual rates of return at the closing date.

Based on the limited difference of €2,944, the Company has concluded that the application of the PUC method would have an immaterial impact.

In 2015, the sum of the positive differences per plan participant between the minimum guaranteed reserves (€6,256,832.58) and the accumulated reserves (€6,243,661.6) as of 31 December 2015 is €13,170.98.

As a consequence, in view of the immaterial difference between the accumulated reserves and the minimum reserves as of 31 December 2015, no provision has been recognised.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.20. REVENUE RECOGNITION As at 31 December (€’000)

2015

2014

Upfront fees

58,559

33,772

R&D service fees

14,403

13,784

Milestone payments

3,500

License fees & other

298

154

76,760

47,710

Total

In 2015, revenues increased to €76.8 million (2014: €47.7 million), mainly driven by higher recognised income from the upfront payments received from AbbVie and Merck & Co., Inc.

8.21. RESEARCH AND DEVELOPMENT EXPENSES Year ended 31 December (€'000)

2015

2014

Consumables

4,448

4,022

Outsourcing

53,897

26,289

Patent costs

2,177

1,655

22,799

22,131

Share-based payments

751

428

Other operating expenses

5,281

5,302

Withholding tax (Reduction Tax Scientist)

(3,381)

(3,133)

R&D tax credit

(3,873)

(3,336)

Subtotal

82,099

53,358

985

1,130

83,084

54,488

Personnel costs

Depreciation and amortisation Total research and development expenses

The increase in outsourcing is largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171.

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8.22. GENERAL AND ADMINISTRATIVE EXPENSES Period ended 31 December (€’000)

2015

2014

Personnel costs

3,091

2,802

Share-based payments

1,069

1,112

Executive Committee(1) compensation

3,341

3,419

Consultancy

1,870

1,464

Other operating expenses

1,881

1,609

Reduction withholding tax scientist / Retribution(2)

(204)

239

Subtotal

11,048

10,645

357

407

11,405

11,052

Depreciation and amortisation Total general and administrative expenses (1) The Executive Committee consists of key management members and entities controlled by them (2) In 2014 the Company had to reimburse €505,828.32 of Reduction Tax Scientist over the previous years

8.23. OTHER INCOME AND EXPENSES Year ended 31 December (€’000)

2015

2014

Other operating income

0

14

Other operating expenses

6

9

Total

(6)

5

Other operating expenses mainly consist of expenses related to non-deductible VAT and county taxes.

Other operating income mainly consists of recuperation of non-deductible VAT of previous years.

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8.24. EMPLOYEE BENEFIT EXPENSE Year ended 31 December (€’000)

2015

2014

Salaries, wages and bonuses

18,233

16,644

Social security

4,779

5,180

881

1,047

Share-based payments

1,820

1,540

Other employment costs

1,997

2,061

Executive Committee compensation(2)

3,341

3,813

Withholding tax (Reduction Tax Scientist)

(3,585)

(3,287)

Total

27,466

26,998

8

8

R&D personnel

301

280

General and administrative staff

43

41

Average FTE

325

317

Group and hospitalisation insurance cost(1)

Headcount Executive Committee(2)

(1) Post-employment benefits (2) The Executive Committee consists of key management members and the entities controlled by them.

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8.25. OPERATING LEASES As at 31 December (€’000)

2015

2014

Current lease payments

3,310

3,225

Within one year

3,277

3,208

In the second to the fifth year

4,750

7,100

0

0

Future lease payments

After five years

The majority of the lease arrangements concerns the leasing of company cars and office facilities.

8.26. FINANCE INCOME AND EXPENSES Year ended 31 December (€’000)

2015

2014

Interest income on financial assets

1,101

1,622

Other finance income

667

2,672

Total

1,768

4,294

1

88

Finance expenses Interest charges on financial liabilities Finance cost convertible bond: Changes fair value derivative Interest amortisation

4,074

Financing charges

549

Other finance expenses

90

698

39,360

786

Total

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34,646

172.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

In 2015, the line ‘Finance cost convertible bond’ mainly includes non-cash expenditure resulting from the fair value calculation and amortisation of the convertible bond components (as a result of the higher share price at year-end compared to the share price at the time of the convertible bonds issuance), and the semi-annual interest paid on the convertible bonds of €1.6 million.

In 2015, the line ‘Other finance expenses’ includes realised exchange losses of €100,687 (2014: €683,791).

In 2015, the line ‘Other finance income’ includes unrealised foreign exchange gains of €428,820 (2014: €681,940 unrealised foreign exchange losses) and realised foreign exchange gains of €1,063,941 (2014: €1,525,455).

8.27. INCOME TAX EXPENSE Year ended 31 December (€’000)

2015

2014

Current income taxes

0

0

Total

0

0

(54,547)

(12,730)

0

1,795

Share-based payments

1,821

1,540

Other permanent differences

3,733

4,595

Expected income tax credit

(16,675)

(13,804)

Impact unrecognised deferred tax asset

(16,675)

(13,804)

0

0

Loss of the year Stock issuance costs

Effective income taxes

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8.28. LOSS PER SHARE Year ended 31 December (€’000)

2015

2014

(54,547)

(12,730)

Weighted average number of shares outstanding

54,382,147

51,105,884

Basic and diluted loss per share after reverse split (in €)

(1.00)

(0.25)

Loss of the year

Earnings/losses per share are calculated by dividing the net result attributable to shareholders by the weighted average numbers of shares during the year.

As the Company is suffering operating losses, warrants have an anti-dilutive effect. As such, there is no difference between basic and diluted earnings per share.

8.29. CONTINGENCIES AND ARBITRATIONS At present there are no contingencies and arbitrations.

8.30. COMMITMENTS 8.30.1. COLLABORATIVE RESEARCH AGREEMENTS AND CLINICAL RESEARCH AGREEMENTS

8.30.1.1. BOEHRINGER INGELHEIM (B.I.) • On 8 January 2007, B.I. and Ablynx agreed to collaborate to identify Nanobodies in a specific biological target believed to be relevant in Alzheimer’s disease and B.I. received an exclusive worldwide license to develop and commercialise such Nanobodies. In return, Ablynx received an upfront payment and would receive milestone payments, FTE payments and royalties as Nanobody drug candidates would proceed through development and potentially reach the market. Ablynx would also participate in the relevant steering committees. On 28 August 2014 it was announced that following the termination of the Phase I study with BI 1034020 (anti-Abeta Nanobody) in Alzheimer’s disease, and after a full review of the programme, Boehringer Ingelheim (BI) decided not to move forward with the

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development of this anti-Abeta Nanobody, thereby ending the collaboration in Alzheimer’s disease that both companies entered into in January 2007.

• On 7 September 2007, B.I. and Ablynx announced a major Global Strategic Alliance to discover, develop and commercialise up to 10 different Nanobody programmes. In return, Ablynx is entitled to receive an upfront payment and received research license payments, milestones and royalties. Additionally, Boehringer Ingelheim subscribed for €15 million in the IPO in November 2007.

Ablynx has certain co-promotion rights in Europe. On 21 August 2008, the research funding was extended until 2009. The agreement was extended with two years in March 2012 and on 21 August 2014 it was extended a last time until 31 December 2014, being the end of the Discovery Term of this Agreement. In November 2015, Boehringer Ingelheim presented compelling pre-clinical proofof-concept data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models. A Phase Ib study with this anti-VEGF/Ang2 Nanobody in patients with solid tumours was initiated by Boehringer Ingelheim in January 2016, triggering a €8 million milestone payment to Ablynx.

8.30.1.2. NOVARTIS AGREEMENT • The agreement with Novartis was signed in December 2005. Under this agreement, Ablynx will discover Nanobodies against a number of targets nominated by Novartis in a collaborative research programme. The deal includes R&D payments, FTE payments, license fees, milestones and royalties. On 10 December 2007, the alliance was extended for another year and on 5 February 2009, it was extended again for another year. On 8 July 2010, two license, development and commercialisation agreements were signed for two targets.

The first partnered programme with Novartis, TAS266 (anti-DR5), entered Phase I clinical development in cancer patients in 2012 but was terminated later the same year.

8.30.1.3. MERCK KGaA AGREEMENTS Agreement signed in 2008 • On 4 September 2008, Ablynx and Merck KGaA announced a co-discovery and co-development collaboration. They will collaborate to research and develop Nanobody-based therapeutics against two disease targets, one oncology and one immunology exploiting some of the key benefits Nanobodies have over conventional antibodies and other fragments.

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Under the terms of the agreement, both companies will equally share all research and development costs. Should Ablynx contribute equally to each programme, it will be eligible to receive fifty percent of the resulting profits.

• In addition, Ablynx has an option to opt-out partly or fully during the research and development programmes, in which case Ablynx would be eligible to receive either a reduced profit share, in the case of a partial opt-out, or milestones and royalties on potential sales in the case of a full opt-out.

The agreement includes an upfront cash payment to Ablynx of €10 million.

• In June 2013, Ablynx announced that it had exercised its opt-out option for the codevelopment project with Merck KGaA on ALX-0761 in inflammation. At the same time, Merck KGaA initiated a Phase I study with ALX-0761, triggering a €2.5 million milestone to Ablynx. In August 2014, Ablynx announced that Merck KGaA further advanced ALX-0761 and initiated a Phase Ib study in patients with psoriasis, which completed recruitment at the end of 2015. The study is expected to read out in the first half of 2016.

• In August 2014, Ablynx announced that it had exercised its opt-out option for the co-development project with Merck KGaA on ALX-0751 in oncology (the second of the two targets as part of the 2008 agreement between Merck KGaA and Ablynx).

• In February 2015 Merck KGaA returned all assets and rights for the pre-clinical oncology programme to Ablynx.

Agreement signed in 2010 • On 11 October 2010, Ablynx and Merck KGaA announced that they have expanded their relationship and entered into a second agreement to co-discover and codevelop Nanobodies against an inflammatory disease target.

• Under the terms of the agreement, Ablynx has received an upfront payment of €10 million in 2010 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package

by Merck KGaA, Ablynx will be eligible for a €15 million milestone payment. Ablynx has the option to continue with Merck KGaA up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties.

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Agreement signed in 2011 • On 9 November 2011, Ablynx and Merck KGaA announced that they have expanded their relationship and entered into a third agreement to co-discover and co-develop Nanobodies against two targets in osteoarthritis.

• Under the terms of the agreement, Ablynx received an upfront payment of €12 million in 2011 and €8 million in January 2012 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package by Merck KGaA, Ablynx will be eligible for a €30 million milestone payment. Ablynx has the option to continue with Merck KGaA up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties.

Agreement signed in 2013 • On 26 September 2013, Ablynx and Merck KGaA announced that they had signed a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations. Under the terms of the agreement, Merck KGaA will fund a dedicated discovery group at Ablynx. Both partners will jointly select disease targets against which this group will develop Nanobodies, up to in vivo proof-of-principle. The dedicated group will focus on the discovery and development of Nanobodies against a number of targets across multiple disease areas. The collaboration will span all of Merck KGaA core research and development fields, including oncology, immuno-oncology, immunology and neurology.

• In February 2015, Ablynx announced that Merck KGaA had informed Ablynx that it wishes to revisit the Strategic Collaboration Agreement between the Companies announced in September 2013, under which €11.5 million, representing nearly 50% of the agreed upon research funding (which was scheduled to be provided over a four-year term) had already been provided by Merck KGaA. • In May 2015, both parties agreed to amend this 2013 alliance and to focus on two particular bi-specific Nanobody programmes going forward.

Ablynx regained, at no cost, full ownership of three other promising pre-clinical programmes which have been generated under this 2013 agreement.

Merck KGaA has provided full financial support and Ablynx is eligible to receive future milestone payments and royalties related to the two specific programmes being pursued.

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8.30.1.4. MERCK & CO., INC. AGREEMENTS • On 2 October 2012 Ablynx announced a collaboration with a subsidiary of Merck & Co., Inc. known outside the US and Canada as MSD, to develop and commercialise Nanobody candidates directed towards a voltage gated ion channel with the option to develop and commercialise a Nanobody to a second target. Under the terms of the agreement, Merck gains exclusive global rights to Nanobodies against the selected target, with an option for similar rights to a second target. Upon signing, Merck paid Ablynx a €6.5 million upfront payment and a €2 million fee for research funding. In addition, Ablynx will be eligible to receive up to €448 million in research, regulatory and commercial milestone payments associated with the progress of multiple candidates as well as tiered royalties on any products derived from the collaboration. Ablynx will be responsible for the discovery of Nanobody candidates and Merck will be responsible for the research, development, manufacturing and commercialisation of any Nanobody product resulting from the collaboration. In March 2015 Ablynx announced an extension of this initial two-year research collaboration with Merck & Co., Inc. whereby Merck & Co., Inc. extended their funding of the research collaboration with Ablynx to the end of September 2016.

• On 3 February 2014, Ablynx announced that they had entered into a second research collaboration and licensing agreement with a subsidiary of Merck & Co., Inc. This new exclusive collaboration and licensing agreement is focused on the discovery and development of several predefined Nanobody candidates (including bi- and tri-specifics) directed toward so called ‘immune checkpoint modulators’, proteins believed to provide potential targets for the development of cancer immunotherapies, a rapidly emerging approach to the treatment of a wide range of cancer types. Under the terms of the agreement, Ablynx received an upfront payment of €20 million and up to €10.7 million in research funding during the initial three year research term of the collaboration. In addition, Ablynx is eligible to receive development, regulatory and commercial milestone payments on achieved sales thresholds for a number of products with ultimate potential to accrue as much as €1.7 billion plus tiered royalties. Merck will be responsible for the development, manufacturing and commercialisation of any products resulting from the collaboration.

• On 22 July 2015 Ablynx announced an expansion of this immuno-oncology collaboration with Merck & Co., Inc. to address an increased number of immune checkpoint modulator targets. As part of this expansion agreement, Ablynx will be responsible for the discovery and development of up to 12 additional Nanobody programmes against individual protein targets and target combinations (monospecific and multi-specific Nanobodies) through to the in vivo pre-clinical proof-

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

of-concept stage, after which Merck will have the option to advance specified lead candidates. Under the terms of this four year expansion, Ablynx received a €13 million upfront payment comprising exclusivity fees and FTE payments as well as further research funding over the term of the collaboration. In addition, Ablynx will be eligible to receive additional exclusivity fees, depending on the number of programmes for which Merck decides to exercise its licensing option, plus development, regulatory and commercial milestone payments of up to €340 million per programme, as well as tiered royalties on annual net sales upon commercialisation of any Nanobody products. Merck will be responsible for clinical development, manufacturing and commercialisation of any products resulting from the collaboration.

8.30.1.5. ABBVIE AGREEMENT • In September 2013, Ablynx and AbbVie entered into a global license agreement to develop and commercialise the anti-IL-6R Nanobody, ALX-0061, to treat inflammatory diseases. ALX-0061 was discovered and developed by Ablynx and it successfully completed a Phase IIa study in February 2013, reporting compelling efficacy and safety data in patients with moderately to severely active rheumatoid arthritis (RA) on a stable background of methotrexate. Under the terms of the agreement, Ablynx is responsible for completing Phase II clinical development in both RA and systemic lupus erythematosus (SLE). Upon the achievement of predefined success criteria, AbbVie will exercise its right to in-license ALX‑0061 and be responsible for subsequent Phase III clinical development and commercialisation.

Ablynx has retained an option for co-promotion rights in Belgium, The Netherlands and Luxembourg. Ablynx has received an upfront payment of US$175 million which is partly being used to fund the next phases of clinical development of ALX-0061 and is thus recognised a rato of the R&D costs incurred in relation with the program.

Upon achievement of certain development, regulatory, commercial and sales-based milestones, Ablynx will be eligible to receive additional milestone payments totaling up to US$665 million as well as double-digit tiered royalties on net sales upon commercialisation.

• In March 2015, Ablynx initiated a Phase IIb study of the anti-IL-6R Nanobody (ALX‑0061), in combination with methotrexate, in patients with rheumatoid arthritis (RA). Recruitment of 345 patients was completed on schedule by year-end.

• In April 2015, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed in February 2016, also on schedule.

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• In July 2015, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled-over into the open-label extension study.

• In August 2015, a Phase II study with ALX-0061 was initiated in patients with systemic lupus erythematosus (SLE). The Company plans to recruit 300 patients in this study by 2017.

8.30.1.6. EDDINGPHARM AGREEMENTS • On 18 October 2013 Ablynx granted an exclusive, royalty-bearing license to Eddingpharm, to develop and commercialise its anti-RANKL Nanobody, ALX0141, in the Mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. Under the terms of the agreement, Eddingpharm will be responsible for the clinical development, registration and commercialisation in Greater China of anti-RANKL Nanobody therapeutics. Ablynx will have access to the data generated by Eddingpharm to support potential licensing discussions in other geographic regions.

Ablynx has received a €2 million upfront payment from Eddingpharm and is entitled to receive commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ALX-0141 generated by Eddingpharm in Greater China.

• On 1 September 2014 Ablynx announced that it had expanded its relationship with Eddingpharm, by granting Eddingpharm an exclusive, royalty-bearing license to develop and commercialise Ablynx’ anti-TNFα Nanobody, ozoralizumab (ATN103), in the Mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including rheumatoid arthritis (RA). Under the terms of the agreement, Eddingpharm will be responsible for the clinical development, registration and commercialisation in Greater China of anti-TNFα Nanobody therapeutics. Ablynx will have access to the clinical data generated by Eddingpharm to support potential licensing discussions in other geographic regions.

Ablynx has received an upfront payment of €2 million, and is entitled to receive development and commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ozoralizumab generated

by Eddingpharm in Greater China. Ablynx received an undisclosed exclusivity payment.

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8.30.1.7. GENZYME AGREEMENT • On 18 May 2015 Ablynx announced that it had entered into an exclusive option and research agreement with Genzyme, a Sanofi company, to investigate Nanobodies against a target that plays an important role in multiple sclerosis (MS) and specifically aligns with Genzyme’s early-stage MS research programmes involving neuroprotection and CNS repair. Ablynx received an undisclosed exclusivity payment.

8.30.1.8. TAISHO PHARMACEUTICALS AGREEMENT • On 30 June 2015 Ablynx announced that it had entered into an exclusive license agreement with Taisho Pharmaceutical Co., Ltd. (“Taisho”) for the development and commercialisation of Ablynx's anti-TNFα Nanobody, ozoralizumab, in Japan, for the treatment of RA. • Under the terms of the agreement, Taisho will be responsible for development, registration and commercialisation of anti-TNFα Nanobody therapeutics in Japan.

Ablynx received an upfront payment of US$3 million and is entitled to receive development and commercial milestone payments plus royalties based on annual net sales of anti-TNFα Nanobody therapeutics generated in Japan.

8.30.1.9. NOVO NORDISK AGREEMENT • On 25 November 2015, Ablynx announced that it had entered into a global exclusive collaboration and licensing agreement with Novo Nordisk to discover and develop novel multi-specific Nanobody drug candidates for use in an undisclosed disease area, with an option to expand the agreement to include a second Nanobody programme.

• Under the terms of the agreement, Ablynx received an upfront license fee of €5 million and will receive up to €4 million in research funding during the initial three year research term of the collaboration. If Novo Nordisk decides to exercise the option to the second programme, the Company will pay Ablynx an exercise fee of €4 million. In addition, Ablynx is eligible to receive potential development, regulatory and commercial milestone payments of up to €182 million per programme plus tiered royalties on the annual net sales on any products resulting from the collaboration. Novo Nordisk will be responsible for the development, manufacturing and commercialisation of any products resulting from this agreement.

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8.30.1.10. OTHER COLLABORATIVE RESEARCH AGREEMENTS • Ablynx has entered into numerous agreements with universities, medical centers and external researchers for research and development work and for the validation of the Company’s technology and products. These agreements typically have durations of one to three years. Ablynx must pay fixed and variable fees to the collaborators and in exchange receives access and rights to the results of the work.

8.30.1.11. CONVERTIBLE BOND On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually.

In accordance with “IFRS 13, Fair Value Measurement”, Ablynx presents information on fair value measurement of financial assets and liabilities in its financial statements as follows: (€‘000)

Level 1

Level 2

Level 3

Total

Financial Liabilities Measured at Amortised Cost Convertible Bond - Host Debt

80,682

80,682

Financial Liabilities at Fair Value Through Profit or Loss Convertible Bond Embedded derivative Total liabilities

80,682

54,146

54,146

54,146

134,828

The level-3 input with the most significant effect on the fair value calculation of the embedded derivative of the convertible bond is the applied credit spread of Ablynx.

The potential effect of using reasonable assumptions to the most significant level 3 inputs is as follows:

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Assumptions at 31 December 2015 Credit spread

Fair Value Convertible Bond (€’000) 700 bps

138,944

+200 bps

900 bps

136,341

-200 bps

500 bps

142,073

Sensitivity analysis Credit spread

An increase (decrease) in fair value of the convertible bond will result in a loss (profit).

There will be no impact in other comprehensive income.

8.30.2. PRINCIPAL GOVERNMENT GRANTS AND INCENTIVES

8.30.2.1. GRANTS Grant

Assigned

Received at 31/12/2015

Recognised as income 2014

Recognised as income 2015

Still to receive

IWT 15

157,773

157,773

157,773

18,991

IWT 16

747,648

747,648

747,648

151,648

IWT 17

1,680,765

1,581,768

1,581,768

432,759

IWT 18

885,597

885,597

708,000

167,489

IWT 19

2,093,845

2,093,845

1,116,000

583,970

484,356

977,845

IWT 20

445,027

445,027

267,000

192,428

74,572

178,027

IWT 21

460,181

460,181

276,000

39,723

220,486

184,181

177,597

Altogether, the Company received a fixed percentage of the expenses incurred in the following R&D projects:

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

1) IWT 15: Centibody Project Grantor: IWT Start date: End date: Amount approved: Amount recognised: Amount received:

1 May 2012 30 April 2014 €157,773 €157,773 €157,773

2) IWT 16: Development of anti-IgE Nanobody in combination with a novel serum albumin binder for the treatment of allergic asthma Grantor: IWT Start date: 1 April 2012 End date: 31 March 2014 Amount approved: €747,647 Amount recognised: €747,647 Amount received: €747,647 3) IWT 17: Efficacy, safety and pharmacokinetic behavior of ALX-0171, an inhaled Nanobody for the treatment of RSV infection in infants Grantor: IWT Start date: 1 June 2013 End date: 31 May 2014 Amount approved: €1,680,765 Amount recognised: €1,581,768 Amount received: €1,581,768 4) IWT 18: T cell recruiting Nanobodies for targeted delivery Grantor: IWT Start date: 1 June 2013 End date: 31 May 2015 Amount approved: €885,597 Amount recognised: €708,000 Amount received: €708,000 5) IWT 19: Development of a novel Nanobody-based therapeutic platform for treatment of ocular diseases Grantor: IWT Start date: 1 April 2014 End date: 31 March 2017 Amount approved: €2,093,845 Amount recognised: €1,068,326 Amount received: €1,116,000

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

6) IWT 20: Bispecific Nanobodies with enhanced specificity Grantor: IWT Start date: 1 June 2014 End date: 31 May 2016 Amount approved: €445,027 Amount recognised: €267,000 Amount received: €267,000 7) IWT 21: Development of Nanobody-based immunotoxins Grantor: IWT Start date: 1 June 2014 End date: 31 May 2016 Amount approved: €460,181 Amount recognised: €260,209 Amount received: €276,000

8.30.3. PRINCIPAL LEASE AND BORROWINGS CONTRACTS Ablynx has signed contracts with nv Bio-Versneller, who provides the Company with 8,000 m2 of laboratory facilities within the Technologiepark as from June 2010, with an initial term of eight years which can be extended.

Ablynx was granted by KBC Bank nv a credit commitment of €3.2 million for the guarantee clause, which is mentioned in the nv Bio-Versneller contract and of which end 2010 €1.3 million was withdrawn. For this same amount, a pledge was granted to KBC Bank nv and is constituted as restricted cash. The pledge and the restricted cash of €1.3 million can be increased to a maximum of €3.2 million in relation to the cash position of the Company. nv Bio-Versneller was granted a pledge of €1.6 million in the framework of additional investments which nv Bio-Versneller made in the Bio-Versneller building at the request of Ablynx. The pledge is being reduced every year over a period of five years as from January 2012 and per 31 December 2015 an amount of €0.35 million was still outstanding. The amount of the pledge is considered as restricted cash.

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Ablynx rented 25,322 m2 of land from BVBA Rootom in Belgium. The Company developed facilities on this land for the housing of llamas. The rental agreement gave the Company the option to purchase the land and the facilities at a nominal value of €375,000 from the first day of the sixth year of the contract. The company decided to exercise this option at the end of January 2015 and owns the facility from 5 May 2015.

Ablynx has signed a contract with Devgen nv, who provides the Company with 970.68 m2 of laboratory facilities within the Technologiepark 30 as from May 2016, with an initial term of five years which can be extended.

8.31. RELATED PARTY TRANSACTIONS 8.31.1. REMUNERATION KEY MANAGEMENT AND NON-EXECUTIVE DIRECTORS Key management consists of the members of the Executive Committee and the nonexecutive Directors and the entities controlled by any of them.

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Remuneration key management: As at 31 December (€'000)

2015

2014

8

8

2,295

2,519

Post-employment benefits (group insurance)

166

157

Share-based compensation

834

926

Other employee costs

124

144

Management fees

451

334

Retribution(1)

(31)

394

Total

3,839

4,474

Number of warrants granted (in units)

293,311

153,168

Cumulative outstanding warrants (in units)

1,744,645

1,814,418

Shares owned (in units)

205,805

100,805

Number of management members

Short-term employee benefits (salaries, social security bonuses, lunch vouchers)

(1) In 2014 the Company had to reimburse €505,828.32 of Retribution over the previous years

Transactions with non-executive Directors: As at 31 December (€'000)

2015

2014

41

0

Management fees

305

140

Total benefits

346

140

0

0

Cumulative outstanding warrants (in units)

74,595

74,595

Non-vested warrants

22,831

44,756

Shares owned (in units)

25,000

25,000

Share-based compensation

Number of warrants offered or granted (in units)

ANNUAL REPORT 2015 / ABLYNX

187.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

8.32. EVENTS AFTER THE BALANCE SHEET DATE On 21 January 2016, Ablynx announced the issuance of an additional 288,170 common shares in exchange for €1,192,292.70 as the result of the exercise of warrants by some employees and consultants of the Company.

On 29 January 2016, Ablynx announced that Boehringer Ingelheim started with the Phase I dose escalation study with the half-life extended bi-specific anti-VEGF/Ang2 Nanobody in adult patients with advanced solid tumors, triggering an €8 million milestone payment to Ablynx. The aim of the study is to evaluate the safety profile and dosing schedule for this Nanobody.

On 23 February 2016, Ablynx announced the issuance of an additional 7,521 common shares in exchange for €34,726.41 as the result of the exercise of warrants.

During the Board Meeting of 24 February 2016, the issuance of a maximum number of 590,000 warrants for the benefit of certain employees and consultants was approved.

The duration of the warrants is 7 years as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were offered.

On 22 March 2016, Ablynx announced the issuance of an additional 210,741 common shares in exchange for €740,375.82 as the result of the exercise of warrants.

As a result of this transaction, Ablynx now has 55,318,806 shares outstanding.

ANNUAL REPORT 2015 / ABLYNX

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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

09. DISCLOSURE AUDIT FEES

€ Auditor’s fees

53,190

Legal missions (pre-emptive rights, warrant exercise, training convertible bond, ...)

37,118

Other assurance services

7,700

Total non-audit fees Deloitte and related parties (direct and indirect tax compliance, global employer services)

28,521

ANNUAL REPORT 2015 / ABLYNX

189.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

10. CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX ANNUAL REPORT 2015 / ABLYNX

As of, and for the Year ended 31 December 2015 In accordance with Art. 105 of the Belgian Companies’ Code, the condensed statutory standalone financial statements of Ablynx are presented. These condensed statements have been drawn up using the same accounting principles for preparing the complete set of statutory financial statements of Ablynx at and for the year ending 31 December 2015 in Belgian GAAP. The management report, the statutory financial statements of Ablynx and the report of the statutory auditor will be filed with the appropriate authorities and are available at the Company’s registered offices.

The statutory auditor has issued an unqualified report on the statutory financial statements of Ablynx. The complete set of the statutory financial statements of Ablynx is also available on the Company’s website www.ablynx.com.

190.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

SUMMARY BALANCE SHEET OF ABLYNX nv Assets as at (€’000)

2015

2014

Fixed assets

167,932

132,434

Intangible fixed assets

165,314

130,133

Tangible fixed assets

2,618

2,301

Current assets

262,321

220,606

Amounts receivable

25,048

12,874

Current investments

232,643

194,535

Cash at bank and in hand

3,601

11,648

Deferred charges and accrued income

1,029

1,549

430,253

353,040

(€’000)

2015

2014

Equity

164,776

173,062

Capital

102,442

100,952

Share premium account

187,316

183,645

Accumulated profits (losses)

(124,982)

(111,535)

Amounts payable after more than one year

100,000

0

Current liabilities

165,477

179,978

Amounts payable within one year

16,420

15,375

Deferred charges and accrued income

149,057

164,603

Total Liabilities

430,253

353,040

Total Assets

Liabilities as at

Current investments include €1,647,541,38 restricted Cash in 2015 (€1,980,000 in 2014).

ANNUAL REPORT 2015 / ABLYNX

191.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

SUMMARY INCOME STATEMENT OF ABLYNX nv (€’000)

2015

2014

144,740

92,507

Turnover

45,161

23,490

Own construction capitalised

89,405

60,528

Other operating income

10,174

8,489

155,243

116,580

Services and other goods

72,410

42,377

Remuneration, social security costs and pensions

27,361

26,528

Depreciation of and amounts written off formation expenses, intangible and tangible fixed assets

55,466

47,666

6

9

Operating Profit

(10,503)

(24,073)

Financial result

(2,935)

1,713

Financial income

2,196

4,298

Financial charges

(5,131)

(2,585)

(13,438)

(22,360)

Extraordinary result

0

(62)

Extraordinary cost

0

(86)

Extraordinary income

0

24

(13,438)

(22,422)

(9)

(19)

(13,447)

(22,441)

Operating Income

Operating charges

Other operating charges

Gain (loss) on ordinary activities before taxes

Profit (loss) for the year before taxes Taxes Profit (loss) for the period available for appropriation

ANNUAL REPORT 2015 / ABLYNX

192.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

APPROPRIATION ACCOUNT (€’000)

2015

2014

Profit (loss) to be appropriated

(124,982)

(111,535)

Profit (loss) to be appropriated

(13,447)

(22,441)

Profit (loss) to be carried forward

(111,535)

(89,094)

Profit (loss) to be carried forward

(124,982)

(111,535)

ANNUAL REPORT 2015 / ABLYNX

193.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

CAPITAL STATEMENT (position as at 31 December 2015) (€’000)

Amounts

Number of shares

A. Capital 1. Issued capital - At the end of the previous year

100,952

- Changes during the year

1,490

- At the end of this year

102,442

2. Capital representation

54,812,374

2.1. Shares without par value - Bearer and dematerialised

54,812,374

B. Own shares held by

0

C. Commitments to issue shares(1)

0

D. Autorised capital not issued

66,520

(1) See chapter 11, Additional information, the number of outstanding warrants amounts to 2,675,031.

ANNUAL REPORT 2015 / ABLYNX

194.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

11. SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION

11.1. PRINCIPLES The valuation rules have been prepared in agreement with the requirements of the Royal Decree of 30 January 2001 concerning the enforcement of the Commercial Code.

11.2. SPECIFIC RULES Company Formation Expenses Formation expenses are charged directly to the profit and loss account.

Intangible Fixed Assets Concessions, patents, licenses, know-how, trademarks.

Software licenses and implementation costs are capitalised at their acquisition prices, and amortised straight-line at a ratio of 33.33 % per year. Other licenses are valued at their acquisition prices and depreciated straight-line over the economic life of the patent to which they relate. The maximum depreciation period for other licenses is five years.

Research and Development Research costs have also been capitalised at cost price, insofar as the cost price does not exceed the value in use or the future return of these assets for the Company. They are amortised straight-line over five years.

Other intangible fixed assets Other intangible fixed assets are capitalised at their cost price and to their probable useful life for the company. These other intangible fixed assets include contributed technology. The contribution value of this technology is depreciated linearly over five years.

Tangible Fixed Assets Tangible fixed assets are capitalised at their acquisition price, including all subsequent direct costs required to make such assets operational.

ANNUAL REPORT 2015 / ABLYNX

195.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

The following depreciation percentages are used: Asset

Method

Basis

Depreciation %

L-D-O

NR-R

Principle costs (min-max)

2 Intangible fixed assets

L

NR

20-33.3%

3 Buildings

L

NR

10%

4 Installations, machinery and equipment

L

NR

33.3%

5 Office equipment and furniture

L

NR

20%

6 Other tangible fixed assets

L

NR

33.3%

Subsequent costs (min-max)

1 Formation cost

7 Leasehold improvements : the shorter of the useful life or the minimum leasing term L =linear, D = degressive, O = other, NR = not revalued, R = revalued Financial Fixed Assets Guarantees are measured at their acquisition price.

Amounts receivable of more than one year The receivables are measured at their nominal value, no discount factor has been taken into account.

Amounts Receivable within one Year The receivables are measured at their nominal value. Each receivable is individually valued. Devaluation of receivables is recorded, if the actual value is lower than their nominal value.

Cash Cash is measured at its nominal value.

Grants, Government Incentives, upfront payments and FTE income Grants and government incentives are recognised in the income statement when all the conditions of the grants and government incentives are fulfilled and costs are incurred.

ANNUAL REPORT 2015 / ABLYNX

196.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Grants, government incentives, upfront payments and FTE income (as from 2009) related to capitalised research cost are recognised in the income statement in accordance with the depreciation rhythm of the asset to which they relate.

In accordance with the CBN recommendation issued in 2010, the reduction in withholding tax has been directly recorded in other operating income.

Amounts Payable after One Year In accordance with the CBN recommendation issued in 1995, a convertible bond, convertible at the discretion of the bondholder, is valued at issue price. Related interest expenses are included in P&L over the respective periods.

Amounts Payable within One Year Amounts payable are measured at their nominal value.

Foreign Currencies Transactions in foreign currencies during the year are booked at the current exchange rate. All outstanding payables and receivables at year end are recorded at the exchange rate on the balance sheet date. Exchange rate gains and losses are recognised in the results under the heading ‘Other Financial Charges and Income’.

Turnover Turnover from research contracts is recognised over the duration of the contract in accordance with the progress of the work and contractual terms.

ANNUAL REPORT 2015 / ABLYNX

197.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Additional Information Warrants

Warrants

2008

2009

2009

2009

2009

2010

2010

2011

54,314

68,500

85,000

249,973

80,500

333,892

62

14,925

19,500

95,833

523

235,048

61,000

238,059

10

44

2,084

4,511

18

329,381

60

21,800

157

45

At 31 December 2013 Outstanding

200,833

Non-vested Exercisable

200,833

54,314

68,500

85,000

Granted Forfeited Exercised

32,916

19,000

17,750

15,578

Expired

72,892

10,416

161,459

68,000

At 31 December 2014 Outstanding

167,917

35,314

50,750

85,000

Non-vested Exercisable

167,917

35,314

50,750

85,000

161,459

68,000

307,581

93,167

35,314

43,300

75,000

161,377

32,250

207,307

Granted Forfeited Exercised Expired

82

882

At 31 December 2015 Outstanding

74,750

7,450

10,000

35,750

121,192

Non-vested Exercisable

2 74,750

7,450

10,000

35,750

121,192

The weighted average price at the date of exercise for warrants exercised during 2014 was €6.02 per share and for warrants exercised during 2015 was €7.51 per share

ANNUAL REPORT 2015 / ABLYNX

607

198.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

58

2012

2012

2012

2013

2013

27,661

46,875

11,434

312,330

8,337

312,330

3,845

03,816

46,875

Total number

Average Exercise price (in Euro)

302,778

2,374,090

5.99

302,778

1,277,548

5.41

8,047

2015

1,096,542

6.68

399,286

8.51

31,917

5.05

85,244

6.02

83,308

7.67

50,000

327,224

46,875

46,875

11,434

305,099

324,840

50,000

327,224

2,572,907

6.34

5,497

157,203

216,560

31,944

327,224

917,524

6.89

5,937

147,896

108,280

18,056

1,655,383

6.03

525,801

10.34

67,569

7.16

647,715

7.51

964

8.59

442,801 1,660

7,954

4,960

46,875

21,808

86,146

2015

7,231

7,296

52,318

2014

3,097

22,062

09,614

2014

46,875

44,897

83,000

16,052

11,434

300,139

279,943

50,000

311,172

442,801

83,000

2,382,460

6.88

2,620

77,954

102,017

15,278

177,711

442,801

83,000

923,189

9.10

8,814

222,185

177,926

34,722

133,461

1,459,271

5.48

ANNUAL REPORT 2015 / ABLYNX

199.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Warrants

2012

2012

2012

Number of warrants granted

748,750

162,500

17,868

Number of warrants not vested at 31/12/2015

21,808

0

2,620

3.21

3.23

5.44

0

0

0

55%

55%

49%-56%

5

Risk-free interest rate

2.35%-2.84%

2.83-3.65%

1.09%-1.78

1

Expected duration

5.00-7.00

5.00-7.00

5.00-7.00

Fair value (in €) at grant date

1.38-1.64

1.47-1.74

2.15-2.89

Exercise price (in €)(1)

Expected dividend yield Expected stock price volatility

(1) Equals the fair market value of the underlying shares on the grant date.

ANNUAL REPORT 2015 / ABLYNX

200.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

2013

2013

2013

2014

2015

2015

391,330

302,778

50,000

327,224

442,801

83,000

77,954

102,017

15,278

177,711

442,801

83,000

6.46

6.79

7.27

8.81

9.98

12.29

0

0

0

0

0

0

53.4% - 54.0%

52.7%-53.8%

52.7%-53.8%

40.9%

40.6%

40.9%

1.54% - 1.88%

1.56%-2.08%

1.56%-2.08%

0.91%-1.50%

0.22%

0.57%

6.60-7.00

6.70-7.00

6.70-7.00

5.00-7.00

7.00

7.00

3.18-4.04

3.86-4.07

3.86-4.07

3.06-3.80

3.71-3.92

5.20

ANNUAL REPORT 2015 / ABLYNX

201.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

Grants

Grant

Assigned

Received at 31/12/2015

Recognised as income 2014

Recognised as income 2015

Still to receive

IWT 15

157,773

157,773

157,773

18,991

IWT 16

747,648

747,648

747,648

151,648

IWT 17

1,680,765

1,581,768

1,581,768

432,759

IWT 18

885,597

885,597

708,000

167,489

IWT 19

2,093,845

2,093,845

1,116,000

583,970

484,356

977,845

IWT 20

445,027

445,027

267,000

192,428

74,572

178,027

IWT 21

460,181

460,181

276,000

39,723

220,486

184,181

177,597

Appropriation account

APPROPRIATION ACCOUNT (€’000)

2015

2014

Profit (loss) to be appropriated

(124,982)

(111,535)

Profit (loss) to be appropriated

(13,447)

(22,441)

Profit (loss) to be carried forward

(111,535)

(89,094)

Profit (loss) to be carried forward

(124,982)

(111,535)

ANNUAL REPORT 2015 / ABLYNX

202.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION

ADRESSES Ablynx’s registered office ABLYNX nv Technologiepark 21 9052 Zwijnaarde Belgium T. +32 (0)9 262 00 00 F. +32 (0)9 262 00 01 info@ablynx.com investors@ablynx.com dealing_code@ablynx.com www.ablynx.com

Independent registered public accounting firm DELOITTE BEDRIJFSREVISOREN | REVISEURS D’ENTREPRISES Berkenlaan 8b 1831 Diegem Belgium T. +32 2 800 20 00 F. +32 2 800 20 01 www.deloitte.com

ANNUAL REPORT 2015 / ABLYNX

203.

CORPORATE GOVERNANCE AND FINANCIAL INFORMATION