`
`Weighted average duration of obligation for pensions and other long-tenn benefits In prtnclpal countries
`
`The table below shows the duration of Sanofi's obligations in the principal countries:
`
`2016
`France Gennany
`
`13
`
`14
`
`US
`
`13
`
`UK
`
`17
`
`2015
`France Gennany
`
`13
`
`14
`
`us
`
`14
`
`2014
`UK France Gennany
`
`17
`
`14
`
`14
`
`us
`
`14
`
`UK
`
`17
`
`(years)
`Weighted average
`duration
`
`Sensitivity analysis
`
`The table below shows the sensitivity of Sanofi's obligations for pensions and other post-employment benefits to changes in key
`actuarial assumptions:
`
`Pensions and other post-employment benefits, by principal country
`Change in
`aAumpUon
`-0.50%
`
`us
`+187
`
`France
`+163
`
`Gennany
`+240
`
`+0.50%
`
`+0.50%
`
`+0.50%
`
`+1 year
`
`+85
`
`+105
`
`+3
`
`+70
`
`+245
`
`+233
`
`+91
`
`+2
`
`+28
`
`+69
`
`UK
`+287
`
`+189
`
`+145
`
`+105
`
`(€million)
`
`M ... urement of defined- benefit obligation
`Discount rate
`
`General inflation rate
`
`Pension benefits indexation
`
`Haalthcare cost inflation rate
`
`Mortality table
`
`F -68 I Form 20-F 2016 • Sanofi
`
`MYLAN - EXHIBIT 1092 - Part 4 of 4
`Mylan Laboratories Limited v. Aventis Pharma S.A. IPR2016-00712
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below reconciles the net obligation in respect of Sanofi's pension and other post-employment benefit plans with the
`amounts recognized in the consolidated financial statements:
`
`(€ million)
`
`Measurement of the obligation:
`
`Beginning of period
`
`Reclassification of the Animal Health business<aJ
`
`Current service cost
`
`Interest cost
`
`Actuariallossesl(gains) due to changes in demographic assumptions
`
`Actuariallossesl(gains) due to changes in financial assumptions
`
`Actuariallossesl(gains) due to experience adjustments
`
`Plan amendments
`
`Plan curtailments
`
`Plan settlements specified in the terms of the plan
`
`Plan settlements not specified in the terms of the plan
`
`Benefits paid
`
`Changes in scope of consolidation and transfers
`
`Currency translation differences
`
`Obligation at end of period
`
`Pensions and other post-employment benefits
`2015
`2014
`
`I
`
`; I
`
`12,825
`
`216
`
`359
`
`(71)
`
`928
`(18)
`
`(2)
`
`(52)
`
`(49)
`
`(254)
`
`(531)
`71
`
`(334)
`
`13,088
`
`13,302
`
`(266)
`
`262
`
`362
`
`(37)
`
`(679)
`(13)
`
`18
`(39)
`
`(61)
`
`(6)
`
`(556)
`
`36
`502
`12,825
`
`11,251
`
`214
`
`418
`
`(25)
`
`1,618
`(30)
`
`5
`(16)
`
`(54)
`
`(110)
`
`(507)
`(2)
`
`540
`13,302
`
`Fair value of plan assets:
`
`Beginning of period
`
`Reclassification of the Animal Health business< a>
`
`Interest income on plan assets
`
`Difference between actual return and interest income on plan assets
`
`Administration costs
`
`Plan settlements specified in the terms of the plan
`
`Plan settlements not specified in the terms of the plan
`
`Contributions from plan members
`
`Employer's contributions
`
`Benefits paid
`
`Changes in scope of consolidation and transfers
`
`Currency translation differences
`
`Fair value of plan assets at end of period
`
`Net amount shown in the balance sheet:
`
`Net obligation
`
`Net amount shown in the balance sheet at end of period
`
`8,566
`
`251
`
`730
`
`(9)
`
`(49)
`
`(256)
`
`3
`
`168
`(405)
`
`86
`(344)
`
`8,741
`
`4,347
`
`4,347
`
`8,488
`
`(208)
`
`254
`
`(79)
`
`(13)
`
`(61)
`
`(6)
`
`4
`
`225
`(415)
`
`377
`
`8,566
`
`4,259
`
`4,259
`
`7,241
`
`285
`
`700
`
`(11)
`
`(54)
`
`(63)
`
`5
`
`354
`(375)
`
`406
`
`8,488
`
`4,814
`
`4,814
`
`Sanofi • Form 20-F 2016 I F-69
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`(€million)
`
`Amounts recognized In the balance sheet:
`
`Pre-funded obligations (sea Note D.7.)
`
`Obligations provided for
`
`Net amount recognized at end of period
`
`Benefit cost for the period:
`
`Current service cost
`
`Past service cost
`
`Net interest (income)/cost
`
`(Gains)/losses on plan settlements not specified in the terms of the plan
`
`Actuarial (gains)/lossas on plan curtailments
`
`Contributions from plan members
`
`Administration costs and taxes paid during the period
`
`Expense recognized directly In profit or loss
`
`Remeasurement of net defined-benefit (asset)/liability (actuarial gains and
`losses)
`
`Ex:pense/(gain) for the period
`
`Pensions and other post-employment benefits
`2015
`201.
`
`-n•
`
`(30)
`4,377
`
`4,347
`
`216
`
`(2)
`
`108
`
`2
`
`(52)
`
`(3)
`
`9
`
`278
`
`109
`
`(49)
`
`4,308
`4,259
`
`262
`
`18
`
`108
`
`(39)
`
`(4)
`
`13
`
`358
`
`(59)
`4,873
`
`4,814
`
`214
`
`5
`
`133
`
`(47)
`
`(16)
`
`(5)
`
`11
`
`295
`
`(650)
`
`(292)
`
`863
`
`1,158
`
`(a) This line comprises the relevant assets and liabilities of the Animal Health business, rec;/assified as of December 31, 2015 to Assets held for seltJ or
`axchanga and Uab/1/tla RJiated to assets held for ultJ or exchange, 1'98par;/jvsJy, in accordance with /FRS 5 (saa NotBB D.2. and 0.36.).
`
`The tables below show Sanofi's net liability in respect of pension plans and other post-employment benefits by geographical
`region:
`
`387
`
`December 31, 2016
`(€ million)
`Measurement of obligation
`
`Fair value of plan assets
`
`Pensions and other post-employment ben&fils
`by geographical region
`us
`France Gennany
`UK
`2,874
`2,361
`3,535
`3,065
`
`Other
`1,253
`
`Total
`13,088
`
`857
`
`2,304
`
`1,760
`
`2,866
`
`954
`
`299
`
`8,741
`
`4,347
`
`Net amount shown in the balance sheet at end of period
`
`1,504
`
`1,231
`
`1,114
`
`199
`
`December 31, 2015
`(€million)
`Measurement of obligation
`
`Fair value of plan assets
`
`Net amount shown In the balance sheet at end of period
`
`December 31, 201•
`(€million)
`Measurement of obligation
`
`Fair value of plan assets
`
`Pensions and other post-employment benefits
`by geographical region
`us
`Franca Gennany
`UK
`2,986
`2,270
`3,502
`2,948
`2,852
`2,216
`
`Other
`1,119
`
`851
`
`96
`
`268
`
`Total
`12,825
`
`8,566
`4,259
`
`841
`1,429
`
`1,806
`1,180
`
`1,286
`
`Pensions and other post-employment benefits
`by geographical region
`us
`Franca Gennany
`UK
`2,819
`2,522
`3,809
`2,996
`
`Other
`1,156
`
`Total
`13,302
`
`865
`
`2,207
`
`1,837
`
`2,745
`
`834
`
`322
`
`8,488
`
`4,814
`
`Net amount shown in the balance sheet at end of period
`
`1,657
`
`1,602
`
`982
`
`251
`
`F -70 I Form 20-F 2016 • Sanofi
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below shows the fair value of plan assets relating to Sanofi's pension and other post-employment plans, split by asset
`category:
`
`Securities quoted in an active market
`
`Cash and cash equivalents
`
`Equity instruments
`
`Bonds and similar instruments
`
`Real estate
`
`Derivatives
`
`Commodities
`
`Other
`
`other securities
`
`Hedge funds
`
`Insurance policies
`
`-
`
`98.2%
`
`2.4%
`
`35.2%
`
`54.3%
`
`3.8%
`
`(0.1)%
`
`1.3%
`
`1.3%
`
`1.8%
`
`0.0%
`
`1.8%
`
`2015
`
`97.0%
`
`2.7%
`
`35.6%
`
`52.8%
`
`3.5%
`
`0.3%
`
`1.0%
`
`1.1%
`
`3.0%
`
`1.5%
`
`1.5%
`
`2014
`
`96.8%
`
`1.0%
`
`40.7%
`
`50.1%
`
`3.7%
`
`0.1%
`
`1.1%
`
`0.3%
`
`3.2%
`
`1.5%
`
`1.7%
`
`100%
`
`100%
`
`Total
`
`100%
`
`Sanofi has a long-term objective of maintaining or increasing the extent to which its obligations are covered by assets. To this
`end, Sanofi uses an asset-liability management strategy, matching plan assets to its pension obligations. This policy aims to
`ensure the best fit between the assets held on the one hand, and the associated liabilities and expected future payments to plan
`members on the other. To meet this aim, Sanofi operates a risk monitoring and management strategy (mainly focused on
`interest rate risk and inflation risk), while investing a growing proportion of assets in high-quality bonds with comparable
`maturities to those of the underlying obligations.
`
`Sanofi did not alter its asset-liability management strategy or its key risk monitoring policy during 2016.
`
`The tables below show the service cost for Sanofi's pension and other post-employment benefit plans, by geographical region:
`
`(€ million)
`Service cost for 2016
`Current service cost
`
`Past service cost
`
`Net interest cost/{income) including administration costs
`and taxes paid during the period
`
`(Gains)/losses on plan settlements not specified in the
`terms of the plan
`
`Actuarial (gains)/losses on plan curtailments
`
`Contributions from plan members
`
`Expense recognized directly In profit or loss
`
`Remeasurement of net defined-benefit (asset)/liability
`(actuarial gains and losses)
`
`Expensel{gain) for the period
`
`Pensions and other post-employment benefits by geographical region
`us
`France
`Germany
`other
`Total
`UK
`62
`70
`42
`42
`216
`
`30
`
`23
`
`48
`
`(2)
`
`(51)
`
`49
`
`70
`
`119
`
`2
`
`67
`
`1
`
`68
`
`108
`
`6
`
`(161)
`
`(53)
`
`165
`
`171
`
`(2)
`
`(2)
`
`6
`
`10
`
`117
`
`4
`
`(3)
`
`(3)
`
`48
`
`34
`
`82
`
`2
`
`(52)
`
`(3)
`
`278
`
`109
`
`387
`
`Sanofi • Form 20-F 2016 I F-71
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`(€million)
`Service coat for 2015
`Current service cost
`
`Past service cost
`
`Net interest cost/(income) including administration costs
`and taxes paid during the period
`
`(Gains)/losses on plan settlements not specified in the
`terms of the plan
`
`Actuarial (gains)/losses on plan curtailments
`
`Contributions from plan members
`
`16
`
`28
`
`(38)
`
`Pensions and other post-employment benefits by geographical region
`us
`France
`Germany
`UK
`Other
`Total
`74
`78
`47
`14
`49
`262
`
`1
`
`23
`
`1
`
`18
`
`44
`
`13
`
`13
`
`121
`
`(1)
`
`(3)
`
`59
`
`(39)
`
`(4)
`
`358
`
`(1)
`
`26
`
`Expense recognized directly in profit or loss
`
`84
`
`71
`
`118
`
`Remeasurement of net defined-benefit (asset)/liability
`(actuarial gains and losses)
`
`Ex:pense/(gain) for the period
`
`(€million)
`Service coat for 2014
`
`Current service cost
`
`Past service cost
`
`Net interest cost/(income) including administration costs
`and taxes paid during the period
`
`(Gains)/losses on plan settlements not specified in the
`terms of the plan
`
`Actuarial (gains)/losses on plan curtailments
`
`Contributions from plan members
`
`(235)
`
`(151)
`
`(211)
`
`(140)
`
`(30)
`
`(144)
`
`88
`
`(118)
`
`(30)
`
`29
`
`(650)
`
`(292)
`
`Pensions and other post-employment banllfits by geographical region
`us
`France
`Germany
`UK
`Other
`Total
`72
`17
`214
`40
`50
`35
`
`1
`
`49
`
`(19)
`
`(11)
`
`4
`
`36
`
`3
`
`5
`
`34
`
`12
`
`13
`
`144
`
`(28)
`
`(47)
`
`(16)
`
`(8)
`
`Expense recognized directly In profit or loss
`
`Remeasurement of net defined-benefit (asset)/liability
`(actuarial gains and losses)
`
`Ex:pense/(gain) for the period
`
`92
`
`175
`
`267
`
`78
`
`56
`
`338
`
`416
`
`225
`
`281
`
`(1)
`
`28
`
`60
`
`88
`
`(4)
`
`41
`
`65
`
`106
`
`(5)
`
`295
`
`863
`
`1,158
`
`There were no significant events affecting Sanofi's pension and other post-employment benefit plans during 2016.
`
`An analysis of the MRemeasurement of net defined-benefit (asset)/liability (actuarial gains and losses)" line in the preceding
`tables is set forth below:
`
`(€million)
`
`France Germany US
`
`UK France Germany
`
`US UK Franca Germany
`
`US
`
`UK
`
`2016
`
`2015
`
`2014
`
`Actuarial gains/(losses) arising during the
`period!al
`~------------------------------
`Comprising:
`
`(70)
`
`(1) 161 (165) 235
`
`210
`
`30 144 (175))
`
`(338)
`
`(225)
`
`(60)
`
`Gains/(losses) on experience adjustmentslbl
`
`58
`
`149 77 442
`
`26
`
`16 (116)
`
`9
`
`132
`
`130
`
`147 238
`
`Gains/(losses) on demographic
`assumptions
`
`(6)
`
`- 79
`
`10
`
`46 (21)
`
`88
`
`(62)
`
`Gains/(losses) on financial assumptions
`
`(122)
`
`(150)
`
`5 (607)
`
`199
`
`194 100 156 (395)
`
`(468)
`
`(310) (298)
`
`(a) Gains and losses arising from changes In assumptions are due primarily to changes In the discount rate.
`(b) Exprmance adjustments are mainly due to the effect of trends in the financial marlcets on plan assets.
`
`F -72 I Form 20-F 2016 • Sanofi
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The net pre-tax actuarial loss (excluding associates and joint ventures) recognized directly in equity in the year ended
`December 31, 2016 was €3,006 million, compared with €2,898 million for the year ended December 31,2015 and €3,548 million
`for the year ended December 31, 2014.
`
`The present value of Sanofi's wholly or partially funded obligations in respect of pension and other post-employment benefit
`plans as of December 31, 2016 was €11,713 million, compared with €11,473 million as of December 31, 2015 and
`€11 ,933 million as of December 31, 2014. The present value of Sanofi's unfunded obligations was €1 ,375 million as of
`December 31,2016, versus €1,352 million as of December 31,2015 and €1,369 million as of Dacembar31, 2014.
`
`The total expense for pensions and other post-employment benefits is allocated between income statement line items as
`follows:
`
`(€ million)
`
`Cost of sales
`
`Research and development expenses
`
`Selling and general expenses
`
`other operating (income)/expenses, net
`
`Restructuring costs
`
`other gains and losses, and litigation
`
`Financial expanses
`
`Total
`
`t.J•ilol 1
`60
`
`48
`
`113
`
`(51)
`
`108
`278
`
`2015
`
`73
`
`58
`
`132
`
`(13)
`
`108
`358
`
`2014
`
`73
`
`45
`
`108
`
`(56)
`
`(8)
`
`133
`295
`
`The estimated amounts of employer's contributions to plan assets in 2017 are as follows:
`
`(€ million)
`Employer's contributions in 2017 (estimate):
`
`2017
`
`Franca
`
`Garmany
`
`us
`
`UK
`
`other
`
`Total
`
`5
`
`47
`
`46
`
`46
`
`144
`
`The table below shows the expected timing of benefit payments under pension and other post-employment benefit plans for the
`next ten years:
`
`Franca
`
`Germany
`
`us
`
`UK
`
`Other
`
`Total
`
`(€million)
`Estimated future benefit payments:
`
`2017
`
`2018
`
`2019
`
`2020
`
`2021
`
`2022to2026
`
`139
`
`105
`
`92
`
`115
`
`113
`
`524
`
`206
`
`210
`
`216
`
`221
`
`226
`
`1,148
`
`191
`
`157
`
`153
`
`159
`
`158
`
`823
`
`105
`
`108
`
`112
`
`115
`
`119
`
`652
`
`59
`
`53
`
`58
`
`61
`
`60
`
`700
`
`633
`
`631
`
`671
`
`676
`
`339
`
`3,486
`
`The table below shows estimates as of December 31, 2016 for the timing of future payments in respect of unfunded pension
`and other post-employment benefit plans:
`
`(€million)
`Estimated payments
`
`Total
`1,374
`
`LBAthan 1
`year
`73
`
`Payments due by period
`
`1 to3yaanl
`144
`
`3 to Syaa.-.
`153
`
`Morethan5
`yea.-.
`1,004
`
`Sanofi • Form 20-F 2016 I F-73
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`0.19.2. Restructuring provisions
`
`The table below shows movements in restructuring provisions classified in non-current and current liabilities:
`
`(£million)
`Balance, beginning of period
`
`of which:
`
`• Classified in non-current liabilities
`
`• Classified in current liabilities
`
`Change in provisions recognized in profit or loss for the period
`
`Provisions utilized
`
`Transfers
`
`Reclassification of the Animal Health business(a)
`
`Unwinding of discount
`
`Currency translation differences
`Balance, end of period
`of which:
`
`• Classified in non-current liabilities
`
`• Classified in current liabilities
`
`-
`
`1,343
`
`762
`581
`667
`(641)
`38
`
`4
`9
`1,420
`
`744
`676
`
`2015
`1,399
`
`835
`564
`508
`(570)
`
`(12)
`6
`12
`1,343
`
`762
`581
`
`2014
`1,801
`
`1,061
`740
`287
`(740)
`14
`
`25
`12
`1,399
`
`835
`564
`
`(a) This line comprises the restructuring provisions of the Animal Health business, reclassified to Liabilitiea related to HSefs held for Ale or exchenge as of
`December 31 2015 (see Notes D.2. and D.36.).
`
`Provisions for employee termination benefits as of December 31, 2016 amounted to €1,159 million (compared with
`€1,030 million as of December 31, 2015 and €1,235 million as of December 31, 2014), and mainly covered redundancy
`programs announced as part of the reallocation of sales forces, R&D and industrial operations in France, the United States, and
`some other European countries. The provision relating to France was €933 million as of December 31, 2016, versus
`fJ72 million as of December 31, 2015 and €1,087 million as of December 31,2014.
`
`The provision for France includes the present value of gross self-funded annuities under various early retirement plans
`(including ongoing plans, and a new plan implemented at the end of 2016), plus social security charges and levies associated
`with those annuities and with annuities funded by external bodies. The average residual holding periods under these plans were
`2.51 years, 2.64 years and 3.08 years as of December 31,2016,2015 and 2014, respectively. In 2016, no premiums were paid
`in respect of externally-funded annuities: the impact of reforms on existing externally-funded plans ended in 2015, and all plans
`implemented since 2011 have been self-funded. This compares with premium payments of €4.4 million in the year ended
`December 31, 2015 and €18 million in the year ended December 31, 2014.
`
`The timing of future termination benefit payments is as follows:
`
`December 31, 2018
`(€ million)
`Employee termination benefits
`
`• France
`
`• Other countries
`
`Total
`
`December 31, 2015
`(£million)
`
`Employee termination benefits
`
`• France
`
`• Other countries
`
`Total
`
`F-74 1 Form 20-F 2016 •Sanofi
`
`Total Less than 1 year
`
`Benefit payments by period
`1 to 3 years
`3 to 5 years More than 5 years
`
`933
`
`226
`1,159
`
`374
`
`182
`
`556
`
`413
`
`35
`
`448
`
`142
`
`4
`
`146
`
`4
`
`5
`
`9
`
`Total Less than 1 year
`
`Benaflt payments by pertod
`1 to 3 years
`3 to 5 years More than 5 years
`
`772
`
`258
`
`1,030
`
`286
`197
`
`483
`
`351
`
`56
`407
`
`120
`
`2
`
`122
`
`15
`
`3
`18
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`Decernber31,2014
`(t' million)
`Employee termination benefits
`
`• France
`
`• Other countries
`
`Total
`
`Total Lass than 1 year
`
`Benefit payments by period
`1 to 3yaara
`3to5yaara More than 5 yaara
`
`1,087
`
`148
`
`1,235
`
`378
`
`94
`
`472
`
`447
`
`48
`
`495
`
`212
`
`5
`
`217
`
`50
`
`51
`
`Restructuring provisions as of December 31, 2016 also include €163 million {€199 million as of December 31, 2015) relating to a
`five-year commitment to Evotec regarding the Toulouse R&D site in France.
`
`0.19.3. other provisions
`Other provisions include provisions for risks and litigation relating to environmental, tax, commercial and product liability
`matters.
`
`_f_£_m_m_ion_~--------------------------------------------------~llllllfi"'I~ _____ 2_01_5 ________ 2_0_14 __
`Tax exposures
`1,077
`1,530
`1,469
`------------------------
`732
`708
`696
`
`Environmental risks and remediation
`
`Product liability risks, litigation and other
`
`Total
`
`Provisions for tax exposures are recorded when Sanofi is
`exposed to a probable risk resulting from a tax position
`adopted by the company or a subsidiary, and the risk has
`been quantified at the end of the reporting period, in
`accordance with the principles described in Note B.22.
`
`Provisions for environmental risks and remediation mainly
`relate to contingencies arising from business divestitures.
`
`Identified environmental risks are covered by provisions
`estimated on the basis of the costs Sanofi believes it will be
`obliged to meet over a period not exceeding (other than in
`exceptional cases) 30 years. Sanofi expects
`that
`€153 million of those provisions will be utilized in 2017, and
`€350 million over the period from 2018 through 2021.
`
`0.19.4. other curTent liabilities
`
`Other current liabilities comprise the following:
`
`(t' million)
`
`Taxes payable
`
`Employee-related liabilities
`
`Restructuring provisions (see Note D.19.2.)
`
`Interest rate derivatives (see Note D.20.)
`
`Currency derivatives (see Note D.20.)
`
`Amounts payable for acquisitions of non-current assets
`
`Other liabilities
`
`Total
`
`968
`
`2,777
`
`908
`
`3,146
`
`911
`
`3,076
`
`"Product liability risks, litigation and other" mainly comprises
`provisions for risks relating to product liability (including
`IBNR provisions as described in Note B.12.), government
`regulatory or antitrust
`law claims, or
`investigations,
`contingencies arising from business divestitures (other than
`environmental risks).
`
`legal and arbitral proceedings and
`The main pending
`government investigations are described in Note D.22.
`
`A full risk and litigation assessment is performed with the
`assistance of Sanofi's legal advisers, and provisions are
`recorded as required by circumstances in accordance with
`the principles described in Note B.12.
`
`IIIIIIFi""
`1,134
`
`1,967
`
`676
`
`2
`
`130
`
`451
`
`5,815
`
`10,175
`
`2015
`1,044
`
`1,920
`
`581
`
`4
`
`78
`
`684
`
`5,131
`
`9,442
`
`2014
`948
`
`1,912
`
`564
`
`2
`
`214
`
`306
`
`3,766
`
`7,712
`
`Sanofi • Form 20-F 2016 I F-75
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`This item includes in particular the current portion of provisions for litigation, sales returns and other risks; amounts due to
`associates and joint ventures (see Note D.6.); and amounts due to governmental agencies and healthcare authorities (see
`Note D.23.).
`
`D.20. DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS
`
`The table below shows the fair value of derivative instruments as of December 31, 2016, 2015 and 2014:
`
`Currency
`derivatives
`
`operating
`
`financial
`
`Interest rate
`derivatives
`
`Total
`
`Non-
`currant
`assets
`
`Currant
`a nets
`
`Total
`assets
`
`Non-
`currant
`liabilities
`
`Currant
`liabilities
`
`Total
`liabilities
`
`Fair value at Fair value at
`
`3
`
`3
`
`99
`
`102
`
`105
`
`26
`
`79
`
`3
`
`108
`
`108
`
`26
`
`82
`
`102
`
`210
`
`(130)
`
`(130)
`
`(51)
`
`(79)
`
`(51)
`
`(79)
`
`(2)
`
`(2)
`
`{132)
`
`(132)
`
`(22)
`
`(25)
`
`3
`
`100
`
`78
`
`(19)
`
`16
`
`(35)
`
`152
`
`133
`
`(91)
`
`4
`
`(95)
`
`302
`
`211
`
`Objectives of the use of derivative financial Instruments
`
`Sanofi uses derivative instruments to manage operating
`exposure to movements in exchange rates, and financial
`exposure to movements in interest rates and exchange rates
`(where the debt or receivable is not contracted in the
`functional currency of the borrower or lender entity). On
`occasion, Sanofi uses equity derivatives in connection with
`the management of its portfolio of equity investments.
`
`Sanofi performs periodic reviews of its transactions and
`contractual agreements in order to identify any embedded
`derivatives, which are accounted for separately from the host
`contract in accordance with lAS 39. Sanofi had no material
`embedded derivatives as of December 31, 2016, 2015 or
`2014.
`
`Counterparty risk
`
`As of December 31, 2016, all currency and interest rate
`hedges were contracted with leading banks, and no single
`
`counterparty accounted for more than 12% of the notional
`amount of Sanofi's overall currency and
`interest rate
`positions.
`
`a) Currency derivatives used to manage operating risk
`exposures
`
`Sanofi operates a foreign exchange risk hedging policy to
`reduce the exposure of operating income to exchange rate
`movements. This policy involves regular assessments of
`Sanofi's worldwide foreign currency exposure, based on
`foreign currency transactions carried out by the parent
`company and its subsidiaries. Those transactions mainly
`comprise sales, purchases, research costs, co- marketing
`and co-promotion expenses, and royalties. To reduce the
`exposure of
`those
`transactions
`to exchange
`rate
`movements, Sanofi contracts hedges using liquid derivative
`instruments, mainly forward currency purchases and sales,
`and also currency swaps.
`
`F -76 I Form 20-F 2016 • Sanofi
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below shows operating currency hedging instruments in place as of December 31, 2016, with the notional amount
`translated into euros at the relevant closing exchange rate:
`
`December 31, 2016
`
`(£million)
`Forward currency sales
`of which US dollar
`
`of which Chinese yuan renminbi
`
`of which Swiss franc
`
`of which Japanese yen
`
`of which Singapore dollar
`
`Forward currency purchases
`of which US dollar
`
`of which Japanasa yen
`
`of which Singapore dollar
`
`of which Swiss franc
`
`of which Hungarian forint
`
`Total
`
`Notional
`amount
`3,963
`1,850
`453
`253
`206
`156
`1,517
`400
`283
`233
`84
`82
`5,480
`
`Fair
`value
`(25)
`(17)
`(2)
`
`(1)
`5
`1
`
`1
`(2)
`1
`
`(25)
`
`Of which derivatives designated
`as cash flow hedges
`
`Notional
`amount
`
`Fair
`value
`
`Of which
`recognized
`In equity
`
`Of which derivatives
`not eligible
`for hedge accounting
`
`Notional
`amount
`3,963
`1,850
`453
`253
`206
`156
`1,517
`400
`283
`233
`84
`82
`5,480
`
`Fair value
`(25)
`(17)
`(2)
`
`(1)
`5
`1
`
`1
`(2)
`1
`
`(25)
`
`The above positions mainly hedge future material foreign-currency cash flows arising after the end of the reporting period in
`relation to transactions carried out during the year ended December 31, 2016 and recognized in the balance sheet at that date.
`Gains and losses on hedging instruments (forward contracts) are calculated and recognized in parallel with the recognition of
`gains and losses on the hedged items. Due to this hedging relationship, the commercial foreign exchange profit or loss on these
`items (hedging instruments and hedged transactions) will be immaterial in 2017.
`
`The table below shows operational currency hedging instruments in place as of December 31, 2015, with the notional amount
`translated into euros at the relevant closing exchange rate:
`
`Of which derivatives designated
`as cash flow hedges
`
`Notional
`amount
`
`Fair
`value
`
`Of which
`recognized
`In equity
`
`December31,2015
`
`(€million)
`Forward currency sales
`of which US dollar
`of which Chinese yuan renminbi
`
`of which Japanese yen
`
`of which Russian rouble
`
`of which Singapore dollar
`
`Forward currency purchases
`of which US dollar
`of which Russian rouble
`
`of which Singapore dollar
`
`of which Hungarian forint
`
`of which Chinese yuan renminbi
`Total
`
`Notional
`amount
`2,142
`672
`339
`159
`130
`114
`905
`204
`109
`104
`90
`86
`3,047
`
`Fair
`value
`27
`(2)
`1
`{1)
`22
`
`(11)
`
`(9)
`(1)
`(1)
`2
`16
`
`Of which derivatives
`not eligible
`for hedge accounting
`
`Notional
`amount
`2,142
`672
`339
`159
`130
`114
`905
`204
`109
`104
`90
`86
`3,047
`
`Fair
`value
`27
`(2)
`1
`{1)
`22
`
`(11)
`
`(9)
`(1)
`(1)
`2
`16
`
`Sanofi • Form 20-F 2016 I F-77
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below shows operating currency hedging instruments in place as of December 31, 2014, with the notional amount
`translated into euros at the relevant closing exchange rate:
`
`December 31, 2014
`
`(€million)
`Forward currency sales
`
`of which US dollar
`
`of which Japanese yen
`of which Chinese yuan renminbi
`
`of which Russian rouble
`
`of which Singapore dollar
`Forward currency purchases
`of which US dollar
`of which Singapore dollar
`
`of which Japanese yen
`
`of which Hungarian forint
`
`of which Mexican peso
`Total
`
`Notional
`amount
`2,981
`1,409
`273
`237
`211
`126
`1,137
`377
`139
`109
`99
`69
`4,118
`
`Fair
`value
`4
`(34)
`5
`(6)
`51
`(1)
`
`6
`2
`
`(2)
`2
`4
`
`Of which derivatives deslgnatad
`as cuh flow hedges
`
`Notional
`amount
`
`Fair
`value
`
`Of which
`recognized
`in equity
`
`Of which dertmlvn
`notallglbla
`for hedge accounting
`
`Notional
`amount
`2,981
`1,409
`273
`237
`211
`126
`1,137
`377
`139
`109
`99
`69
`4,118
`
`Fair
`value
`4
`(34)
`5
`(6)
`51
`(1)
`
`6
`2
`
`(2)
`2
`4
`
`b) Currency and interest rate derivatives used to manage financial exposure
`
`The cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of Sanofi's financing activities, expose
`certain Sanofi entities to financial foreign exchange risk (i.e. the risk of changes in the value of borrowings and loans
`denominated in a currency other than the functional currency of the borrower or lender). That foreign exchange exposure is
`hedged by Sanofi using firm financial instruments (usually currency swaps or forward contracts) contracted with banking
`counterparties.
`
`The table below shows financial currency hedging instruments in place, with the notional amount translated into euros at the
`relevant closing exchange rate:
`
`(€million)
`Forward currency
`sales
`of which US dollar
`of which Japanese
`yenr•J
`
`of which Pound sterling
`Forward currency
`purchases
`of which US dollar<bJ
`of which Singapore
`dollar
`of which Czech koruna
`Total
`
`Notional
`amount
`
`5,298
`3,356
`
`1,036
`317
`
`5,980
`3,967
`
`878
`332
`11,278
`
`2016
`
`Fair
`value
`
`(28)
`(37)
`
`7
`
`31
`30
`
`5
`(1)
`3
`
`Expiry
`
`Notional
`amount
`
`2017
`
`2017
`2017
`
`2017
`
`2017
`2017
`
`3,472
`2,171
`
`612
`117
`
`2,623
`610
`
`310
`245
`6,095
`
`2015
`Fair
`value
`
`(44)
`(30)
`
`(9)
`
`1
`
`9
`5
`
`(1)
`(35)
`
`Expiry
`
`NoOonal
`amount
`
`2016
`
`2016
`2016
`
`2016
`
`2016
`2016
`
`5,869
`4,840
`
`571
`104
`
`2,686
`498
`
`563
`137
`8,555
`
`2014
`
`Fair
`value
`
`(111)
`(111)
`
`11
`(2)
`
`16
`2
`
`5
`(1)
`(95)
`
`Expiry
`
`2015
`
`2015
`2015
`
`2015
`
`2015
`2015
`
`(a) Includes JPY 41,712 mil/ian as of D9C8mber 31, 2016 designated as a cash flow hedgs in fBspecl. of cash flows forecast for 2017.
`(b) Includes $3,116 million as of D9C8mber 31, 2016 designated as a cash flow hedge In respect of cash flows forecast for 2017 and the first quatterof2018.
`
`F -78 I Form 20-F 2016 • Sanofi
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`These forward currency contracts generate a net financial foreign exchange gain or loss arising from the interest rate differential
`between the hedged currency and the euro, given that the foreign exchange gain or loss on the foreign-currency borrowings
`and loans is offset by the change in the intrinsic value of the hedging instruments. Sanofi may also hedge some future
`foreign-currency investment or divestment cash flows.
`
`Since the financing of the Genzyme acquisition, Sanofi has managed its net debt in two currencies: the euro and the US dollar
`(see Note 0.17.). The floating-rate portion of this debt exposes Sanofi to rises in interest rates, primarily in the Eonia and
`Euribor benchmark rates (for the euro) and in the US Libor and Federal Fund Effective rates (for the US dollar). To optimize the
`cost of debt or reduce the volatility of debt, Sanofi uses interest rate swaps, cross currency swaps and interest rate options to
`alter the fixed/floating rate split of debt. Such derivative instruments are predominantly denominated in euros and in US dollars.
`
`The table below shows instruments of this type in place as of December 31, 2016:
`
`Notional amounts by expiry date as of December 31, 2016
`
`Of which designated
`as fair value hedges
`
`2017
`
`2019
`
`2020
`
`2021
`
`2022
`
`2023
`
`Total
`
`Fair Notional
`value
`amount
`
`Fair
`value
`
`Of which diiSignated
`as cash flow hedges
`Of which
`Fair recognized
`value
`In equity
`
`Notional
`amount
`
`- 1,550
`
`- 1,550
`
`88
`
`1,550
`
`88
`
`428
`
`3
`
`428
`
`3
`
`475
`
`475
`
`10
`
`475
`
`10
`
`428
`
`475
`
`(€ million)
`Interest rate
`swaps
`
`pay capitalized
`Eonia I receive
`1.58%
`
`pay 3-month
`Euribor I receive
`1.15%
`
`pay 3-month US
`dollar Libor I
`receive 2.22%
`
`pay 1.22%1
`receive
`3-month &
`6-month US
`dollar Libor
`
`pay capitalized
`Eonia I receive
`-0.01%
`
`Total
`
`903 1,550
`
`475
`
`475
`
`(2)
`
`475
`
`(2)
`
`300
`
`300
`
`300
`
`300
`
`1
`
`- 3,228
`
`100
`
`2,753
`
`102
`
`475
`
`(2)
`
`Sanofi • Form 20-F 2016 I F-79
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below shows instruments of this type in place as of December 31, 2015:
`
`Notional amounts by expiry date as of December 31, 2015
`
`Of which designated
`as fair value hedges
`
`2018
`
`2017
`
`2019
`
`2020
`
`2021
`
`2022
`
`Total
`
`Fair Notional
`amount
`value
`
`Fair
`value
`
`Of which designated as
`cash flow hedges
`Of which
`Fair recognized
`Inequity
`value
`
`Notional
`amount
`
`500
`
`500
`
`14
`
`500
`
`14
`
`1,000
`
`- 1,550
`
`- 2,550
`
`128
`
`2,550
`
`128
`
`428
`
`428
`
`3
`
`459
`
`459
`
`14
`
`459
`
`14
`
`459
`
`459
`
`(2)
`
`459
`
`(2)
`
`(1)
`
`175
`
`92
`
`175
`
`(4)
`
`92
`
`(1)
`
`1,767
`
`887 1,550
`
`459
`
`- 4,663
`
`152
`
`3,509
`
`156
`
`459
`
`(2)
`
`(1)
`
`(€million)
`Interest rate
`swaps
`
`pay 1-month
`Euribor +0.26%
`I receive 2.73%
`
`pay capitalized
`Eonia I receive
`1.90%
`
`pay3-month
`Euribor I receive
`1.15%
`
`pay 3-month US
`dollar Libor I
`receive 2.22%
`pay 1.22% I
`receive
`3-month &
`6-month US
`dollar Libor
`
`Currency
`swaps hedging
`investments
`
`payJPY I
`receive €
`
`pay USD I
`receive €
`
`Total
`
`F -80 I Form 20-F 2016 • Sanofi
`
`
`
`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
`
`The table below shows instruments of this type in place as of December 31, 2014:
`
`Notional amounts by expiry date as of December 31, 2014
`
`Of which designated
`as fair value hedges
`
`2015
`
`2016
`
`2017
`
`2019
`
`2020
`
`2021
`
`Total
`
`Fair Notional
`value
`amount
`
`Fair
`value
`
`Of which designated as
`cash flow hedges
`Of which
`Fair recognized
`In equity
`value
`
`Notional
`amount
`
`500
`
`500
`
`26
`
`500
`
`26
`
`- 1,000
`
`- 1,550
`
`- 2,550
`
`169
`
`2,550
`
`169
`
`428
`
`428
`
`3
`
`412
`
`412
`
`10
`
`412
`
`10
`
`412
`
`412
`
`(2)
`
`412
`
`(2)
`
`244
`
`530
`
`774 1,500
`
`840 1,550
`
`412
`
`244
`
`89
`
`244
`
`89
`
`530
`
`- 5,076
`
`7
`
`302
`
`3,462
`
`205
`
`656
`
`87
`
`1
`
`(€ million)
`Interest rate
`swaps
`
`pay 1-month
`Euribor +0.26%
`I receive 2.73%
`
`pay capitalized
`Eonia I receive
`1.90%
`
`pay 3-month
`Euribor I receive
`1.15%
`
`pay 3-month US
`dollar Libor I
`receive 2.22%
`
`pay 1.22%1
`receive
`3-month &
`6-month US
`dollar Libor
`
`Cross-
`currency
`swaps
`
`Pay€4.87% I
`receive CHF
`3.38%
`
`Currency
`swaps hedging
`investments
`
`payJPY I
`receive €
`
`Total
`
`Sanofi • Form 20-F 2016 I F-81
`
`
`
`NOTES TO THE CONSOLIDATE