Share capital
`At 31 December 2013 the authorised and issued share capital of Roche Holding Ltd, w hich is the Group's parent company,
`consisted of 160 million shares w ith a nominal value of 1.00 Swiss franc each, as in the preceding year. The shares are bearer
`shares and the Group does not maintain a reg ister of shareholders. Based on information supplied to the Group, a shareholder
`group w ith pooled voting rights owns 45.01 % (20 12: 45.01%) of the issued shares. On 24 March 20 11 the shareholder group
`announced that it would continue the shareholder pooling agreement existing since 1948 w ith a modified shareholder
`composition. The shareholder group w ith pooled voting rights now holds 72,018,000 shares, corresponding to 45.01 % of the
`shares issued. This fig ure does not include any shares w ithout pooled voting rights that are held outside this group by individual
`members of the group. Ms Maja Oeri, formerly a member of the pool, now holds 8,091,900 shares representing 5.057% of
`the voting rights independently of the pool. This is further described in Note 30. Based on information supplied to the Group,
`Novartis Ltd, Basel, and its affiliates own 33.3330% (participation below 331/3%) of the issued shares (2012: 33.3330%).
`
`Non-voting equity securities (Genussscheine)
`At 31 December 2013, 702,562,700 non-voting equity securities have been authorised and were in issue as in the preceding
`year. Under Swiss company law these non-voting equity securities have no nominal value, are not part of the share capital
`and cannot be issued against a contribution w hich would be shown as an asset in the balance sheet of Roche Holding Ltd.
`Each non-voting equity security confers the same rights as any of the shares to participate in the net profit and any remaining
`proceeds from liquidation following repayment of the nominal value of the shares and, if any, participation certificates.
`In accordance w ith the law and the Articles of Incorporation of Roche Holding Ltd, the Company is entitled at all times
`to exchange all or some of the non-voting equity securities into shares or participation certificates.
`
`Dividends
`On 5 March 2013 the shareholders approved the distribution of a div idend of 7.35 Swiss fra ncs per share and non-voting
`equity security (2012: 6.80 Swiss francs) in respect of the 2012 business year. The distribution to holders of outstanding
`shares and non-voting equity securities totalled 6,238 million Swiss fra ncs (2012: 5,770 million Swiss francs) and has
`been recorded against retained earnings in 2013. The Board of Directors has proposed dividends for the 2013 business
`year of 7.80 Swiss francs per share and non-voting equity security w hich, if approved, would resu lt in a total distribution
`to shareholders of 6,728 million Swiss fra ncs. This is subject to approval at the Annual General Meeting on 4 March 2014.
`
`Own equity instruments
`
`Holdings of own equity instruments in equivalent number of non-voting equity securities
`
`Shares
`Non-voting equity securities
`Derivative instruments
`Total
`
`2013
`(millions)
`
`0.9
`12.6
`
`5.5
`19.0
`
`2012
`(millions)
`
`14.1
`
`8.9
`23.0
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2013
`
`8 9
`
`Novartis Exhibit 2164.0091
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Own equity instruments are recorded within equity at original purchase cost. Details of own equity instruments held at
`31 December 2013 are shown in the table below. Fair values are disclosed for information purposes.
`
`Own equity instruments at 31 December 2013: supplementary information
`
`Equivalent number of non-voting
`equity securities (millions)
`
`
`
`Shares
`Non-voting equity securities
`
`Derivative instruments
`Total
`
`0.9
`12.6
`
`5.5
`19.0
`
`Maturity
`
`–
`–
`30 Jan. 2015–
`16 Feb. 2016
`
`
`Strike price
`(CHF)
`
`Market value
`(CHF billions)
`
`–
`–
`
`145.50–195.80
`
`
`0.2
`3.1
`
`0.4
`3.7
`
`Own equity instruments are held for the Group’s potential conversion obligations that may arise from the Group’s equity
`compensation plans (see Note 26). The derivative instruments mainly consist of call options that are exercisable at any time
`up to their maturity.
`
`Reserves
`Fair value reserve. The fair value reserve represents the cumulative net change in the fair value of available-for-sale financial
`assets until the asset is sold, impaired or otherwise disposed of.
`
`Hedging reserve. The hedging reserve represents the effective portion of the cumulative net change in the fair value of cash
`flow hedging instruments related to hedged transactions that have not yet occurred.
`
`Translation reserve. The translation reserve represents the cumulative currency translation differences relating to
`the consolidation of Group companies that use functional currencies other than Swiss francs.
`
`22. Chugai
`
`Effective 1 October 2002 the Roche Group and Chugai completed an alliance to create a leading research-driven Japanese
`pharmaceutical company, which was formed by the merger of Chugai and Roche’s Japanese pharmaceuticals subsidiary,
`Nippon Roche. The merged company is known as Chugai.
`
`Consolidated subsidiary
`Chugai is a fully consolidated subsidiary of the Group. This is based on the Group’s interest in Chugai at 31 December 2013
`of 61.5% (2012: 61.6%) and the Roche relationship with Chugai that is founded on the Basic Alliance, Licensing and Research
`Collaboration Agreements.
`
`The common stock of Chugai is publicly traded and is listed on the Tokyo Stock Exchange under the stock code ‘TSE:4519’.
`Chugai prepares financial statements in accordance with International Financial Reporting Standards (IFRS) which are
`filed on a quarterly basis with the Tokyo Stock Exchange. Due to certain consolidation entries there are minor differences
`between Chugai’s stand-alone IFRS results and the results of Chugai as consolidated by the Roche Group in accordance
`with IFRS.
`
`90
`
`Roche Finance Report 2013 | Roche Group – Notes to the Roche Group Consolidated Financial Statements
`
`Novartis Exhibit 2164.0092
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Financial information
`
`Chugai summarised financial information in millions of CHF
`
`Income statement
`Sales•
`Roya lties and other operating in come 2
`Total revenues
`Operating profit '
`
`Balance sheet
`Non-current assets
`Current assets
`Non-current liabilities
`Current liabilities
`Total net asse ts
`
`Cash flows
`Cash flows from operating activities
`Cash flows from investing activities
`Cash flows from financing activities
`
`20 13
`
`3,813
`212
`4,025
`
`679
`
`1,786
`4,280
`(251 )
`(824)
`4,991
`
`509
`(126)
`(220)
`
`2012
`
`4,408
`133
`4,541
`
`805
`
`2,270
`4,867
`(273)
`(1 ,006)
`5,858
`
`911
`(645)
`(268)
`
`Dividends
`The dividends distributed to third parties holding Chugai shares during 2013 totalled 84 million Swiss francs (2012: 98 million
`Swiss francs) and have been recorded against non-controlling interests (see Note 23). Dividends paid by Chugai to Roche
`are eliminated on consolidation as inter-company items.
`
`Roche's relationship with Chugai
`Chugai has entered into certain agreements w ith Roche, w hich are discussed below:
`
`Basic Alli ance Agreement. As part of the Basic A lliance Agreement signed in December 2001, Roche and Chugai entered
`into certain arrangements covering the future operation and govern ance of Chugai. Amongst other matters these cover
`the following areas:
`• The structuring of the alliance.
`• Roche's rights as a shareholder.
`• Roche's rights to nominate members of Chugai's Board of Directors.
`• Certain limitations to Roche's ability to buy or sell Chugai's common stock.
`
`Chugai issues additional shares of common stock in connection w ith its convertible debt and equity compensation plans,
`and may issue additional shares for other purposes, w hich affects Roche's percentage ownership interest. The Basic
`A lliance Agreement provides, amongst other matters, that Chugai w ill guarantee Roche's right to maintain its shareholding
`percentage in Chugai at not less than 50.1%.
`
`Licensing Agreements. Under the Japan Umbrella Rights Agreement signed in December 2001, Chugai has exclusive rights
`to market Roche's pharmaceutical products in Japan. Chugai also has right of first refusal on the development and marketing
`in Japan of all development compounds advanced by Roche.
`
`Roche Group - Not es to the Roche Group Consolidated Financial St at ements I Roche Finance Report 2013
`
`91
`
`Novartis Exhibit 2164.0093
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Under the Rest of the World Umbrella Rights Agreement signed in May 2002, Roche has the right of first refusal on
`the development and marketing of Chugai's development compounds in markets outside Japan, excluding South Korea,
`if Chugai decides that it requires a partner for such activities.
`
`Further to these agreements, Roche and Chugai have signed a series of separate agreements for certain specific products.
`Depending on the specific circumstances and the terms of the agreement, this may result in payments on an arm's length
`basis between Roche and Chugai, for any or all of the following matters:
`• Upfront payments, if a right of first refusal to license a product is exercised.
`• Milestone payments, dependent upon the achievement of agreed performance targets.
`• Royalties on future product sales.
`
`These specific product agreements may also cover the manufacture and supply of the respective products to meet the other
`party's clinical and/or commercial requirements on an arm's length basis.
`
`Research Collaboration Agreements. Roche and Chugai have entered into research collaboration agreements in the areas
`of small-molecule synthetic drug research and biotechnology-based drug discovery.
`
`23. Non-controlling interests
`
`Changes in equity attributable to non- controlling interests in millionsofCHF
`
`At 1 January
`
`Net income recognised in income statement
`
`- Chugai
`- Other non-controlling interests
`Total net income recognised in income statement
`
`Available-for-sale investments
`Cash flow hedges
`
`Currency translation of foreign operations
`Remeasurements of defined benefit plans
`
`Other comprehensive income, net of tax
`
`Total comprehensive income
`
`Div id ends to non-control Ii ng shareholders
`- Chugai 22
`
`- Other non-controlling interests
`Equity compensation plans. net of transactions in own equity
`
`Changes in non-controlling interests
`Equity contribution by non-controlling interests
`At 31 December
`
`Chugai
`Other non-controlling interests
`Total non-controlling interests
`
`2013
`
`2,236
`
`188
`21
`
`209
`
`7
`15
`(428)
`4
`(402)
`
`(193)
`
`(84)
`(39)
`4
`
`3
`20
`1,947
`
`1,854
`93
`1,947
`
`2012
`
`2,390
`
`215
`18
`
`233
`
`4
`
`(282)
`5
`(273)
`
`(40)
`
`(98)
`(18)
`
`2,236
`
`2,154
`82
`2,236
`
`As disclosed in Note 32, the non-controlling interests for the year ended 31 December 2012 has been restated following the accounting policy changes which were
`adopted in 2013. A reconciliation to the previously published non-controlling interests is provided in Note 32.
`
`92
`
`Roche Fina nce Report 2013 I Roche Group - Notes to the Roche Group Consolidated Finan cial Statements
`
`Novartis Exhibit 2164.0094
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`24. Employee benefits
`
`Employee remuneration in millionsofCHF
`
`Wages and salaries
`Social security costs
`Defined contribution plans 25
`Operating expenses for defined benefit plans 25
`Equity compensation plans 2•
`Termination costs•
`Other employee benefits
`Employee remuneration included in operating results
`
`Net interest cost of defined benefit plans 25
`Total employee remuneration
`
`2013
`
`8,512
`957
`343
`102
`360
`220
`588
`11,082
`
`227
`
`11,309
`
`2012
`
`8,410
`888
`313
`280
`363
`515
`485
`11,254
`
`226
`11,480
`
`Other employee benefits consist mainly of life insurance schemes and certain other insurance schemes providing medical
`coverage and other long-term and short-term disability benefits.
`
`25. Pensions and other post-employment benefits
`
`As disclosed in Note 32, following the implementation of IAS 19 (revised), the Group has amended its accounting policy
`with respect to pensions and other post-employment benefits and restated the related 2012 comparatives and disclosures.
`
`The Group's objective is to provide attractive and competitive post-employment benefits to employees, while at the same
`time ensuring that the various plans are appropriately financed and managing any potential impacts on the Group's long(cid:173)
`term financial position. Most employees are covered by pension plans sponsored by Group companies. The nature of such
`plans varies according to legal regulations, fiscal requirements and market practice in the countries in which the employees
`are employed. Post-employment benefit plans are classified for IFRS as 'defined contribution plans' if the Group pays fixed
`contributions into a separate fund or to a third-party financial institution and will have no further legal or constructive
`obligation to pay further contributions. All other plans are classified as 'defined benefit plans'.
`
`D efin ed contribution plans
`Defined contribution plans are funded through payments by employees and by the Group to funds administered by third
`parties. The Group's expenses for these plans were 343 million Swiss francs (2012: 313 million Swiss francs). No assets or
`liabilities are recognised in the Group's balance sheet in respect of such plans, apart from regular prepayments and accruals
`of the contributions withheld from employees' wages and salaries and of the Group's contributions. The Group's major
`defined contribution plans are in the United States, notably the US Roche 401 (k) Savings Plan.
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2013
`
`9 3
`
`Novartis Exhibit 2164.0095
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Defined benefit plans
`Plans are usually established as trusts independent of the Group and are funded by payments from Group companies
`and by employees. In some cases, notably for the major defined benefit plans in Germany, the plans are unfunded and the
`Group pays pensions to retired employees directly from its own financial resources. Plans are usually governed by a senior
`governing body, such as a Board of Trustees, which is typically composed of both employee and employer representatives.
`Funding of these plans is determined by local regulations using independent actuarial valuations. Separate independent
`actuarial valuations, together with a semi-annual update, are prepared in accordance with the requirements of IAS 19 for use
`in the Group’s financial statements. The Group’s major defined benefit plans are located in Switzerland, the US and Germany,
`which in total account for 81% of the Group’s defined benefit obligation (2012: 81%).
`
`Pension plans in Switzerland. Current pension arrangements for employees in Switzerland are made through plans
`governed by the Swiss Federal Occupational Old Age, Survivors and Disability Pension Act (‘BVG’). The Group’s pension
`plans are administered by separate legal foundations, which are funded by regular employee and company contributions.
`The final benefit is contribution-based with certain minimum guarantees. Due to these minimum guarantees, the Swiss plans
`are treated as defined benefit plans for the purposes of these IFRS financial statements, although they have many of the
`characteristics of defined contribution plans. Where there is an under-funding this may be remedied by various measures
`such as increasing employee and company contributions, lowering the interest rate on retirement account balances,
`reducing prospective benefits and a suspension of the early withdrawal facility.
`
`Past service costs in 2013 include 142 million Swiss francs of income recorded in respect of changes to the Group’s pension
`plans in Switzerland. The change represents the adoption of lower conversion rates, which determines the annuity at the
`normal retirement age.
`
`Pension plans in the United States. The Group’s major defined benefit plans in the US have been closed to new members
`since 2007. New employees in the US now join the defined contribution plan. The largest of the remaining defined benefit
`plans are funded pension plans, including separate plans originating from the Nutley, Palo Alto and Indianapolis sites, together
`with smaller unfunded supplementary retirement plans. The benefits are based on the highest average annual rate of earnings
`during a specified period and length of employment. The plans are non-contributory for employees, with the Group making
`periodic payments to the plans. In 2013 payments made by the Group were 130 million US dollars (2012: 114 million US dollars).
`Where there is an under-funding this would normally be remedied by additional company contributions.
`
`In 2013 some of the US pension plans made an offer to deferred vested members to settle the defined benefit obligation
`for a lump sum payment. The total lump sum payment made from defined benefit assets was 244 million US dollars
`(226 million Swiss francs), which settled an obligation of 264 million US dollars (245 million Swiss francs). This led to a gain
`of 20 million US dollars (19 million Swiss francs), which is included as a settlement gain in 2013.
`
`Past service costs in 2012 include 68 million Swiss francs of income recorded in respect of curtailments to US defined benefit
`plans. This arose primarily from the reorganisation of the Pharmaceuticals Division’s Research and Development organisation,
`which involved the closure of the site in Nutley, New Jersey.
`
`Pension plans in Germany. The Group’s major pension arrangements in Germany are governed by the Occupational
`Pensions Act (‘BetrAVG’). These plans are unfunded and the Group pays pensions to retired employees directly from its
`own financial resources. These plans are non-contributory for employees. The benefits are based on final salary and length
`of employment. These plans have been closed to new members since 2007. They have been replaced by a new plan which
`is funded by regular employee and company contributions and administered through a contractual trust agreement. The final
`benefit is contribution-based with a minimum guarantee. Due to this minimum guarantee, this plan is treated as a defined
`benefit plan for the purposes of these IFRS financial statements, although it has many of the characteristics of a defined
`contribution plan.
`
`Past service costs in 2013 include 55 million Swiss francs of income recorded in respect of changes to the Group’s German
`pension plans. This change represents the adoption of an increase in the normal retirement age.
`
`94
`
`Roche Finance Report 2013 | Roche Group – Notes to the Roche Group Consolidated Financial Statements
`
`Novartis Exhibit 2164.0096
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Pension plans in the rest of the world. These represent approximately 13% of the Group's defined benefit obligation
`(2012: 13%) and consist of a number of smaller plans in various countries. Of these the largest are the pension plans at
`Chugai, which are independently managed by Chugai, and the main pension plan in the United Kingdom. The Chugai plans
`are fully described in Chugai's own IFRS financial statements. The UK pension plan is funded by regular employee and
`company contributions, with benefits based on final salary and length of employment. This plan has been closed to new
`members since 2003 and has been replaced with a defined contribution plan.
`
`Past service costs in 2013 include 110 million Swiss francs of income recorded in respect of changes to the Group's UK
`pension plans. This reflects a change in the indexation of pension increases to the consumer price index instead of previously
`used retail price index.
`
`Other post-employment benefit ('OPEB') plans. These represent approximately 6% of the Group's defined benefit
`obligation (2012: 6%) and consist mostly of post-retirement healthcare and life insurance schemes, mainly in the US. These
`plans are mainly unfunded and are contributory for employees, with the Group reimbursing retired employees directly from
`its own financial resources. The Group's major defined benefit OPEB plans in the US have been closed to new members since
`2011 . Part of the costs of these plans is reimbursable under the Medicare Prescription Drug Improvement and Modernization
`Act of 2003. There is no statutory funding requirement for these plans. The Group is funding these plans to the extent that
`it is tax efficient. In 2013 there were no payments made by the Group to these plans (2012: none). At 31 December 2013 the
`IFRS funding status was 57% (2012: 51 %), including reimbursement rights, for the funded OPEB plans in the US.
`
`Defined benefit plans: income statement in millions of CHF
`
`Current service cost
`Pa st service (income) cost
`Settlement (gain) I oss
`
`Total operating expenses
`
`Net interest cost of defined benefit plans
`Total expense recognised in income
`statement
`
`Pension
`plans
`
`Other post-
`employment
`benefit plans
`
`407
`(301)
`(19)
`
`87
`
`201
`
`288
`
`16
`(1)
`-
`15
`
`26
`
`41
`
`2013
`
`Total
`expense
`
`423
`(302)
`(19)
`
`102
`
`227
`
`329
`
`Other post-
`employment
`benefit plans
`
`2012
`
`Total
`expense
`
`15
`(5)
`
`10
`
`30
`
`40
`
`351
`(71)
`
`280
`
`226
`
`506
`
`Pension
`plans
`
`336
`(66)
`
`270
`
`196
`
`466
`
`Funding status
`The funding of the Group's various defined benefit plans is the responsibility of a senior governing body, such as a Board
`of Trustees, and the sponsoring employer, and is managed based on local statutory valuations, which follow the legislation
`and requirements of the respective jurisdiction in which the plan is established. Qualified independent actuaries carry out
`statutory actuarial valuations on a regular basis. The actuarial assumptions determining the funding status on the statutory
`basis are regularly assessed by the local senior governing body. The funding status is closely monitored at a corporate level.
`
`During 2013 the fair value of plan assets increased due to favourable market conditions. Higher discount rates compared
`to 2012 and the changes to the pension plans in Switzerland, Germany and the UK described above resulted in a decrease
`in the overall defined benefit obligation. As a result the IFRS funded status of the funded defined benefit plans improved
`to 88% (2012: 81%).
`
`Reimbursement rights are linked to the post-employment medical plans in the US and represent the expected reimbursement
`of the medical expenditure provided under the Medicare Prescription Drug Improvement and Modernization Act of 2003.
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2013
`
`9 5
`
`Novartis Exhibit 2164.0097
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Defined benefit plans: funding status in millions of CHF
`
`Funded plans
`
`- Fair value of plan assets
`
`- Defined benefit obligation
`Over (under) funding
`
`Unfunded plans
`
`- Defined benefit obligation
`Total funding status
`limit on asset recognition
`
`Reimbursement rights
`Net recognised asset (liability)
`
`Re ported in bal a nee sheet
`
`- Defined benefit p Ian assets
`
`- Defined benefit plan liabilities
`
`Pension
`plans
`
`Other post-
`employment
`benefit plans
`
`2013
`
`Total
`
`Pension
`plans
`
`Other post-
`employment
`benefit plans
`
`10,833
`(11,863)
`(1,030)
`
`(3,847)
`(4,877)
`(6)
`-
`(4,883)
`
`311
`(762)
`(451)
`
`(212)
`(663)
`-
`120
`(543)
`
`11,144
`(12,625)
`(1,481)
`
`10,893
`(12,901)
`(2,008)
`
`(4,059)
`(5,540)
`(6)
`120
`(5,426)
`
`(3,864)
`(5,872)
`(7)
`
`(5,879)
`
`321
`(911)
`(590)
`
`(226)
`(816)
`-
`142
`(674)
`
`2012
`
`Total
`
`11,214
`(13,812)
`(2,598)
`
`(4,090)
`(6,688)
`(7)
`142
`(6,553)
`
`516
`(5,399)
`
`120
`(663)
`
`636
`(6,062)
`
`536
`(6,415)
`
`142
`(816)
`
`678
`(7,231)
`
`Plan assets
`The responsibility for the investment strategies of funded plans is with the senior governance body such as the Board of
`Trustees. Asset-liability studies are performed regularly for all major pension plans. These studies examine the obligations
`from post-retirement benefit plans, and evaluate various investment strategies with respect to key financial measures such
`as expected returns, expected risks, expected contributions, and expected funded status of the plan in an interdependent
`way. The goal of an asset-liability study is to select an appropriate asset allocation for the funds held within the plan. The
`investment strategy is developed to optimise expected returns, to manage risks and to contain fluctuations in the statutory
`funded status. Asset-liability studies include strategies to match the cash flows of the assets with the plan obligations.
`The Group currently does not use annuities or longevity swaps to manage longevity risk.
`
`Plan assets are managed using internal and external asset managers. The actual performance is continually monitored
`by the pension fund governance bodies as well as being closely monitored at a corporate level. In these financial statements
`the difference between the interest income and actual return on plan assets is a remeasurement that is recorded directly
`to other comprehensive income. During 2013 the actual return on plan assets was a gain of 462 million Swiss francs
`(2012: gain of 892 million Swiss francs).
`
`The recognition of pension assets is limited to the present value of any economic benefits available from refunds from
`the plans or reductions in future contributions to the plans.
`
`96
`
`Roche Finance Report 2013 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`
`Novartis Exhibit 2164.0098
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Defin ed benefit plans: fair value of plan asset s and reimbursement ri ghts in millions of CHF
`
`At 1 January
`
`Interest income on plan assets
`
`Remeasureme nts on plan assets
`
`Currency translation effects
`
`Employer contributions
`
`Employee contributions
`
`Benefits paid - funded plans
`
`Benefits paid - settlements
`
`Past service income (cost)
`
`Administration costs
`
`At 31 December
`
`Pension
`plans
`
`10,893
`283
`141
`(244)
`
`352
`88
`(451)
`(226)
`-
`(3)
`
`10,833
`
`Other post-
`employment
`benefit plans
`
`463
`17
`
`5
`(11)
`(4)
`-
`(38)
`-
`-
`(1)
`
`431
`
`2013
`
`Total
`
`11,356
`300
`146
`(255)
`348
`88
`(489)
`(226)
`-
`(4)
`
`11,264
`
`Pension
`plans
`
`10,299
`332
`522
`(168)
`
`307
`80
`(479)
`
`10,893
`
`Other post-
`employment
`benefit plans
`
`460
`18
`40
`(11)
`(7)
`-
`(35)
`-
`(2)
`-
`463
`
`Defined benefit plans: composition of plan assets in millions of CHF
`
`Equity securities
`
`Debt securities
`
`Property
`
`Cash and money market instruments
`
`Other investments
`At 31 December
`
`2013
`
`4,027
`3,942
`1, 173
`637
`1,365
`11,144
`
`2012
`
`Total
`
`10,759
`350
`562
`(179)
`
`300
`80
`(514)
`
`(2)
`
`11,356
`
`2012
`
`4,341
`4,288
`1,182
`396
`1,007
`11,214
`
`Assets are invested in a variety of different classes in order to maintain a balance between risk and return as follows:
`• Equity and debt securities which mainly have quoted market prices (Level 1 fair value hierarchy).
`• Property which is mainly in private and commercial property funds which have quoted market prices (Level 1 fair value
`hierarchy) and directly held property investments (Level 3 fair value hierarchy).
`• Cash and money market instruments which are mainly invested with financial institutions with a credit rating no lower
`than A.
`• Other investments which mainly consist of alternatives, mortgages and commodities. These are used for risk management
`purposes and mainly have a quoted market price (Level 1 fair value hierarchy).
`
`Included within the fair value of plan assets are the Group's shares and non-voting securities with a fair value of 165 million
`Swiss francs (2012: 109 million Swiss francs) and debt instruments issued by the Group with a fair value of 17 million Swiss
`francs (2012: 44 million Swiss francs). During 2013 Swiss pension plans purchased 0.4 million Roche shares from the Group
`for 95 million Swiss francs.
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2013
`
`97
`
`Novartis Exhibit 2164.0099
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`D efin ed benefit obligation
`The defined benefit obligation is calculated using the projected unit credit method. This reflects service rendered by
`employees to the dates of valuation and incorporates actuarial assumptions primarily regarding discount rates used in
`determining the present value of benefits, projected rates of remuneration growth and mortality rates. The present value
`of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
`high-quality corporate bonds or government bonds in countries where there is not a deep market in corporate bonds.
`The corporate or government bonds are denominated in the currency in which the benefits will be paid, and have maturity
`terms approximating to the terms of the related pension obligation.
`
`The Group's final salary-based defined benefit pension plans in the US, Germany and the United Kingdom have been closed
`to new participants. Active employees that had been members of these pension plans at the time these were closed to
`new participants continue to accrue benefits in the final salary-based defined benefit pension plans. New employees in the
`US and UK now join the Group's defined contribution plans, while new employees in Germany join the contribution-based
`plan with a minimum guarantee. The defined benefit pension plans in Switzerland, where the final benefit is contribution(cid:173)
`based with a minimum guarantee, remain open to new employees. As a result, the proportion of the defined benefit
`obligation which relates to these closed plans is expected to decrease in the future.
`
`Defined benefit plans: defined benefit obligation in millions of CHF
`
`At 1 January
`
`Current service cost
`
`Interest cost
`
`Remeasurements:
`
`- demographic assumptions
`
`-
`
`fin a nci a I assumptions
`
`- experience adjustments
`
`Currency translation effects
`
`Employee contributions
`
`Benefits paid - funded plans
`
`Benefits paid - unfunded plans
`
`Benefits paid - settle men ts
`
`Past service (income) cost
`
`Settlement (gain) loss
`At 31 December
`
`Compos ition of plan
`Active members
`
`Deferred vested members
`
`Retired members
`
`At 31 December
`
`Plans by geogra phy
`Switzerland
`
`United States
`
`Germany
`
`Rest of wo rid
`At 31 December
`
`Pension
`plans
`
`16.765
`407
`484
`
`28
`(792)
`
`59
`(214)
`
`88
`(451)
`(11 8)
`(226)
`(301)
`(19)
`15,710
`
`7,328
`1,352
`7,030
`15,710
`
`6,879
`3,104
`3,507
`2,220
`15,710
`
`Other post-
`employment
`benefit plans
`
`1, 137
`16
`43
`
`12
`(138)
`(22)
`(18)
`-
`(38)
`(17)
`-
`(1)
`-
`974
`
`294
`14
`666
`974
`
`-
`936
`-
`38
`974
`
`2013
`
`Total
`
`17,902
`423
`
`527
`
`40
`(930)
`
`37
`(232)
`
`88
`(489)
`(135)
`(226)
`(302)
`(19)
`16,684
`
`7,622
`1,366
`7,696
`16,684
`
`6,879
`4,040
`3,507
`2,258
`16,684
`
`Pension
`plans
`
`14,534
`336
`528
`
`170
`1,863
`144
`(220)
`
`80
`(479)
`(125)
`
`(66)
`
`16,765
`
`7,794
`1,724
`7,247
`16,765
`
`7, 121
`3,791
`3,481
`2,372
`16,765
`
`Other post-
`employment
`benefit plans
`
`1,131
`15
`48
`
`-
`64
`(33)
`(32)
`-
`(35)
`(14)
`-
`(7)
`-
`1,137
`
`390
`13
`734
`1,137
`
`-
`1,109
`-
`28
`1,137
`
`2012
`
`Total
`
`15,665
`351
`
`576
`
`170
`1,927
`111
`(252)
`
`80
`(514)
`(139)
`
`(73)
`
`17,902
`
`8, 184
`1,737
`7,981
`17,902
`
`7, 121
`4,900
`3,481
`2,400
`17,902
`
`Du ration in years
`
`14.3
`
`12.3
`
`14.2
`
`15.6
`
`15.7
`
`15.6
`
`98
`
`Roche Finance Report 2013 I Roche Group- Notes to the Roche Group Consolidated Finan cial Statements
`
`Novartis Exhibit 2164.00100
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Actuarial assumptions
`The actuarial assumptions used in these financial statements are based on the requirements set out in IAS 19 'Employee
`Benefits'. They are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing
`post-employment benefits. They are set on an annual basis by local management, based on advice from actuaries, and are
`subject to approval by corporate management and the Group's actuaries. Actuarial assumptions consist of demographic
`assumptions on matters such as mortality and employee turnover, and financial assumptions on matters such as interest
`rates, salary and benefit levels, inflation rates and costs of medical benefits. The actuarial assumptions vary based upon
`local economic and social conditions. The actuarial assumptions used in the various statutory valuations may differ from
`these based on local legal and regulatory requirements.
`
`Demographic assumptions. The most significant demographic assumptions relate to morta