Based on the most recent actuarial valuations. the Group expects that employer contributions for funded plans in 2013 will
`be approximately 319 million Swiss francs. which includes an estimated 11 1 million Swiss francs of additional contributions.
`Benefits paid for unfunded plans are estimated to be approximately 136 million Swiss francs.
`
`Amounts recorded in other comprehensive income
`The actuarial gains and losses recognised in the statement of comprehensive income were as follows:
`
`Accumulated actuarial gains and losses (pre-tax) in millions of CHF
`
`At 1 January
`Actuarial gains (losses) recognised on plan assets and liabilities
`Actuarial gains (losses) recognised on reimbursement rights
`At 31 December
`
`2012
`
`(3,030)
`(1,819)
`11
`(4,838)
`
`2011
`(1,846)
`(1,205)
`21
`(3,030)
`
`The recognition of pension assets is limited to the total of the present value of any future refunds from the plans or reductions
`in future contributions to the plans and the cumulative unrecognised past service costs. Adjustments arising from this limit
`on asset recognition are recorded directly in other comprehensive income as follows:
`
`limit on asset recognition (pre-tax) in millions or CHF
`
`At 1 January
`(Increase) decrease in asset limit recognised during the year
`At 31 December
`
`2012
`
`(1 O)
`
`3
`0)
`
`2011
`
`(4)
`(6)
`(10)
`
`84
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0086
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`1 o. Employee stock options and other equity compensation plans
`
`The Group operates several equity compensation plans, including separate plans at Chugai. IFRS 2 'Share-based Payment'
`requires that the fair value of all equity compensation plan awards granted to employees be estimated at grant date and
`recorded as an expense over the vesting period. The expense is charged against the appropriate income statement heading.
`
`Expenses for equity compensation plans in millions of CHF
`
`Cost of sales
`Marketing and distribu tion
`Research and development
`General an d administration
`Total operating expenses
`
`Share option plans
`Roche Option Plan
`Total share option plans
`
`Other equity compensation plans
`Bonus Stock Awards
`Roche Connect
`Roche Stock-settled Stock Appreciation Rights
`Roche Restricted Stock Unit Plan
`Roche Performance Share Plan
`Roche Stock Appreciation Rights
`Chugai equity compensation plans
`Total other equity compensation plans
`
`Total operating expenses
`
`of which
`- Equity-settled
`- Cash-settled
`
`2012
`
`45
`77
`108
`133
`363
`
`6
`6
`
`5
`12
`256
`65
`16
`
`-
`
`3
`357
`
`363
`
`363
`
`-
`
`2011
`
`56
`79
`106
`130
`371
`
`6
`6
`
`5
`13
`231
`95
`17
`
`,
`
`3
`365
`
`371
`
`370
`
`,
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2012
`
`85
`
`Novartis Exhibit 2274.0087
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Cash inflow (outfl ow) from equity compensation plans in millions of CHF
`
`Equity-settled equity compensation plans
`Roche Option Plan exercises
`Chugai equity- compensation plan exercises
`Roche Connect costs
`Total equity-settled equity compensation plans
`
`Cash outflow from transactions in own equity instruments
`Total cash inflow (outflow) from equity-settled equity compensation plans,
`net of transactions in own equity instruments
`
`Cash-settled plans (included as part of movements in net working capital)
`Roche Stock Appreciation Rights
`
`2012
`
`28
`1
`(12)
`17
`
`(319)
`
`(302)
`
`-
`
`2011
`
`24
`
`-
`
`(13)
`11
`
`(589)
`
`(578)
`
`(7)
`
`The net cash outflow from transactions in own equity instruments mainly arises from sales and purchases of non-voting
`equity securities (Genussscheine) and derivative instrum ents thereon which are held for the Group's potential conversion
`obligations that may arise from the Group's equity-settled equity compensation plans. These derivative instruments mainly
`consist of call options that are exercisable at any time up to their maturity (see Note 27).
`
`Roche Long-Term. During 2005 the Group implemented a new global long-term incentive programme which is available to
`certain directors, management and employees selected at the discretion of the Group. The programme consists of Stock(cid:173)
`settled Stock Appreciation Rights ('S-SARs'), with the Group having the alternative of granting awards under the existing
`Roche Option Plan. In 2009, following the integration of Genentech, the Group also established a Restricted Stock Unit
`('RSU') plan. The first awards of this plan were made in September 2009 to employees at Genentech. The S-SARs are issued
`in accordance with the Roche S-SAR Plan regulations, under which 180 million S-SARs will be available for issuance over
`a ten-year period. The RSUs are issued in accordance with the Roche Restricted Stock Unit Plan regulations, under which
`20 million non-voting equity securities will be available for issuance over a ten-year period. The Remuneration Committee
`determines the number of non-voting equity securities that will be available under the plans each year. The Plan regulations
`for both the S-SAR and the RSU plans were restated and amended effective 1 January 2013. Further details of both plans
`are given in the relevant sections below.
`
`Share option plans
`Roche Option Plan. Awards under this plan give employees the right to purchase non-voting equity securities at an exercise
`price specified at the grant date. The Roche Option Plan regulations were restated and amended effective 1 January 2013
`(referred to as the 'Roche Option Plan'). The options, which are non-tradable equity-settled awards, have a seven-year
`duration and vest on a phased basis over three years, subject to continued employment. The Roche Option Plan includes
`provisions with respect to the consequences of termination of employment, the effect of certain corporate transactions
`and the authority of the Remuneration Committee and Executive Committee to interpret and administer the plan. The
`Group covers such obligations by purchasing non-voting equity securities or derivatives thereon (see Note 27). With the
`introduction of Roche Long-Term in 2005, the number of options granted under the Roche Option Plan was significantly
`reduced, as most eligible employees now receive Roche Stock-settled Stock Appreciation Rights instead.
`
`8 6
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0088
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Option Pl an - movement in number of options outstanding
`
`Ou tstanding at 1 January
`
`Granted
`
`Forfeited
`
`Exercised
`
`Expired
`Outstanding at 31 December
`- of which exercisable
`
`Number of options
`(thousands)
`
`2012
`We,ghted average
`exercise price
`(CHF)
`
`Number of options
`(thousands)
`
`2011
`Weighted average
`exercise price
`(CHF)
`
`1,676
`
`443
`(117)
`
`(190)
`
`(2)
`1,810
`
`966
`
`167.77
`
`157.67
`
`176.68
`
`145.01
`
`132.74
`167,15
`179.93
`
`1,437
`
`536
`
`(105)
`
`(18 4)
`
`(8)
`1,676
`840
`
`173.29
`
`140.10
`
`174.18
`
`128.33
`
`129.50
`167,77
`186.38
`
`Roche Option Pl an - terms of options outstanding as at 31 December 2012
`
`Year of grant
`
`2006
`2007
`
`2008
`
`2009
`2010
`
`201 1
`
`2012
`Total
`
`Number
`outstanding
`(thousands)
`
`Weighted average
`years remaining
`contractual life
`
`Options outstanding
`Weighted average
`exercise price
`(CHF)
`
`Number exercisable
`(thousands)
`
`Options exercisable
`Weighted average
`exercise price
`(CHFJ
`
`70
`
`138
`
`266
`195
`
`269
`444
`428
`1,810
`
`0.1 8
`
`1.18
`2. 11
`
`3.23
`4.26
`
`5.1 7
`
`6.25
`4.13
`
`195.34
`
`229.71
`
`194.76
`
`152.11
`
`17 1.14
`
`140.1 0
`
`157.67
`167.15
`
`70
`138
`
`266
`195
`
`174
`
`122
`
`1
`
`966
`
`195.34
`
`229.71
`
`194.76
`
`152.11
`
`171.02
`
`140.10
`
`157.50
`179.93
`
`Issues of Roche Option Plan in 2012
`
`Number of options granted
`
`Underlying equity
`
`Currency
`Vesting period
`
`Contractual life
`
`Weighted average fair value of options issued
`
`Option pricing model used
`Inputs to option pricing mod el
`
`- Share price at grant date
`
`- Exercise price
`
`- Expected volatility
`
`- Expected dividend yield
`
`- Early exercise factor
`
`- Expected exit rate
`
`443,1 96
`
`Roche non- voting equity securities
`
`Swiss francs
`
`Progressively over 3 years
`
`7 years
`
`16.49
`
`Binomial
`
`157.67
`
`157.67
`
`24.69%
`
`6.03%
`
`1.136
`
`10.10%
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2012
`
`87
`
`Novartis Exhibit 2274.0089
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Volatility was determined primarily by reference to historically observed prices of the underlying equity. Risk-free interest
`rates are derived from zero coupon swap rates at the grant date taken from Datastream. The early exercise factor describes
`the ratio between the expected market price at the exercise date and the exercise price at which early exercises can be
`expected. based on historically observed behaviour.
`
`Exercise of share options in 2012. The weighted average share price of Roche non-voting equity securities during the year
`was 168.47 Swiss francs.
`
`Other equity compensation plans
`Bonus Stock Awards. Certain members of the Corporate Executive Committee will be granted Bonus Stock Awards in lieu
`of part or all of their cash-settled bonus for the financial year 2012. These will be issued by the end of April 2013 with a total
`fair value of 5 million Swiss francs. The number of awards and fair value per award will be calculated at the grant date.
`
`Roche Connect. This programme enables all employees worldwide. except for those in the United States and certain
`other countries. to make regular deductions from their salaries to purchase non-voting equity securities. It is administered
`by independent third parties. The Group contributes to the programme, which allows the employees to purchase non-voting
`equity securities at a discount (usually 20%). The programme has been operational since 1 October 2002. The administrator
`purchases the necessary non-voting equity securities directly from the market. At 3 1 December 2012 the administrator held
`2.3 million non-voting equity securities (2011: 2.2 million). During the year the cost of the plan was 12 million Swiss francs
`(2011: 13 million Swiss francs). which was reported within the relevant expenditure line by function.
`
`Roche Stock-settled Stock Appreciation Rights. With the introduction of Roche Long-Term in 2005, the Group offers
`Stock-settled Stock Appreciation Rights (S- SARs) to certain directors. management and employees selected at the
`discretion of the Group. The S-SARs give employees the right to receive non-voting equity securities reflecting the value
`of any appreciation in the market price of the non-voting equity securities between the grant date and the exercise date.
`The S-SAR Plan regulations were restated and amended effective 1 January 2013 (referred to as the 'Roche S-SAR Plan').
`Under the Roche S-SAR Plan, 180 million S-SARs will be available for issuance over a ten-year period. The rights. which
`are non-tradable equity-settled awards, have a seven-year duration and vest on a phased basis over three years. The
`Roche S-SAR Plan also includes provisions with respect to the consequences of termination of employment. the effect of
`certain corporate transactions and the authority of the Remuneration Committee and Executive Committee to interpret
`and administer the plan. Within the meaning of Section 25102(0) of Title 4 of the California Corporations Code and Sections
`260.140.41 and 260.140.42 of Title 1 o of the California Code of Regulations. approval of these Annual Financial Statements
`constitutes approval of the Roche S-SAR Plan. which is described in these Annual Financial Statements, by a majority of
`Roche Holding Ltd's outstanding securities entitled to vote. The Group covers such obligations by purchasing non-voting
`equity securities, or derivatives thereon (see Note 27).
`
`Roche S-SARs - movement in number of rights outstanding
`
`Ou tstan ding at 1 January
`
`Granted
`
`Forfeited
`
`Exercised
`
`Expired
`Outstanding at 31 December
`- of which exercisable
`
`Number of rights
`(thousands)
`
`2012
`Weighted average
`exercise price
`(CHF)
`
`Number of rights
`(thousands)
`
`2011
`Weighted average
`exercise price
`(CHFJ
`
`51 .044
`
`19.673
`
`( 3. 196)
`(11,924)
`(7)
`55,590
`22,400
`
`158.09
`
`157.92
`
`166.52
`
`149.36
`
`123.00
`159.42
`170.55
`
`38,833
`
`18,266
`(4,239)
`
`( 1,8 16)
`-
`51 ,044
`20,733
`
`165.73
`
`140.20
`
`162.12
`
`132.29
`
`158.09
`174.92
`
`88
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0090
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche S-SARs - terms of rights outstanding at 3 1 December 2012
`
`Year or grant
`
`2006
`
`2007
`
`2008
`
`2009
`
`2010
`
`201 1
`
`2012
`Total
`
`Number
`outstanding
`(thousands)
`
`Weighted average
`years remaining
`contractual life
`
`Rights outstanding
`Weighted average
`exercise price
`(CHF)
`
`Number
`exercisable
`(thousands)
`
`Rights exercisable
`Weighted average
`exercise price
`(CHF]
`
`1,232
`
`1,960
`
`4,209
`
`5,759
`
`10,750
`
`13,029
`
`18,651
`55,590
`
`0.1 7
`
`1.17
`
`2.1 0
`
`3.54
`
`4.59
`
`5.1 8
`
`6.26
`4.77
`
`195.08
`
`229. 43
`
`194.85
`
`158. 48
`
`155.06
`
`140.21
`
`157.93
`159.42
`
`1,232
`
`1,960
`
`4,209
`
`5,759
`
`6,255
`
`2,851
`
`134
`22,400
`
`195.08
`
`229.43
`
`194.85
`
`158.48
`
`156.13
`
`140.22
`
`157.52
`170.55
`
`The weighted average fair value of the rights granted in 2012 was calculated using the Binomial model and the inputs to
`the model were consistent with those used for the Roche Option Plan 2012 awards. The resulting weighted average fair value
`per right is 16.52 Swiss francs giving a total fair value of 325 million Swiss francs which is charged over the vesting period
`of three years.
`
`Roche Restricted Stock Unit Plan. The Group issues Restricted Stock Units (RSUs) awards to certain directors,
`management and employees selected at the discretion of the Group. The RSUs. which are non-tradable, represent the right
`to receive non-voting equity securities which vest only after a three-year period.
`
`The RSU Plan regulations were restated and amended effective 1 January 2013 (referred to as the 'Roche RSU Plan').
`Under the Roche RSU Plan 20 million non-voting equity securities will be available for issuance over a ten-year period. The
`awards, which are non-tradable, represent the right to receive non-voting equity securities which generally vest after a
`three year period, subject to performance conditions. if any. The Roche RSU Plan also includes a value adjustment which will
`be an amount equivalent to the sum of shareholder distributions made by the Group during the vesting period attributable
`to the number of non-voting equity securities for which an individual award has been granted. In addition. the Roche RSU
`Plan includes provisions with respect to the consequences of termination of employment. the effect of certain corporate
`transactions and the authority of the Remuneration Committee and Executive Committee to interpret and administer the plan.
`The provisions are consistent with the terms of applicable California securities laws. Within the meaning of Section 25102(0)
`ofTitle 4 of the California Corporations Code and Sections 260.1 40.41 and 260.140.42 of Title 10 of the California Code of
`Regulations, approval of these Annual Financial Statements constitutes approval of the Roche RSU Plan, which is described
`in these Annual Financial Statements, by a majority of Roche Holding Ltd's outstanding securities entitled to vote.
`
`Roche RSUs - movement in number of awards outstanding
`
`Ou tstanding at 1 January
`
`Granted
`
`Forfeited
`
`Transferred to participants
`Outstanding at 31 December
`- of which exercisable
`
`2012
`Number of awards
`(thousands)
`
`20 11
`Number of awards
`(thousands]
`
`2,227
`
`-
`
`(98)
`
`(992)
`
`1,137
`1
`
`2.495
`
`16
`( 265)
`
`(19)
`
`2,227
`
`-
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2012
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`8 9
`
`Novartis Exhibit 2274.0091
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Roche Performance Share Plan. The Group offers future non-voting equity security awards (or, at the discretion of the
`Board of Directors. their cash equivalent) to certain directors and key senior managers. These are non-tradable equity(cid:173)
`settled awards. The programme was established at the beginning of 2002 and currently operates in annual three-year cycles.
`The Roche Performance Share Plan regulations were restated and amended effective 1 January 2013 (referred to as the
`'Roche PSP Plan'), The Roche PSP Plan includes a value adjustment which will be an amount equivalent to the sum of
`shareholder distributions made by the Group during the vesting period attributable to the number of non-voting equity
`securities for which an individual award has been granted. In addition. the Roche PSP Plan includes provisions with respect
`to the consequences of termination of employment. the effect of certain corporate transactions and the authority of the
`Remuneration Committee and Executive Committee to interpret and administer the plan. The terms of the currently outstanding
`awards are set out in the table below. The amount of non-voting equity securities allocated will depend upon the individual's
`salary level. the achievement of performance targets linked to the Group's Total Shareholder Return (shares and non-voting
`equity securities combined) relative to the Group's peers during the three-year period from the date of the grant. and the
`discretion of the Board of Directors. Each award will result in between zero and two non-voting equity securities. depending
`upon the achievement of the performance targets.
`
`Roche Performance Share Plan - terms of outstanding awards at 31 December 2012
`
`Number of awards outstanding (thousands)
`
`Vesting period
`
`Allocated to recipients in
`
`Fair value per unit at grant (CHF)
`Total fair value at grant (CHF millions)
`
`2010- 2012
`
`87
`
`3 years
`
`Feb. 20 13
`
`173.39
`19
`
`20 11-2013
`
`135
`
`3 years
`
`Feb. 20 14
`
`124.1 7
`19
`
`2012- 20 14
`
`133
`
`3 years
`
`Feb. 20 15
`
`153.67
`22
`
`The weighted average fair value of the 142,981 awards granted in 20 12 was calculated using a Monte Carlo simulation.
`The input parameters to the model were the covariance matrix between Roche and the other individual companies of
`the peer group based on a three-year history and a risk-free rate of minus 0.067%. The valuation also takes into account
`the defined rank and performance structure which determines the pay-out of the plan.
`
`Chugai Stock Acquisition Rights. During 2003 Chugai adopted a Stock Acquisition Rights programme. The programme
`allows for the granting of rights to employees and directors of Chugai. The 3,340 rights issued in 2012 (20 11 : 3,250) are non(cid:173)
`tradable equity-settled awards, have a ten-year duration and vest after two years. Each right entitles the holder to purchase
`100 Chugai shares at a specified exercise price. The total fair value of rights issued was equivalent to 1 million Swiss francs
`(2011: 1 million Swiss francs). which was calculated using a binomial model.
`
`Chugal Retirement Stock Acquisition Rights. For the first time in 2009 Chugai issued Stock Acquisition Rights in lieu
`of the Retirement Gratuities System for Directors which was abolished. The 8 17 rights issued in 2012 (2011: 888) have a
`thirty-year duration and vest upon the holder's retirement as a director of Chugai. Each right entitles the holder to purchase
`100 Chugai shares at an exercise price of 100 Japanese yen. The total fair value of rights issued was equivalent to 1 million
`Swiss francs (2011: 1 million Swiss francs). which was calculated using a binomial model.
`
`90
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0092
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`11. Property, plant and equipment
`
`Property, pl ant and equipment: movements in carrying value of assets in millions of CHF
`
`At 1 January 2011
`Cost
`
`Accumulated depreciation and impairment
`Net book value
`
`Year ended 31 December 2011
`A t 1 January 2011
`
`Additions
`
`Disposals
`
`Business combinations•
`
`Divestment of subsidiaries"'
`
`Transfers
`
`Reclassification to assets-held-for- sale
`
`Depreciat ion charge
`
`Impairment charge
`
`Other
`
`Land
`
`970
`
`-
`
`970
`
`970
`
`4
`
`Buildings
`and land
`improvements
`
`Machinery
`and
`equipment
`
`Construction
`in progress
`
`11 .853
`(4,557)
`7,296
`
`7,296
`
`95
`(183)
`-
`(1)
`
`744
`
`(13)
`
`(461)
`
`(61)
`-
`(4)
`7,412
`
`16.257
`
`(9,579)
`6,678
`
`6.678
`
`858
`(66)
`
`3
`(6)
`
`764
`
`(63)
`
`(1,387)
`
`(29)
`
`(124)
`
`(34)
`6,594
`
`1,908
`
`(123)
`1,785
`
`1,785
`
`1,049
`
`(1 3)
`-
`(2)
`(1,508)
`
`(23)
`-
`(6)
`-
`(8)
`1,274
`
`Total
`
`30.988
`(14,259)
`16,729
`
`16,729
`
`2,006
`
`(323)
`
`3
`(9)
`
`-
`
`(99)
`
`(1.848)
`
`(96)
`
`(124)
`
`(38)
`16,201
`
`31,062
`
`(14,861)
`16,201
`
`16,201
`
`2,130
`
`(133)
`
`--
`
`(1,891)
`
`(462)
`
`(17)
`
`(426)
`15,402
`
`3 1,251
`(15,849)
`15,402
`
`1,344
`
`(70)
`1,274
`
`1,274
`
`l , 118
`
`(5)
`-
`(984)
`-
`(72)
`-
`(1 3)
`1,318
`
`1.406
`(88)
`1,318
`
`(61)
`-
`-
`-
`-
`-
`-
`-
`8
`921
`
`921
`
`-
`
`921
`
`12,166
`
`(4,754)
`7,412
`
`16,631
`
`(l 0,037)
`6,594
`
`92 1
`
`7,412
`
`4
`(6)
`-
`I
`-
`-
`
`4
`(44)
`880
`
`880
`
`-
`
`880
`
`79
`(33)
`-
`395
`(4 76)
`
`( 246)
`
`-
`
`(1 83)
`6,948
`
`6,594
`
`929
`(89)
`-
`588
`(1,4 15)
`
`(144)
`
`(21)
`
`(186)
`6,256
`
`12,138
`(5,190)
`6,948
`
`16,827
`(10,571)
`6,256
`
`Currency translation effects
`At 31 December 2011
`
`Cost
`Accumulated depreciation and impairment
`Net book value
`
`Year ended 31 December 2012
`At 1 January 2012
`Additions
`
`Disposals
`
`Business combinations•
`
`Transfers
`
`Depreciat ion charge
`
`Impairment charge
`
`Other
`
`Currency translation effects
`At 31 December 2012
`
`Cost
`
`Accumulated depreciation and impairment
`Net book value
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2012
`
`9 J
`
`Novartis Exhibit 2274.0093
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Impairment charges arise from changes in the estimates of the future cash flows expected to result from the use of the asset
`and its eventual disposal. Factors such as changes in the planned use of buildings, machinery or equipment, or closure
`of facilities, the presence or absence of competition and technical obsolescence could result in shortened useful lives or
`impairment. Impairment charges of 55 million Swiss francs (2011 : 25 million Swiss francs) are reported as part of 'Cost
`of sales', 4 million Swiss francs (2011: none) in 'Marketing and Distribution', 98 million Swiss francs (2011 : 71 million Swiss
`francs) in 'Research and development' and 305 million Swiss francs in 'General and administration' (2011 : none).
`
`In 201 2 no income was received from insurance companies in respect of impairments to property. plant and equipment
`(201L 24 million Swiss francs). In 2012 no borrowing costs were capitalised as property, plant and equipment (2011: none).
`
`Leasing arrangements where the Group is the lessee
`Finance leases. As at 31 December 2012 the capitalised cost of property, plant and equipment under finance leases was
`327 million Swiss francs (2011 : 314 million Swiss francs) and the net book value of these assets was 159 million Swiss francs
`(201L 181 million Swiss francs). The carrying value of the leasing obligation was 203 million Swiss francs (201 1: 225 million
`Swiss francs), which is reported as part of Debt (see Note 26).
`
`Finance l eases: future minimum lease payments under non• cancellabl e l eases in millions of CHF
`
`Within one yea r
`Between one and five years
`More than five yea rs
`Total
`Future finance charges
`Total future minimum lease payments (undiscounted)
`
`Future minimum lease
`payments
`201 1
`
`2012
`
`Present val ue of future
`minimum l ease payments
`2012
`201 1
`
`3 1
`133
`94
`258
`-
`258
`
`31
`13 1
`13 1
`293
`-
`293
`
`19
`97
`87
`203
`55
`258
`
`17
`89
`119
`225
`68
`293
`
`Operating leases. Group companies are party to a number of operating leases, mainly for plant and machinery, including
`motor vehicles, and for certain short-term property rentals. The arrangements do not impose any significant restrictions on
`the Group. Total operating lease rental expense was 404 million Swiss francs (201 1: 395 million Swiss francs).
`
`Operating leases: future minimum lease payments under non- cancellable l eases in millions of CHF
`
`Within one year
`Between one and five years
`More than five years
`Total minimum payments
`
`2012
`
`228
`432
`149
`809
`
`2011
`
`206
`376
`178
`760
`
`Leasing arrangements where th e Group is the lessor
`Finance leases. Certain assets, mainly Diagnostics instruments, are leased to third parties through finance lease
`arrangements. Such assets are reported as receivables at an amount equal to the net investment in the lease. Lease income
`from finance leases is recognised over the term of the lease based on the effective interest rate method.
`
`9 2
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0094
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`Finance l eases: future minimum lease payments under non- cancellabl e l eases in m,llions of CHF
`
`Within one yea r
`Between one and five years
`More than five yea rs
`Total
`Unearned finance income
`Unguaranteed residual value
`Net investment in lease
`
`Gross investment m lease
`2012
`2011
`
`Present value of future
`minimum lease payments
`2012
`2011
`
`42
`93
`1
`136
`(9)
`n/a
`127
`
`33
`86
`-
`
`119
`(8)
`n/a
`111
`
`38
`87
`1
`126
`n/a
`1
`127
`
`30
`81
`-
`
`111
`n/a
`
`-
`
`111
`
`The accumulated allowance for uncollectible minimum lease payments was 2 million Swiss francs (2011 : 2 million Swiss francs).
`There were no contingent rents recognised in income.
`
`Operating leases. Certain assets, mainly Diagnostics instruments, are leased to third parties through operating lease
`arrangements. Such assets are reported within property, plant and equipment. Lease income from operating leases is
`recognised over the lease term on a straight-line basis.
`
`At 31 December 2012 machinery and equipment with an original cost of 3,382 million Swiss francs (20 11 : 3,040 million Swiss
`francs) and a net book value of 1,36 1 million Swiss francs (2011 : 1,274 million Swiss francs) was being leased to third parties.
`There was no contingent rent recognised as income.
`
`Operating leases: future minimum lease payments under non- cancellable l eases in millions of CHF
`
`Within one yea r
`Between one and five years
`More than five years
`Total minimum payments
`
`2012
`
`151
`124
`3
`278
`
`Capital commitments
`The Group has non-cancellable capital commitments for the purchase or construction of property, plant and equipment
`totalling 0.5 billion Swiss francs (2011 : 0.6 billion Swiss francs).
`
`2011
`
`95
`103
`
`-
`
`198
`
`Roche Group - Notes to the Roche Group Consolidated Financial Statements I Roche Finance Report 2012
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`9 J
`
`Novartis Exhibit 2274.0095
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`12. Goodwill
`
`Goodwill: movements in carrying value of assets in millions of CHF
`
`At 1 January
`Cost
`
`Accumulated impairment
`Net book value
`
`Year ended 31 December
`At 1 January
`
`Business combinations'
`
`Divestment of subsidiaries"'
`
`Impairment charge
`
`Currency translation effects
`At 31 December
`
`Cost
`Accumulated impairment
`Net book value
`
`Allocated to the following cash- generati ng units
`
`Roche Pharmaceuticals
`
`Chugai
`Total Pharmaceuticals Division
`
`Diabetes Care
`
`Professional Diagnostics
`
`M olecular Diagnostics
`
`Applied Science
`
`Tissue Diagnostics
`
`Strategic goodwill (held at divisional level and not allocated to business areas)
`Total Diagnostics Division
`
`2012
`
`7,843
`-
`7,843
`
`7,843
`
`-
`-
`
`(1 87)
`
`(176)
`7,480
`
`7,662
`
`( 182)
`7,480
`
`2,047
`
`11 7
`2 ,164
`
`832
`1,539
`-
`34
`
`80 1
`
`2, 11 0
`5,316
`
`2011
`
`7.722
`-
`7,722
`
`7,722
`
`194
`
`(72)
`
`-
`
`(1)
`7,8.43
`
`7,843
`
`-
`
`7,8,43
`
`2.099
`134
`2,233
`
`833
`1,581
`-
`223
`
`822
`2, 151
`5,610
`
`The goodwill arising from investments in associates is classified as part of the investments in associates (see Note 14).
`
`Goodwill impairment testing
`Pharmaceuticals Division. The division's sub-divisions are the cash- generating units used for the testing of goodwill.
`
`For Chugai, the recoverable amount is based on fair value less costs to sell, determined with reference to the publicly quoted
`share prices of Chugai shares. For Roche Pharmaceuticals, the recoverable amount used in the impairment testing is based
`on value in use. The cash flow projections used for Roche Pharmaceuticals impairment testing are based on the most recent
`business plans approved by management. The business plans include management's latest estimates on sales volume and
`pricing, and production and other operating costs and assumes no significant changes in the organisation.
`
`94
`
`Roche Finance Report 2012 I Roche Group - Notes to the Roche Group Consolidated Financial Statements
`https://Www.roche.com/dam/jcr:13c45df4-9cf6-4545-a23d-874d398aa788/en/fb12e.pdf
`
`Novartis Exhibit 2274.0096
`Regeneron v. Novartis, IPR2021-00816
`
`

`

`The business plans are projected over five years. These valuations include a terminal value beyond these years, assuming
`no further growth. The discount rate used is based on an after-tax rate of 6.4%, which is derived from a capital asset pricing
`model using data from capital markets. including government twenty-year bonds. A weighted average tax rate of 25.5% is
`used in the calculations and the corresponding pre-tax discount rate is 8.6%.
`
`Diagnostics Division. The division's business areas are the cash- generating units used for the testing of goodwill. The
`goodwill arising from the Corange/Boehringer Mannheim acquisition and part of the goodwill from the Ventana acquisition
`is recorded and monitored at a divisional level as it relates to the strategic development of the whole division and cannot
`be meaningfully allocated to the division's business areas. Therefore the cash-generating unit for this goodwill is the entire
`division.
`
`The recoverable amount used in the impairment testing is based on value in use and the cash flow projections are based
`on the most recent business plans approved by management. The business plans include management's latest estimates
`on sales volume and pricing, and production and other operating costs. The business plans assume no further significant
`changes in the organisation beyond the Applied Science restructuring explained below.
`
`The business plans are projected over five years, except for the Tissue Diagnostics business area which is projected over
`ten years reflecting the long-term nature of this business. These valuations include a terminal value beyond these years,
`assuming no further growth. The discount rate used is based on an after-tax rate of 6.4%, which is derived from a capital
`asset pricing model using data from capital markets, including government twenty-year bonds. A weighted average tax
`rate of 15.9% is used in the calculations and the corresponding pre-tax discount rate is 7.7%.
`
`The Diagnostics Division announced several global restructuring initiatives in 2012, as disclosed in Note 7. As part of the
`plan for streamlining the product portfolio in the Applied Science business, the division is exiting the Microarray business.
`The Microarray business was acquired in 2007 through the acquisition of NimbleGen. As a result of this decision the
`Microarray business is no longer considered to be part of the Applied Science business area cash- generating unit for
`assessing goodwill impairment. Given the plan to exit the Microarray business the goodwill which arose from the NimbleGen
`acquisition was considered to be fully impaired and a charge of