Impact of Amended Accounting Standard on Employee Benefits IAS19R

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Molly McCormick
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1 Impact of Amended Accounting Standard on Employee Benefits IAS19R February 2013

2 Forward Looking Statements This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. These statements include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans" and similar expressions. Although Sanofi's management believes that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Sanofi, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in research and development, future clinical data and analysis, including post marketing, decisions by regulatory authorities, such as the FDA or the EMA, regarding whether and when to approve any drug, device or biological application that may be filed for any such product candidates as well as their decisions regarding labeling and other matters that could affect the availability or commercial potential of such product candidates, the absence of guarantee that the product candidates if approved will be commercially successful, the future approval and commercial success of therapeutic alternatives, the Group's ability to benefit from external growth opportunities, trends in exchange rates and prevailing interest rates, the impact of cost containment policies and subsequent changes thereto, the average number of shares outstanding as well as those discussed or identified in the public filings with the SEC and the AMF made by Sanofi, including those listed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" in Sanofi's annual report on Form 20-F for the year ended December 31, Other than as required by applicable law, Sanofi does not undertake any obligation to update or revise any forward-looking information or statements. 2

3 Implementation of IAS19R Issued on June 16, 2011 Effective date: January 1, 2013 Full retrospective application required P&L and segment results: Comparative periods to be presented in accordance with the amended standard for 2011 and

4 Main Differences Between IAS19R and IAS19: The Expected Return On Assets IAS19R Interest income on plan assets is based on discount rate instead of expected return on plan assets The discount rates are based on markets rates for high quality corporate bonds As a consequence, benefit cost is higher under IAS19R Past Service Cost is recognized in Profit & Loss in the period of a plan amendment instead of deferring the portion related to unvested benefits Past Service Cost arises when an entity introduces a pension plan or changes the benefit payable under an existing pension plan The deferral of Past Service Cost on unvested benefits is recognized immediately in Profit or Loss under IAS19R (instead of being amortized under IAS19) 4

5 Reclassification of the Net Interest on the Net Defined Benefit Liability (Asset) into the P&L The net interest on the net defined benefit liability (asset) is: Equal to interest cost on defined benefit obligation less Interest income on plan assets A component of the Defined Benefit Costs Reported on Net Financial Income/Expense line instead of Operating cost line No longer included in Business Operating Income (segment result) This change is a voluntary change in accounting methods and is justified by: The financial nature of this component, not directly connected to operating performance Harmonizing the treatment between net interest for Pension liabilities and unwinding of discounting for provisions (already booked as financial expense) 5

6 Impact of IAS19R on 2012 Business Net Income m 2012 IAS IAS19R Difference Cost of sales (122) (102) 20 R&D expenses (74) (57) 17 SG&A (65) (47) 18 Other operating income Benefit cost included in BOI (241) (146) 95 Financial expenses (1) (10) (208) (198) Income tax expense 25 Benefit cost included in BNI (78) Business EPS equivalent to 0.06 in 2012 BOI: Business Operating Income BNI: Business Net Income (1) Net interest on the net defined benefit liability (asset) 6

7 Impact of IAS19R on 2012 Business Net Income (1) by Quarter m Q Q Q Q FY 2012 Cost of sales R&D expenses SG&A Other current operating income/expenses Business Operating Income Financial expenses (50) (48) (51) (49) (198) Income tax expense 8 (2) 6 (2) 6 (2) 5 25 Business Net Income (18) (18) (20) (22) (78) (1) IAS19R is applicable as of Jan 1, 2013 (2) Calculated on the basis of the forecasted full-year effective tax rate in accordance with IAS34 7

Caution concerning Forward-Looking Statements Purpose of This Material and Cautionary Notes This material is prepared for the purpose of understanding

(Reference Material) Voluntary Adoption of International Financial Reporting Standards(IFRS)from the fiscal year ended March 31,2012 Japan Tobacco Inc. Caution concerning Forward-Looking Statements Forward-Looking