ROCHE CAROLINA, INC.

Financial Statements

December 31, 2016 and 2015

(With Independent Auditors’ Report Thereon)

ROCHE CAROLINA, INC.

Table of Contents

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Independent Auditors’ Report

Roche Carolina Inc.:

We have audited the accompanying financial statements of Roche Carolina Inc., which comprise the statements of financial position as of December 31, 2016 and 2015 and the related statements of comprehensive income (loss), changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2016, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Roche Carolina Inc. as of December 31, 2016 and 2015 and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2016, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Greenville, South Carolina
April 7, 2017

See accompanying notes to financial statements.

 

See accompanying notes to financial statements

See accompanying notes to financial statements.

 

See accompanying notes to financial statements.

(1)	Reporting Entity Information

Roche Carolina, Inc. (the Company) is a South Carolina corporation located at 6173 E Old Marion Hwy, Florence, South Carolina, USA. The Company is a wholly owned subsidiary of Roche Holdings, Inc. (RHI), a company incorporated in state of Delaware, which is 100% indirectly owned by the ultimate parent, Roche Holding Ltd. Roche Holding Ltd. is a public company registered in Switzerland and together with its subsidiaries included in consolidation is considered the “Roche Group”. RHI is the holding company for Roche Group’s US operations and performs financing activities for RHI and its subsidiaries (collectively referred herein as the “RHI Group). The Company is involved in the manufacture of active pharmaceutical ingredients for sale to other Roche Group companies.

The largest group in which the results of the Company are consolidated is that headed by Roche Holding Ltd. The smallest group in which they are consolidated is that headed by RHI. The consolidated financial statements of these parent companies are available to the public and may be obtained from Roche Holding Ltd., Grenzacherstrasse 124, 4058 Basel, Switzerland.

(2)	General Accounting Principles

(a)

Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

The financial statements are prepared on the historical cost basis. The amounts disclosed in the financial statements are expressed in thousands of U.S. dollars (USD), the Company’s functional and presentational currency. They were approved for issue by the Management on April 7, 2017.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. There was no impact on net income (loss) as a result of these reclassifications.

(b)

Going Concern

The financial statements have been prepared on a going concern basis.

On November 25, 2016, the Roche Group signed a definitive agreement with Patheon N.V. (Patheon) to sell 100% of its shares in Roche Carolina, Inc. for approximately USD 10 million, which mainly represents property, plant and equipment, including spare parts, and certain specified inventory whereas the deal is on a cash free, debt free, net working capital free basis.

Pursuant to the purchase agreement, Patheon will purchase certain specified inventory, including raw materials, packaging materials and operating supplies (“MRO”). In these financial statements the MRO supplies have been reclassified to property, plant and equipment. During January 2017 the Roche Group purchased 100% of the processed inventory held at Roche Carolina for USD 67,614 thousand. Additionally, in January 2017, pursuant to the purchase agreement, the Income tax receivable of USD 19,311 thousand due from RHI as part of the U.S. consolidated group’s tax sharing agreement was settled through a deemed equity distribution in anticipation of the purchase.

The sale of the Company closed on February 1, 2017.

(c)

Key Accounting Judgements, Estimates and Assumptions

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and contingent amounts. Actual outcomes could differ from those management estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and various other factors. Revisions to estimates are recognized in the period in which the estimate is revised. The following are considered to be the key accounting judgments, estimates and assumptions made and are believed to be appropriate based upon currently available information.

(i)

Impairment of Property, Plant and Equipment

Property, plant and equipment are assessed for impairment when there is a triggering event that provides evidence that an asset may be impaired. To assess whether any impairment exists estimates of expected future cash flows are used. Actual outcomes could vary significantly from such estimates. Factors such as changes in discount rates, the planned use of buildings, machinery or equipment or closure of facilities, the presence of competition, technical obsolescence and lower than anticipated product sales could lead to shorter useful lives or impairment. When an impairment loss arises, the useful life of the asset is reviewed and, if necessary, the future depreciation charge is accelerated.

(ii)

Inventory Obsolescence

Inventory is measured at lower of cost or net realizable value as discussed in note 2 d). The Company regularly reviews inventory quantities in process and on hand, and when appropriate, records a provision for obsolete or excess inventories. The provision is based on actual loss experience from expiry and quality control results. Once inventories are deemed not sellable by the quality group or a decision to destroy the inventory has been made, such write‑down is taken against the provision.

(d)

Significant Accounting Policies

(i)

Revenue

Sales represent amounts received and receivable for goods supplied to customers and exclude sales taxes and other taxes directly linked to sales. Revenues from the sale of active pharmaceutical ingredients, intermediates and raw materials are recognized upon transfer to the customer of the significant risks and rewards of ownership.

(ii)

Cost of Sales

Cost of sales includes the corresponding direct production costs and related production overheads of goods sold. Start‑up costs between validation and the achievement of normal production capacity are expensed as incurred.

(iii)

Employee Benefits

Short‑term employee benefits include wages, salaries, social security contributions, paid annual leave and sick leave, profit sharing and bonuses, and nonmonetary benefits for current employees.

The costs are recognized within the operating results when the employee has rendered the associated service. The Company recognizes a liability for profit sharing and bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

Long‑term employee benefits include long‑service or sabbatical leave, long‑service benefits and long‑term disability benefits. The expected costs of these benefits are accrued over the period of employment. Any changes in the carrying value of other long‑term employee benefit liabilities are recognized within the operating results.

Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Termination costs are recognized at the earlier of when the Company can no longer withdraw the offer of the benefits or when the Company recognizes any related restructuring costs.

(iv)

Pensions and Other Post‑Employment Benefits

The Company participates in a number of defined benefit plans that are sponsored by RHI. There is no contractual agreement or stated policy for charging the net defined benefit cost to the Company and therefore the defined benefit cost recognized is equal to the contribution payable for the period. A payment to the pension fund in 2016 and 2015 was made by the Company, and therefore, is recorded as capital distribution to the parent in the statement of changes in equity.

(v)

Equity Compensation Plans

The fair value of all equity compensation awards granted to employees is estimated at the grant date and recorded as an expense over the vesting period. The expense is charged to the appropriate statement of comprehensive income (loss) line item within the operating results. For equity‑settled plans, an increase in equity is recorded for this expense.

Roche Holding Ltd, as the ultimate parent company who has the obligation to settle the award, has an intragroup payment arrangement with the Company. Under this arrangement, Roche Holding Ltd recharges the Company the intrinsic value of the awards at their exercise date. Such recharge is recorded through equity as a distribution to parent. As the arrangement is known at the grant date, an estimated recharge liability for unexercised awards is recorded at each reporting date.

(vi)

Property, Plant and Equipment

Property, plant and equipment are initially recorded at cost of purchase or construction, and include all costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. These include items such as costs of site preparation, installation and assembly costs and professional fees. The net costs of testing whether the asset is functioning properly, including validation costs, are also included in the initially recorded cost of construction. Spare parts and supplies are stated at average cost, less provision for obsolescence, where appropriate, based on age and usage.

Property, plant and equipment are depreciated on a straight‑line basis, except for land, which is not depreciated. The estimated useful lives of major classes of depreciable assets are as follows:

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate components. The estimated useful lives of the assets are regularly reviewed and, if necessary, the future depreciation charges are accelerated. Repairs and maintenance costs are expensed as incurred.

(vii)

Impairment of Property, Plant and Equipment

An impairment assessment is carried out when there is evidence that an asset may be impaired. When the recoverable amount of an asset, being the higher of its fair value less costs of disposal and its value in use, is less than its carrying value, the carrying value is reduced to its recoverable amount. This reduction is reported in the statement of comprehensive income (loss) as an impairment loss. Value in use is calculated using estimated cash flows, generally over a five‑year period, with extrapolating projections for subsequent years. These are discounted using an appropriate long‑term discount rate. When an impairment loss arises, the useful life of the asset is reviewed and, if necessary, the future depreciation/amortization charge is accelerated.

(viii)

Inventories

Raw materials and intermediates are stated at the lower of cost and net realizable value. The cost includes raw materials, direct labor and other directly attributable costs and overheads based upon the normal capacity of production facilities. Cost is determined using the weighted average method. Net realizable value is the estimated selling price less cost to completion and selling expenses. A new assessment of net realizable value is made each period and when circumstances that previously caused inventories to be written down below cost no longer exist or when there is an increase in net realizable value because a change in circumstances, the amount of any previous write‑down would be reversed.

(ix)

Accounts Receivable

Accounts receivable are carried at the original invoice amount. In order to help manage liquidity needs, the Company has an access to liquidity through a cash pooling arrangement with RHI Group companies. The Company’s positive cash pooling balances may not be representative of actual cash or cash equivalents, but the Company receives interest on these balances and pays interest on the amounts owed, therefore, cash pooling balances are classified as accounts receivable due from related parties in the statement of financial position.

At December 31, 2016, the Company had no accounts receivable balance due from third parties (2015: USD 5,327 thousand) and accounts receivable due from related parties of USD 60,759 thousand (2015: USD 59,046 thousand).

(x)

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and time, call and current balances with banks and similar institutions. Such balances are only reported as cash equivalents if they are readily convertible to known amounts of cash, are subject to insignificant risk of changes in their fair value, and have a maturity of three months or less from the date of acquisition.

(xi)

Taxation

Income taxes were determined as if the Company were a separately taxable entity. This assumption implies that the current and deferred income taxes of the Company are calculated separately and the recoverability of the deferred tax assets is assessed accordingly.

Income taxes include all taxes based upon the taxable profits of the Company. Other taxes not based on income, such as property and capital taxes, are included within general and administration expenses.

Deferred tax assets and liabilities are recognized on temporary differences between the tax bases of assets and liabilities and their carrying values. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilized.

Current and deferred tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a legally enforceable right to offset them. Deferred taxes are determined based on the currently enacted tax rates applicable in each tax jurisdiction where the Company operates.

(e)

New Accounting Standards

(i)

IFRS 15 – Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers (IFRS 15). The objective of this standard is to provide a five‑step approach to revenue recognition that includes identifying contracts with customers, identifying performance obligations, determining transaction prices, allocating transaction prices to performance obligations and recognizing revenue when performance obligations are satisfied. The standard also expands current disclosure requirements. IFRS 15 is effective for annual periods beginning on or after January 2018, and earlier application is permitted. The potential impact on the Company is currently being assessed.

(ii)

IFRS 16 – Leases

The IASB has published in January 2016 IFRS 16, Leases (IFRS 16), which will supersede IAS 17, Leases, and related interpretations. IFRS 16 brings most leases on statement of financial position for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 is effective for periods beginning on or after January 1, 2019,

with earlier adoption permitted if IFRS 15 has also been applied. IFRS 15 is effective for annual periods beginning on or after January 2018, and earlier application is permitted. The potential impact on the Company is currently being assessed.

(3)	Restructuring Plans

During the first half of 2016, in an effort to minimize job reductions, the Roche Group actively looked into divestment opportunities for the Company. In May of 2016, negotiations with a potential buyer fell through, indicating to employees that the Company would operate under the intentions to close the plant by 2019.

In connection with the plan to close the manufacturing facility, the Company recorded restructuring expenses for employee related severance cost.

Pursuant to the purchase agreement; Roche would place in escrow an amount to provide severance for all employees transferred to Patheon. Also per the agreement, employees not severed within 24 months would instead receive a transition payment equal to or slightly less than the severance amount. The restructuring provision at year‑end included a severance payment for all current employees including those given a 60 day termination notice in November 2016. The provision totaled USD 23,777 thousand on December 31, 2016.

The following table summarizes the activity of the restructuring provision for the twelve months ended December 31, 2016 (U.S. dollars in thousands):

(5)	Net Finance Income (Cost)

(6)

Taxation

The Company is part of a consolidated U.S. tax group for income tax reporting purposes. The Company has entered into a tax sharing agreement with RHI whereby the current tax receivable (payable) for each fiscal year is settled with the consolidated U.S. tax group as the return is filed. These financial statements were prepared as if the income taxes were determined based on the assumption that it was a separate taxable entity.

Deferred Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Provision is made at rates expected to apply when the timing differences reverse.

Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in taxable profits in periods different from those in which they are recognized in the financial statements.

A net deferred tax asset is regarded as recoverable and, therefore, recognized only when, on the basis of all available evidence, it is regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. As of December 31, 2016 and 2015 the Company has not recognized any deferred tax assets for any tax losses carried forward as it is not probable they will be able to realize the related benefit.

(7)	Property, Plant and Equipment

Impairment

On November 12, 2015, the Roche Group announced a strategic realignment of its manufacturing network including exiting from the manufacturing site at Florence. Following this announcement, the Company determined that the value of its property, plant, and equipment was no longer recoverable. The cash‑generating unit was determined as the entire Florence manufacturing facility encompassing all property, plant and equipment. The recoverable amount was determined to be only the property value of USD 3,935 thousand.

The recoverable amount used in the impairment testing is the higher of value in use and fair value less costs of disposal. The Company uses the value in use as the recoverable amount. For assessing value in use, 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, as well as production and other operating costs. The business plans are projected over ten years. The discount rate used is based on an after‑tax rate of 7.0%, which is derived from a capital asset pricing model using data from capital markets, including government twenty‑year bonds. An average tax rate of 36.0% is used in the calculations.

During the year ended December 31, 2016, there were no events or transactions that indicated the value of the property, plant, and equipment would be recoverable and therefore, the Company impaired all subsequent purchases. As a result, an impairment charge of USD 10,330 thousand was recorded in cost of sales in 2016 (2015: USD 257,947 thousand).

Capital Commitments

Noncancelable capital commitments for the purchase or construction of property, plant and equipment as of December 31, 2016 were USD 268 thousand (2015: none). There were no additional capital commitments as of December 31, 2016 and 2015.

(8)	Inventories

Inventories recognized as an expense during the year ended December 31, 2016 amounted to USD 62,942 thousand (2015: USD 124,094 thousand; 2014: USD 158,754 thousand). These were included in cost of sales. Inventories write‑downs during the year resulted in a net expense of USD 5,263 thousand in 2016 (2015: USD 1,473 thousand; 2014: USD 4,689 thousand).

Corden Pharma

In August 2011, the Roche Group sold its site in Boulder, Colorado, U.S. to Corden Pharma, an unrelated party. As a result of the transaction, the Company assumed ownership of a portion of the inventory previously owned by a former affiliate of Roche which is recorded as consignment inventory. All the remaining consignment inventory was sold to Genentech, Inc., a related party, at carrying value in December 2016.

The Company also had a loan receivable due from Corden Pharma. The balance of the loan receivable was received as of December 31, 2016 (2015: USD 2,812 thousand).

(9)	Accounts Payable

(10)	Other Current Liabilities

(11)	Employee Benefits

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. See note 12 for details related to pension and other postemployment benefits.

(12)	Pensions and Other Post‑Employment Benefits

(a)

Defined contribution plans

Defined contribution plans are funded through payments by employees and by the RHI Group into funds administered by third parties. The Company’s expenses for these plans in 2016 were USD 1,305 thousand (2015: USD 1,424 thousand; 2014: USD 1,166 thousand). No assets or liabilities are recognized in the Company’s statement of financial position in respect of such plans, apart from regular prepayments and accruals of the contributions withheld from employees’ wages and salaries. The Company’s employees participate in the U.S. Roche 401(k) Savings Plan, which are governed by a senior governing body, the U.S. Roche D.C. Fiduciary Committee.

(b)

Defined benefit plans

The Company participates in a number of defined benefit plans that are sponsored by RHI. These defined benefit plans are deemed as “group plans” as they share risks between various other Roche entities under common control. There is no contractual agreement or stated policy for charging the net defined benefit cost to the Company and therefore the defined benefit cost recognized is equal to the contribution required to be made to the plan by the parent on behalf of the Company. The expenses for these plans in 2016 were USD 1,896 thousand (2015: USD 2,349 thousand; 2014: USD 2,114 thousand) and were deemed capital contributions. The Company made actual cash contribution to the plan of USD 13,300 thousand in 2016 (2015: USD 2,000 thousand; 2014: none).

The following provides disclosure of the RHI Group defined benefit plans in which employees of the Company participate.

(c)

RHI Group defined benefit plans disclosure

RHI’s Plans are mostly established as trusts independent of the RHI Group and are funded by payments from RHI Group companies and by employees. In some cases, the plan is unfunded and the RHI Group pays pensions to retired employees directly from its own financial resources. The plans are governed by a senior governing body, the Roche U.S. Governance Committee. Funding of these plans is determined by local regulations using independent actuarial valuations. Separate independent actuarial valuations, together with a semiannual update, are prepared in accordance with the requirements of IAS 19 for use in the RHI Group’s financial statements.

The RHI Group’s major pension plans have been closed to new members since 2007. New employees now join the defined contribution plan. The largest of the remaining defined benefit plans is a funded pension plan. The benefits are based on the highest average annual rate of earnings during a specified period and length of employment. The plans are noncontributory for employees, with the RHI Group making periodic payments to the plans. Where there is an under‑funding, this would normally be remedied by additional company contributions. In 2016 payments made by the Group were USD 233 million (2015: USD 130 million; 2014: USD 130 million). With the increased contribution the RHI Group benefitted from a lower insurance fee to Pension Benefit Guarantee Corporation, a US government agency overseeing occupational pension schemes in the US.

Other post‑employment benefit (OPEB) plans. These consist mostly of postretirement healthcare and life insurance schemes. These plans are mainly unfunded or are contributory for employees, with the RHI Group also making contributions directly from its own financial resources. The RHI Group’s major defined benefit OPEB plans 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 RHI Group is funding these plans to the extent that it is tax efficient. In 2016 there were no payments made by the Group to these plans (2015: none and 2014: none). At December 31, 2016, the IFRS funding status was 44% (2015: 45% and 2014: 50%), including reimbursement rights, for the funded OPEB plans.

(i)

Funding Status

The funding of the RHI Group’s various defined benefit plans is the responsibility of the sponsoring employer, and is managed based on local statutory valuations, which follow the statutory requirements in the United States. 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.

The IFRS funded status of the funded defined benefit plans improved to 75% in 2016 (2015: 71% 2014: 71%).

Reimbursement rights are linked to the post‑employment medical plans in the United States and represent the expected reimbursement of the prescription expenditure provided under the Medicare Prescription Drug Improvement and Modernization Act of 2003.

(ii)

Plan Assets

The responsibility for the investment strategies of funded plans is with the senior governance body, the Roche U.S. Governance Committee. Asset‑liability studies are performed regularly for all major pension plans. These studies examine the obligations from postretirement defined 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 optimize 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 RHI Group currently does not use annuities or longevity swaps to manage longevity risk.

Plan assets are managed using external asset managers. The actual performance is continually monitored by the pension fund governance body as well as being closely monitored at a corporate level. In the financial statements of the RHI Group the difference between the interest income and actual return on plan assets is a remeasurement that is recorded directly to other comprehensive income. During 2016 the actual return on plan assets was a gain of USD 283 million (2015: loss of USD 40 million 2014: gain of USD 383 million).

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.

Assets are invested in a variety of different asset classes in order to maintain a balance between risk and return as follows:

·

Equity and debt securities which have quoted market prices (Level 1 fair value hierarchy) and other observable inputs (Level 2 fair value hierarchy).

·

Property which is mainly in REITs and commercial property funds which have quoted market prices (Level 1 fair value hierarchy) and other observable inputs (Level 2 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 hedge funds, private equity, commodities and insurance contracts which have other observable inputs (Level 2 fair value hierarchy) and unobservable inputs (Level 3 fair value hierarchy).

(iii)

Defined 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. The corporate bonds have maturity terms approximating to the terms of the related pension obligation.

The RHI Group’s final salary‑based defined benefit pension plans have been closed to new participants since 2007. 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 now join the RHI Group’s defined contribution plans. As a result, the proportion of the defined benefit obligation which relates to these closed plans is expected to decrease in the future.