Management Report Audited

Summary assessment

In 2010, the business performance of Merck was very successful overall. As of the beginning of 2010, we recorded higher total revenues compared to year-earlier quarters. Primarily the Chemicals business sector benefited from improved economic conditions. Additionally, the acquisition of Millipore contributed to the increase in total revenues. The operating result of the Chemicals business sector increased markedly despite the costs of the integration of Millipore and the expenses from the purchase price allocation. In the Pharmaceuticals business sector, the operating result was lowered by one-time expenses from declines in the value of intangible assets.

The balance sheet ratios and the key financial indicators of Merck in 2010 were influenced mainly by the acquisition of Millipore. On the assets side of the balance sheet, acquired intangible assets led to an increase of more than EUR 5 billion. This compares mainly with third-party financing of the Millipore acquisition in addition to deferred taxes resulting from the purchase price allocation. Thanks to the good development of cash flow, Group net financial debt has already fallen since the acquisition.

Dividend proposal

We will propose to the Annual Meeting on April 8, 2011 a raise in the dividend from EUR 1.00 to EUR 1.25 per share.