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Disclaimer Publication of
Merck KGaA, Darmstadt, Germany. In the United States and Canada the
subsidiaries of Merck KGaA, Darmstadt, Germany operate under the
umbrella brand EMD.

Table of contents

  • Page 1
    Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the subsidiaries of Merck KGaA, Darmstadt, Germany operate under the umbrella brand EMD.

  • Page 2
    Merck Annual Report 2011 Merck Serono Performance Materials Consumer Health Care Merck Millipore

  • Page 3
    ... Capital Market 032 ➝ Key Events in 2011 #02 Group Management Report 035 ➝ Overall Economic Situation 036 ➝ Financial Position and Results of Operations 050 ➝ Corporate Responsibility 060 ➝ Merck Serono 071 ➝ Consumer Health Care 075 ➝ Merck Millipore 079 ➝ Performance Materials...

  • Page 4
    ... of the Merck Group Pharma­ ceuticals Corporate and Other Change in % â,¬ million Chemicals Total Total revenues Gross margin Research and development Operating result Exceptional items EBIT before depreciation and amortization (EBITDA) Earnings before interest and tax (EBIT) Return on sales in...

  • Page 5
    ... The road to tomorrow Merck Annual Report 2011 The road to tomorrow starts with this Annual Report, which offers far more than a look back at the year 2011. Continue this journey into the future - with our online media and our media for tablet PCs. More information is available online at: ➝ www...

  • Page 6
    ... innovative prescription drugs of chemical and biotechnological origin. It is our largest division in terms of sales. Consumer Health Care ➝ offers patients and consumers high­quality over­the­counter products for a healthy lifestyle. Merck Millipore ➝ is a world-class partner to the life...

  • Page 7
    ... We are on the road to tomorrow 046 Innovative Dynamic Future-oriented Values-based We are a leading pharmaceutical, chemical and life science company with four strong divisions: Merck Serono, Consumer Health Care, Merck Millipore and Performance Materials. We have a clear focus on research and...

  • Page 8
    Merck 2011 The road to tomorrow 1 /4

  • Page 9
    015 046 The road to tomorrow #1 Innovative thinking Promoting research ➝ Merck ranks among the world's leading pharmaceutical, chemical and life science companies. Our success is based on our unwavering focus on research and innovation.

  • Page 10
    Merck 2011 The road to tomorrow Seeing the world through the eyes of our patients is a unique source of inspiration which drives us to continuously strengthen our product offerings, taking advantage of the latest medical and technological advances to ultimately meet patient needs. Over the years, ...

  • Page 11
    015 046

  • Page 12
    Merck 2011 The road to tomorrow 2 /4

  • Page 13
    015 046 The road to tomorrow #2 Dynamic change Transforming ideas into reality ➝ Merck embodies experience and pioneering spirit. Our corporate culture is based on the dynamism of innovation and the commitment of our employees.

  • Page 14
    ... and potential of our employees in order to tap new, high-growth markets systematically and successfully. Setting milestones ➝ The world's largest OLED display, manufactured using materials from Merck, represents an important step forward in developing the information technology of tomorrow.

  • Page 15
    015 046

  • Page 16
    Merck 2011 The road to tomorrow 3 /4

  • Page 17
    015 046 The road to tomorrow #3 Future-oriented growth Recognizing potential ➝ Merck is growing in promising markets of the future with innovative products and new solutions for the world of tomorrow.

  • Page 18
    ... we are tapping key markets of the future. We are keenly aware of our customers' needs. For example, we are one of the leading suppliers of cell culture media. Tapping growth markets ➝ Merck is one of the world's leading suppliers of laboratory chemicals and cell culture media for use in research...

  • Page 19
    015 046

  • Page 20
    Merck 2011 The road to tomorrow 4 /4

  • Page 21
    015 046 The road to tomorrow #4 Values-based behavior Living our values ➝ Merck thinks and acts in a long­term and values-based manner. As a company, we actively take on responsibility in the communities in which we operate.

  • Page 22
    Merck 2011 The road to tomorrow 4 /4 As a company that is very conscious of its values, we feel committed not only to the employees and shareholders of Merck but also to the community - at all our sites and worldwide. With the drug Cesol ® 600, Merck has been cooperating with the World Health ...

  • Page 23
    015 046

  • Page 24
    ... leadership structure ➝ The divisions have full business accountability ➝ Global Group functions help to steer the company uniformly and provide services Efficiency enhancement ➝ Central steering with new targets ➝ Clear guidelines for corporate development Performance-oriented corporate...

  • Page 25
    Merck 2011 021 032 #01 To our Shareholders Letter from Karl-Ludwig Kley The Executive Board Merck in the Capital Market Key Events in 2011 023 026 029 032

  • Page 26
    22 Merck 2011 To our Shareholders Letter from Karl-Ludwig Kley » Merck has changed significantly in recent years. «

  • Page 27
    ...activities. And with the acquisition of Millipore, we established ourselves as a leading partner to the global life science industry. With its new structure, Merck is in a good starting position to sustainably exploit the growth opportunities in the pharmaceutical, chemical and life science sectors.

  • Page 28
    ... changes. With three new members, the Executive Board has been complete since mid-2011. In January, Stefan Oschmann took over responsibility for our Pharmaceuticals business sector. Kai Beckmann followed in April as Head of Group Human Resources. And Matthias Zachert has been Chief Financial Officer...

  • Page 29
    ...to survive wars, currency reforms and changes in government systems while continuing to operate its businesses successfully. Whenever changes take place, our employees can rely on the fact that Merck remains a community based on a shared set of values, attaches great importance to social partnership...

  • Page 30
    ...Head of Group Human Resources / Chief Administration Officer Born in 1965, university degree in computer science Joined Merck in 1989, member of the Executive Board since April 2011 Responsibility for Group functions: Group Human Resources; Group Information Services; Site Management Darmstadt and...

  • Page 31
    Merck 2011 To our Shareholders 27 The Executive Board Bernd Reckmann Stefan Oschmann Karl-Ludwig Kley Kai Beckmann Matthias Zachert

  • Page 32
    ...on the number of shares in free float (64.6 million) on December 31 WKN: 659990 ISIN: DE 0006599905 The performance of Merck shares vs. the DAX ® and the Bloomberg Europe 500 Pharmaceuticals Index (BEPHARM) in 2011 Jan. 140% 120% 100% 80% 60% Feb. March April May June July Aug. Sept. Oct. Nov. Dec...

  • Page 33
    ... Chemicals Index, performed negatively, declining by 14%. At nearly 500,000, the average number of Merck shares traded daily was 13% lower in 2011 than in 2010. Identified investors by region 5 4 6 1 United States 2 United Kingdom 1 54% 14% 12% 11% 6% 3% 3 2 3 Germany 4 Rest of Europe 5 France...

  • Page 34
    ... price). The proportion of value investors remained at a high level. As of December 31, 2011, the following shareholders reported their holdings in Merck shares to the company in accordance with the German Securities Trading Act: Number of shares held % of free float Reported on Sun Life Financial...

  • Page 35
    ... in the Capital Market acquisition. The majority of the investors in the convertible bond exercised a conversion right resulting from the acquisition in 2010. The still outstanding total nominal amount of US$ 27.2 million was repaid in the fourth quarter of 2011, which slightly reduced financial...

  • Page 36
    ... 2011 To our Shareholders Merck: Key Events in 2011 01 /11 In January, Merck acquired 100% of the share capital of Beijing Skywing Technology Co., Ltd, a leading supplier of cell culture media products, related technical services and bioreactors for the Chinese biopharmaceutical industry. China...

  • Page 37
    Merck 2011 #02 Merck Group Management Report 2011 Overall Economic Situation Financial Position and Results of Operations Corporate Responsibility Merck Serono Consumer Health Care Merck Millipore Performance Materials Corporate and Other Risk Report Report on Expected Developments Subsequent ...

  • Page 38
    ... Report The Year 2011 in Figures Merck Group Total revenues EBITDA EBIT Employees â,¬ 10,276 million Underlying free cash flow â,¬ 2,736 million R&D costs â,¬ 1,137 million Return on sales (ROS) 40,676 Global presence â,¬ 1,395 million â,¬ 1,517 million 9.6% 67 countries Merck Serono...

  • Page 39
    ...2.5%. For 2011, the German Chemical Industry Association (VCI) reported an increase in chemical production of 4% compared to 2010. Total sales of the German chemical industry rose by 9% in 2011 to â,¬ 186.5 billion. Consequently, Germany ranks fourth globally after the United States, China and Japan...

  • Page 40
    ...All four divisions contributed to this development. Total revenues of the Merck Group rose in fiscal 2011 by â,¬ 986 million or 11% to â,¬ 10,276 million. This increase was primarily due to the acquisition of Millipore Corporation, a leading U.S. life science company, which we completed in July 2010...

  • Page 41
    ... 390 million reported in 2010. This sharp increase is due largely to the asset impairment of the Large-Scale Biotech production plant (LSB) at the Merck Serono Biotech Center in Switzerland. Owing to expected overcapacity, an asset impairment of â,¬ 165 million was recognized on the LSB in 2011. Due...

  • Page 42
    ... 1,028 Chemicals Pharmaceuticals Amortization of intangible assets increased sharply to â,¬ 1,005 million in 2011 from â,¬ 819 million in 2010. This total mainly includes amortization of intangible assets in connection with the purchase price allocations for Serono and Millipore. The increase is...

  • Page 43
    Merck 2011 39 Group Management Report Financial Position and Results of Operations Impairments impact the operating result impairment loss of â,¬ 9 million was recognized on an intangible asset. Impairment losses of â,¬ 9 million on various patents in the Performance Materials division were ...

  • Page 44
    ...innovative prescription drugs and Consumer Health Care for over-the-counter pharmaceuticals, increased its total revenues in 2011 by 3.1% to â,¬ 6,416 million. This business sector accounted for 62% of the Merck Group's total revenues in 2011. Total revenues of the Merck Serono division increased by...

  • Page 45
    ... the Merck Millipore division, it should be noted that the Millipore companies were only included in the financial statements for six months in 2010. Organically, meaning adjusted for acquisition and exchange rate effects, total revenues of the Chemicals business sector increased by 4.2%. Chemicals...

  • Page 46
    ...Merck 2011 Group Management Report Financial Position and Results of Operations Chemicals | Operating result by division â,¬ million / % of Chemicals total revenues 1 1 Merck Millipore 2 Performance Materials 226 525 30% 70% 2 The operating result of the Chemicals business sector increased...

  • Page 47
    ... 376 million in 2011 compared to â,¬ 366 million in 2010). Within Europe, France contributed the highest share of pharmaceutical sales in the Merck Serono and Consumer Health Care divisions, then followed by Germany. Like many other European countries, both these markets recorded sales declines with...

  • Page 48
    ... aim of the acquisition of Millipore was to increase our sales contribution from the Chemicals business sector in the United States. Prescription drugs from the Merck Serono division generated 59% of our sales in the United States. In Latin America, Brazil is our largest market, followed by Mexico...

  • Page 49
    ... interest payment date in March 2011 for major bonds issued in 2010 in order to finance the Millipore acquisition. Underlying free cash flow, i.e. adjusted for the payments to externally finance pension obligations of Merck KGaA (CTA) as well for effects of acquisitions and divestments, decreased by...

  • Page 50
    ...-sur-Vevey, Switzerland. As in previous years, this represents the single largest capital investment project of the Merck Group. Around 26% of capital spending in Pharmaceuticals related to headquarters in Darmstadt, Germany. Capital spending on property, plant and equipment (excluding Corporate and...

  • Page 51
    ... for what it is used. Our corporate result, meaning the sum of total revenues, other income and financial income, amounted to â,¬ 10,685 million in 2011 (2010: â,¬ 9,552 million). After deducting the costs of materials as well as other purchased services and expenses, gross value added amounted to...

  • Page 52
    48 Merck 2011 Group Management Report Financial Position and Results of Operations Net value added statement â,¬ million 2011 2010 Total revenues Other income Financial income Corporate result Cost of materials Other purchased services/expenses Gross value added Depreciation and amortization...

  • Page 53
    ... with the members of the Executive Board or employees in the event of a takeover offer. Summary assessment Solid balance sheet, decline in financial debt Overall, Merck's business performance in 2011 was solid. As of the beginning of 2011, both the Pharmaceuticals and Chemicals business sectors...

  • Page 54
    ... In Germany, the workforce increased by 560 employees. This was mainly attributable to both the acquisition of Biotest AG's microbiology business, as well as to chemicals production, where we increased the number of permanent employees and reduced the share of temporary workers. In China, the number...

  • Page 55
    ... in newly added businesses such as Merck Millipore. These programs aim to develop a performance culture based on the joint strategic direction of the company, to establish a performance-related, market-oriented compensation structure, and to fill positions with the right people. Merck is using the...

  • Page 56
    ... Group Management Report Corporate Responsibility Global Rewards Policy The Global Rewards Policy applies to all Merck companies worldwide and ensures a systematic compensation structure. The policy describes the principles governing how employees are compensated depending on their performance...

  • Page 57
    ... Group Management Report Corporate Responsibility Accidents 2011 2010 2009 2008 2007 LTIR (Lost Time Injury Rate) Number of fatalities Not portfolio-adjusted 2.0 - 3.0 1 3.5 - 3.9 1 4.7 3 Diversity in the workforce As an international company, Merck endeavors to achieve a good balance...

  • Page 58
    54 Merck 2011 Group Management Report Corporate Responsibility Entrepreneurial opportunities through balanced diversity Balanced diversity among the executive staff enhances career advancement opportunities for talented employees. However, it also enables the company to leverage a broad base of...

  • Page 59
    ...Care Charter. It aims to achieve a globally uniform standard for evaluating product safety. At Merck, we are implementing the GPS by compiling online product safety summaries that are available on websites such as the GPS portal of the International Council of Chemical Associations (ICCA). These use...

  • Page 60
    ... 2011 Group Management Report Corporate Responsibility Improving access to medicine in developing countries We utilize our scientific expertise and global market presence to provide products and services that focus on patients. For many years, Merck has been promoting and working on programs...

  • Page 61
    ... thus cutting costs, conserving resources and protecting the environment. In 2011, energy checks were conducted at the Chemicals production sites in Altdorf, Switzerland; Savannah, GA, United States; and Taicang, China. Another energy audit was performed at the Merck Serono site in Semoy, France. In...

  • Page 62
    ...Management Report Corporate Responsibility Energy Star and national model for construction safety Lower energy consumption and a proactive safety culture There are many examples of achievements and activities in this area. In February 2011, the Merck Millipore site in Billerica, MA (United States...

  • Page 63
    ... not only an integral part of the cultural life in the vicinity of our corporate headquarters in Darmstadt - it also tours internationally. In autumn 2011, the Deutsche Philharmonie Merck performed in seven cities in India as part of the "Year of Germany in India 2011-2012", and then went on to play...

  • Page 64
    60 Merck 2011 Group Management Report The Divisions of the Merck Group 1/4 Merck Serono Merck Serono is the largest division of Merck. It markets innovative prescription drugs of chemical and biological origin. The division offers its leading brands in around 150 countries. Merck Serono focuses...

  • Page 65
    ...Management Report Merck Serono Sales of the Merck Serono division increased slightly over 2010. More than half of this growth was attributable to the three top-selling products in our CardioMetabolic Care portfolio. Growth also thanks to classic products The Merck Serono division increased total...

  • Page 66
    ... free cash flow ROS in % 5,920 4,888 1,225 304 25 1,475 1,205 5.1 5,754 4,793 1,167 565 69 1,298 1,308 9.8 2.9 2.0 5.0 -46 -63 14 -7.8 Double-digit sales growth in Latin America Europe was once again Merck Serono's top-selling region in 2011, accounting for nearly half of the division's sales...

  • Page 67
    ... level and totaled â,¬ 742 million (-1.4%). The highest sales were achieved in Germany and Italy, where we recorded growth rates of 6.8% and 2.7%, respectively. In Latin America, sales increased by 3.2% to â,¬ 111 million; in Asia, Africa, Australasia, growth amounted to 14%. The human serum albumin...

  • Page 68
    ... hormones. The Fertility business unit increased its sales in 2011 by 6.1% to â,¬ 697 million and expanded its market share. Europe accounted for nearly half our sales, which remained at the previous year's level. We recorded double-digit growth rates in Asia, Africa, Australasia and Latin America...

  • Page 69
    ... by 18% in Latin America to â,¬ 94 million. We recorded sales declines in Europe because at times we reached our production capacity limits. Merck is the world's largest supplier of medicines to treat thyroid disorders. Sales of our key product, the thyroid hormone Euthyrox ®, increased by 19% to...

  • Page 70
    66 Merck 2011 Group Management Report Merck Serono Thanks to their good competitive position in key markets outside of Europe, our other products generated sales of â,¬ 1,034 million. Sales of the Neurobion ® range increased by 10% to â,¬ 198 million. Neurobion ® is a multivitamin to treat and...

  • Page 71
    ... capital fund. In 2011, we set up the Merck Serono Israel Bioincubator Fund, a strategic and corporate initiative targeting Israeli biotechnology start-ups. The fund will offer both seed financing and the opportunity to use certain labs at Merck Serono's Israeli R&D center. We will commit a total...

  • Page 72
    ... Phase III START trial. We completed patient recruitment in 2011. Merck Serono entered into two collaboration agreements with Ono Pharmaceutical to strengthen its multiple sclerosis and cancer franchises. The oncology agreement provides Ono with rights to co-develop and co-market Stimuvax ® in...

  • Page 73
    ... 2011 69 Group Management Report Merck Serono Compounds to treat MS added to pipeline In Neurodegenerative Diseases, our focus is on new therapeutic options for patients with multiple sclerosis. In November, the Committee for Medicinal Products for Human Use of the European Medicines Agency...

  • Page 74
    70 Merck 2011 Group Management Report Merck Serono The aim of our Endocrinology research and development work is to offer patients with growth disorders and selected metabolic diseases new therapeutic options. We also want to continuously enhance the understanding of the products in our ...

  • Page 75
    ... in key future markets such as Russia, Brazil and India. Sales decline in the United Kingdom, Poland, Mexico, and Indonesia; sales grow in all regions Total revenues increase by 5.1%, operating result more than triples following one-time effects in 2010 Improved cost structure and profitability lead...

  • Page 76
    ... our products are pharmacies as well as retail chains, drug stores and mail order in some countries and certain markets. Consumer Health Care | Key figures â,¬ million 2011 2010 ∆ in % Total revenues Gross margin R&D Operating result Exceptional items Free cash flow Underlying free cash flow...

  • Page 77
    Merck 2011 73 Group Management Report Consumer Health Care With the exception of Seven Seas ®, all our key brands generated strong single- and double-digit sales increases. Global sales of the Bion ® brand grew by 17% to â,¬ 63 million, with France accounting for â,¬ 36 million of this amount....

  • Page 78
    74 Merck 2011 Group Management Report Consumer Health Care United Kingdom and other European countries In the United Kingdom, which is currently characterized by a generally difficult market environment, sales declined by 3.4% to â,¬ 52 million. We expanded the well-established Seven Seas ® ...

  • Page 79
    ..., Lab Solutions and Process Solutions strengthen their offerings through acquisitions of Amnis Corporation, Biotest AG's microbiology business and Beijing Skywing Technology Co., Ltd. New, state-of-the-art Biopharmaceutical Technical and Training Center opened in Shanghai, China New Merck Millipore...

  • Page 80
    ... Merck's acquisition of Millipore in 2010, reported solid organic revenue growth in 2011. This was mainly achieved through new product launches and acquisitions. The division's three business units - BioScience, Lab Solutions and Process Solutions - all increased their sales in 2011. Total revenues...

  • Page 81
    ...Group Management Report Merck Millipore Merck Millipore | Sales by region â,¬ million / % of divisional sales 4 1 1 Europe 2 North America 3 Latin America 4 Asia, Africa, Australasia 906 648 183 646 38% 27% 8% 27% 3 2 Sales in Asia and Latin America rise sharply The BioScience business unit...

  • Page 82
    78 Merck 2011 Group Management Report Merck Millipore Acquisition of Biotest's microbiology business expands the product portfolio Innovation was a major driver for Lab Solutions. An example is a new collection and recycling program developed by Lab Water that addresses customer requests for ...

  • Page 83
    ... 8.0% despite pressure on prices Despite a sales decline of 5.4% in the Pigments & Cosmetics business unit, total revenues of the division increase to â,¬ 1,467 million After the earthquake in Japan on March 11, production of XiRAlliC ® effect pigments resumes at the Onahama site in May Decision to...

  • Page 84
    ... at times, increased raw materials costs, as well as additional expenses for new product launches. However, the division's profitability was lower than in 2010; return on sales (ROS) amounted to 35.8% in 2011, compared to 39.7% in 2010. In order to defend and expand our leadership position, we...

  • Page 85
    Merck 2011 81 Group Management Report Performance Materials resumed in May after an interruption of only four weeks. Merck will additionally begin producing Xirallic ® pigments, which are in high demand for automotive coatings, at its German site in Gernsheim in 2012. Liquid Crystals: Higher ...

  • Page 86
    82 Merck 2011 Group Management Report Performance Materials OLED technology progressing rapidly Besides liquid crystal technology, our researchers are working on materials for innovative displays. The special focus of development here is on OLED materials, which are already being used in mobile...

  • Page 87
    ... effective taxes but also deferred taxes, which take into consideration the difference in the carrying values between the tax accounts of the Group companies and the consolidated balance sheet. The latter result primarily from the purchase price allocations for Serono and Millipore. Free cash flow...

  • Page 88
    .... Opportunity management is conducted in the operating units on the basis of the corporate strategy. More information can be found in the Report on Expected Developments starting on page 91. Within the context of the Group-wide risk management process, the division heads, managing directors of Merck...

  • Page 89
    ... of materially false accounting statements to a minimum. However, no internal control system - regardless of its design - can prevent a residual risk. Business-related risks Total revenues and the operating result of the Merck Group depend on a large number of pharmaceutical and chemical products...

  • Page 90
    ... Merck 2011 Group Management Report Risk Report Political and regulatory risks As a global company, Merck faces political and regulatory changes in many countries and markets. In 2011, increasingly restrictive requirements were imposed in the pharmaceutical environment in terms of drug pricing...

  • Page 91
    ... by these market price risks owing to its global group structure and the associated financial transactions, receivables and liabilities in operating business, as well as expected future cash flows from sales and costs in foreign currency. Merck therefore uses derivative financial instruments to...

  • Page 92
    ... for Human Resources; they identify the key improvement areas for Merck to focus on in order to motivate and retain employees. Merck has been investing in talent processes for a number of years. Through a global talent and succession management approach, Merck analyzes current and future capability...

  • Page 93
    ... data by means of redundant structures of technical components, networks and sites, as well as suitable, tested contingency measures. Security guidelines are in place for the entire Merck Group. They include appropriate organizational and technical precautions for access control, access rights...

  • Page 94
    ... 2011 Group Management Report Risk Report Environmental and safety risks Merck is a company with global production operations and is exposed to risks of possible damage to people, goods and its image. We minimize the risks to people and the environment by means of auditing, advising and training...

  • Page 95
    ... pharmaceutical data provider Evaluate Pharma, the global market for prescription and over-the-counter (OTC) products will increase by 2.7% to US$ 765 billion in 2012. For 2013, sales are predicted to increase by 3.8% to US$ 794 billion compared to 2012. Evaluate Pharma also assumes that the share...

  • Page 96
    92 Merck 2011 Group Management Report Report on Expected Developments The pharmaceutical market research firm IMS Health (Intercontinental Marketing Services Health) forecasts that the global pharmaceutical market will grow by between 3% and 6% annually up until 2015, based on sales of US$ 856 ...

  • Page 97
    ... that total revenues of the Merck Group will increase slightly in 2012 and 2013. However, in both the Performance Materials division and the Pharmaceuticals business sector, we see ourselves exposed to relative price pressure especially as a result of the structural problems faced by health care...

  • Page 98
    ...the therapeutic class with the second-largest market volume after oncology drugs. For the Merck Serono division, we expect total revenues in 2012 to remain at the level of 2011 and increase slightly in 2013. The efficiency-enhancement and cost-reduction program could adversely affect reported EBITDA...

  • Page 99
    ...on Europe - its core market - as well as growth markets in Asia, Latin America and eastern Europe. The Consumer Health Care division faces risks especially from global changes in health care policy framework conditions and consumer purchasing behavior, factors that can negatively impact the business...

  • Page 100
    ... reason, R&D costs are expected to rise further in 2012 and 2013. Despite higher capital spending on property, plant and equipment in 2012 and 2013 to support growth, free cash flow will be clearly positive in the coming years. The BioScience business unit of Merck Millipore develops products that...

  • Page 101
    ... growth of 3%. According to research by Datamonitor, the value of the market for skin care products is to increase by 4% in 2012 and in a similar range of 3.9% in 2013. This is also a market for products from the Performance Materials division. Datamonitor also expects that the global market...

  • Page 102
    98 Merck 2011 Group Management Report Report on Expected Developments The Performance Materials division expects total revenues to grow slightly in 2012 and 2013. Volume growth especially in Liquid Crystals could possibly be offset by price pressure in the market. Therefore, in 2012, EBITDA ...

  • Page 103
    Merck 2011 #03 Corporate Governance Statement on Corporate Governance Report of the Supervisory Board Objectives of the Supervisory Board with respect to its composition 101 119 122 099 124

  • Page 104
    ... Governance Merck KGaA at a glance Capital structure and bodies of Merck KGaA Total capital of Merck KGaA â,¬ 565,211,241.95 â,¬ 168,014,927.60 Share capital â,¬ 397,196,314.35 Equity interest Limited liability shareholders Merck KGaA General Meeting (with equity interest) General partner...

  • Page 105
    ... Governance Code including Statement of Compliance The German Corporate Governance Code is geared exclusively toward the conditions found in a German stock corporation (Aktiengesellschaft) and not toward a corporation with general partners (Kommanditgesellschaft auf Aktien) such as Merck KGaA. Merck...

  • Page 106
    ..., Germany, on April 18, 2011. At 56.60%, the proportion of share capital represented at the meeting was stable. At 58.22%, the proportion was slightly higher in 2010. In accordance with Article 21 (3) of the company's Articles of Association, the annual financial statements, the management report...

  • Page 107
    ...Code) The compensation report is part of the audited Notes to the Group accounts. Compensation of members of the Executive Board of Merck KGaA Contrary to management board members of German stock corporations, the members of the Executive Board of Merck KGaA are not employed officers of the company...

  • Page 108
    ...11) Total 1,100 800 600 1,000 1,000 450 583 5,533 1,000 800 n/a n/a 750 900 n/a 3,450 * Michael. Becker was the Chief Financial Officer of Merck KGaA until May 31, 2011. After June 1, 2011, Michael Becker remained a General Partner of Merck KGaA, but was no longer a member of the Executive Board...

  • Page 109
    ... Becker was the Chief Financial Officer of Merck KGaA until May 31, 2011. After June 1, 2011, Michael Becker remained a General Partner of Merck KGaA, but was no longer a member of the Executive Board. ** Elmar Schnee was a General Partner of Merck KGaA in the period from January 1, 2011 to June 30...

  • Page 110
    ... contributions to insurance policies as well as a company car, which they are entitled to use privately. The members of the Executive Board must declare these benefits in their tax returns. In total, the value of miscellaneous benefits amounted to â,¬ 121 thousand in 2011 (2010: â,¬ 86 thousand). Of...

  • Page 111
    ... each year, under the Merck Long-Term Incentive Plan the members of the Executive Board could be eligible to receive a certain number of virtual shares - Merck Share Units (MSUs) - at the end of a three-year performance period. The number of MSUs depends on the total value defined for the respective...

  • Page 112
    ... 2011 Corporate Governance Statement on Corporate Governance introduce a new long-term incentive plan for eligible executives and employees effective January 1, 2012 which corresponds in its composition largely to the Merck Long-Term Incentive Plan. Compensation of the Supervisory Board members...

  • Page 113
    ... Merck website at www.merckgroup.com/investors Corporate Governance Directors' Dealings. Supervisory Board Information on Corporate Governance Practices Reporting It is Merck KGaA's objective to provide the latest information to all shareholders, media, financial analysts and interested members...

  • Page 114
    ...-internal regulations and the basic ethical principles anchored in the company values. With the Code of Conduct and the various unit-specific compliance rules, the values are integrated into daily work and business practice. The Code of Conduct is binding on all employees, both at headquarters...

  • Page 115
    Merck 2011 111 Corporate Governance Statement on Corporate Governance legal entities in the countries. This Group-wide network is used to steer the global compliance program. Regular regional and global compliance meetings are held to promote the exchange of information within the network. ...

  • Page 116
    ... of corporations Member Karl-Ludwig Kley Darmstadt Chairman Michael Becker* Darmstadt, Chief Financial Officer (until 5/31/11) Kai Beckmann Griesheim, Head of Group Human Resources (since 4/1/11) Stefan Oschmann Munich, Head of the Pharmaceuticals business sector (a) - Bertelsmann AG, Gütersloh...

  • Page 117
    .../11) (b) - Merck Serono S.A., Coinsins, Switzerland (until 1/10/11) - ChemGenex Pharmaceuticals Ltd., Geelong, Australia no board positions * Michael Becker was Chief Financial Officer of Merck KGaA until May 31, 2011. After June 1, 2011, Michael Becker remained a General Partner of Merck KGaA, but...

  • Page 118
    ..., Full-time member of the Works Council of the Darmstadt site of Merck KGaA Mechthild Auge Wehrheim, Head of Strategy, CardioMetabolic Care, Merck Serono, Merck KGaA Johannes Baillou Vienna, Austria, Managing Partner of Bondi Immobilien-Consulting GmbH, Vienna (a) - Epigenomics AG, Berlin (Chairman...

  • Page 119
    ... business policy, as well as other fundamental issues pertaining to corporate planning, especially financial, investment and HR planning; the profitability of the Merck Group; the progress of business; the risk situation; risk management (including compliance), and the internal auditing system...

  • Page 120
    116 Merck 2011 Corporate Governance Statement on Corporate Governance The Supervisory Board deals with the quarterly and half-year consolidated financial statements and examines the annual financial statements of the Merck Group as well as the annual financial statements of Merck KGaA, taking ...

  • Page 121
    ... AG & Co. KGaA, Düsseldorf (b) - DKSH Holding Ltd., Zurich, Switzerland Theo Siegert Düsseldorf, Managing Partner of Haen Carstanjen & Söhne, Düsseldorf The Board of Partners supervises the Executive Board in its management of the company. It informs itself about the business matters of Merck...

  • Page 122
    ... and Chemicals. The Pharmaceuticals and Chemicals business sectors present the status of their respective research to the Research and Development Committee in special meetings. The Committee deals thoroughly with the pharmaceutical research progress report and with developments of new medicines in...

  • Page 123
    ... of the Merck Group in order to improve processes as well as on the planned program to boost efficiency and reduce costs. In addition, the head of Group Legal & Compliance presented the compliance report for 2011 to the Supervisory Board. This report is a standard part of the October meeting every...

  • Page 124
    120 Merck 2011 Corporate Governance Report of the Supervisory Board The annual financial statements of Merck KGaA, the consolidated financial statements of the Merck Group, and the management reports for Merck KGaA and the Merck Group, including the accounts, were audited by KPMG AG ...

  • Page 125
    Merck 2011 121 Corporate Governance Report of the Supervisory Board Committees The Supervisory Board of Merck KGaA currently has no committees on account of the special features that apply to the Supervisory Board of a corporation with general partners (KGaA) under German company law and ...

  • Page 126
    ... of the German Corporate Governance Code, the Supervisory Board shall specify concrete objectives regarding its composition which, while considering the specifics of the enterprise, take into account the international activities of the enterprise, potential conflicts of interest, an age limit to be...

  • Page 127
    ... appropriate management experience in family-owned companies of this size. Internationality The Supervisory Board shall have at least three members with business experience in the main sales markets of Merck KGaA. Currently, the main sales markets of Merck KGaA are Europe, North and Latin America...

  • Page 128
    ... Corporate Governance Code with respect to conflicts of interest. No Supervisory Board member serves on a body of or advises a major competitor, or provides consultancy services thereto. No Supervisory Board member performs a function that could lead to a lasting conflict of interest. No age limit...

  • Page 129
    ...133 137 146 153 175 178 180 195 Notes to the Group accounts Scope of consolidation Accounting policies Notes to the Consolidated Income Statement Notes to the Consolidated Balance Sheet Segment reporting Notes to the Consolidated Cash Flow Statement Other disclosures List of shareholdings 125 202

  • Page 130
    126 Merck 2011 Consolidated Financial Statements Merck Consolidated Income Statement â,¬ million Note 01 02 2011 2010 Sales Royalty, license and commission income Total revenues Cost of sales Gross margin Marketing and selling expenses Royalty, license and commission expenses Administration...

  • Page 131
    Merck 2011 127 Consolidated Financial Statements Merck Consolidated Statement of Comprehensive Income â,¬ million 2011 2010 Profit after tax Available-for-sale financial assets Fair value adjustments Reclassification to income statement Deferred taxes Changes recognized in equity Derivative ...

  • Page 132
    ... Statements Merck Consolidated Balance Sheet â,¬ million Note 16 17 18 19 20 21 22 Dec. 31, 2011 Dec. 31, 2010 Current assets Cash and cash equivalents Marketable securities and financial assets Trade accounts receivable Inventories Other current assets Tax receivables Assets held for sale...

  • Page 133
    ... in financial assets Disposal of non-current assets Purchase/sale of marketable securities Changes in financial assets covering pensions Changes in other financial assets Net cash flows from investing activities Dividend payments Profit transfers to E. Merck KG and changes in reserves Changes in...

  • Page 134
    130 Merck 2011 Consolidated Financial Statements Merck Consolidated Statement of Changes in Net Equity For details see Note [34] Equity capital General partner's equity Merck KGaA Subscribed capital Merck KGaA Capital reserves (share premium) Merck KGaA Reserves Retained earnings/ Net retained ...

  • Page 135
    Merck 2011 131 Consolidated Financial Statements Gains/losses recognized immediately in equity Available-for-sale financial assets Derivative financial instruments Currency translation difference Equity attributable to Merck KGaA shareholders Non-controlling interest Equity 18.8 - -21.8 -21.8 ...

  • Page 136
    .... Reporting principles Company information The consolidated financial statements of the Merck Group have been prepared in accordance with consistent accounting policies. Pursuant to section 315a of the German Commercial Code (HGB), the International Financial Reporting Standards (IFRS) in force on...

  • Page 137
    ... financial assets. A list of all the Merck Group's shareholdings can be found in Note [56]. Acquisitions At the end of December 2010, Merck acquired 100% of the shares in Beijing Skywing Technology Co., Ltd., Beijing, China. The acquired company, which is now part of the Merck Millipore division...

  • Page 138
    ... statement. Within the scope of the purchase price allocation, the acquired assets and liabilities were recognized at fair values in the balance sheet in accordance with IFRS 3. The acquisitions had the following effects on the consolidated balance sheet: Amnis Corporation Microbiology business...

  • Page 139
    ... step-up of intangible assets within the scope of the purchase price allocation as well as higher cost of sales due to the step-up of the acquired inventories to fair values. Had the microbiology business and Amnis Corporation been included in the consolidated financial statements of the Merck Group...

  • Page 140
    ... the first quarter of 2011. In the Group balance sheet as of December 31, 2010, the corresponding assets and liabilities were disclosed under "Assets held for sale" and "Liabilities directly related to assets held for sale". The Performance Materials division generated sales of around â,¬ 46 million...

  • Page 141
    ... accounted for using the purchase method in accordance with IFRS 3. Subsidiaries consolidated for the first time in the reporting period are measured at the carrying values at the time of acquisition on the basis of corresponding financial statements. Resulting differences are recognized as assets...

  • Page 142
    ... of sales and other revenue Sales are recognized net of related taxes as well as revenue-lowering items. They are deemed realized once the goods have been delivered or the services have been rendered and the material opportunities and risks of ownership have been transferred to the purchaser. The...

  • Page 143
    ... measure the financial instrument. In other cases, generally accepted financial techniques using observable prices on the market or third-party valuations are used. Financial assets are derecognized in part or in full if the contractual rights to the cash flows from the financial asset have expired...

  • Page 144
    ...impairment losses are also recognized in the income statement up to the amount of the original cost of the asset. Long-term non-interest-bearing and low-interest receivables are measured at their present value. Merck primarily assigns trade receivables, loans, and miscellaneous other current and non...

  • Page 145
    ... specifically assigned to that hedged item. At Merck, all hedges relate to existing or highly probable hedged items. Merck only uses derivatives as hedging instruments. Changes in the fair value or cash flows of the hedged item and the hedging instrument must be effective at all times. In both cash...

  • Page 146
    ... capitalized. Intangible assets with indefinite useful lives acquired in the course of business combinations are recognized at fair value on the date of acquisition. This includes purchased goodwill and intangible assets used in products that have not yet reached market maturity. Intangible assets...

  • Page 147
    ... Financial Statements Accounting policies In the business plan, a long-term growth rate of 2.8% was used to measure the goodwill of the Merck Millipore division. The long-term growth rates used for the other divisions are as follows: Merck Serono 1.5%, Consumer Health Care 2.5%, and Performance...

  • Page 148
    144 Merck 2011 Consolidated Financial Statements Accounting policies in those cases where government grants or subsidies have been paid for the acquisition or manufacture of assets (investment grants). Grants related to expenses which no longer offset future expenses are recognized in income. ...

  • Page 149
    ...of service and salary of the employees. Pension obligations of the Merck Group include both defined benefit and defined contribution plans and comprise both obligations from current pensions and accrued benefits for pensions payable in the future. In the Merck Group, defined benefit plans are funded...

  • Page 150
    ...also include revenues from services rendered. Merck Group sales totaled â,¬ 9,905.9 million in 2011, which represents an increase of 10.9% compared to 2010. Adjusted for the impact of foreign exchange rates and acquisitions, primarily as a result of the Millipore acquisition, organic growth amounted...

  • Page 151
    ...-Scale Biotech production plant (LSB) currently being built at the Merck Serono Biotech Center in Switzerland, an impairment loss of â,¬ 165.1 million was recognized in 2011. The write-downs of receivables relate in 2011 mainly to receivables from state hospitals and health care organizations in...

  • Page 152
    ...in 2010. This total mainly includes amortization of intangible assets in connection with the purchase price allocations for Serono and Millipore. The increase is due on the one hand to the fact that amortization of intangible assets from the purchase price allocation for the Merck Millipore division...

  • Page 153
    Merck 2011 149 Consolidated Financial Statements Notes to the consolidated income statement ( 11 ) Exceptional items Exceptional items comprised: â,¬ million 2011 2010 Gain on the divestment of the Crop BioScience business/transaction costs Gain on the divestment of the Théramex business ...

  • Page 154
    ... changes Deferred taxes (income statement) 136.9 60.9 -13,3 3.9 188.4 47.7 -617.0 -54.2 742.6 119.1 Tax loss carryforwards are structured as follows: Dec. 31, 2011 â,¬ million Germany Abroad Total Germany Dec. 31, 2010 Abroad Total Tax loss carryforwards thereof: Including deferred tax asset...

  • Page 155
    ...Dec. 31, 2011 â,¬ million Assets Liabilities Dec. 31, 2010 Assets Liabilities Intangible assets Property, plant and equipment Current and non-current financial assets Inventories Current and non-current receivables/Other assets Provisions for pensions and other post-employment benefits Current and...

  • Page 156
    ...share are calculated by dividing the profit after tax attributable to the shareholders of Merck KGaA by the weighted average number of theoretical shares outstanding. The use of a theoretical number of shares takes into account the fact that the general partner's capital is not represented by shares...

  • Page 157
    Merck 2011 153 Consolidated Financial Statements Notes to the consolidated balance sheet Notes to the consolidated balance sheet ( 16 ) Cash and cash equivalents This item comprises: â,¬ million Dec. 31, 2011 Dec. 31, 2010 Cheques, cash and bank balances Short-term cash investments 187.7 ...

  • Page 158
    154 Merck 2011 Consolidated Financial Statements Notes to the consolidated balance sheet ( 18 ) Trade accounts receivable This item comprises: â,¬ million Dec. 31, 2011 Dec. 31, 2010 Receivables from affiliates Receivables from associates Receivables from third parties - - 2,328.3 2,328.3...

  • Page 159
    Merck 2011 155 Consolidated Financial Statements Notes to the consolidated balance sheet ( 19 ) Inventories This item comprises: â,¬ million Dec. 31, 2011 Dec. 31, 2010 Raw materials and production supplies Work in progress, finished goods and goods purchased for resale 288.9 1,402.2 1,691...

  • Page 160
    ... Financial Statements Notes to the consolidated balance sheet Other receivables from third parties past due were as follows: â,¬ million Dec. 31, 2011 Dec. 31, 2010 Neither past due nor impaired Past due, but not impaired up to 3 months up to 6 months up to 12 months over 1 year Impaired Book...

  • Page 161
    Merck 2011 157 Consolidated Financial Statements Notes to the consolidated balance sheet ( 22 ) Assets held for sale and liabilities directly related to assets held for sale As of December 31, 2011, there were no assets held for sale and liabilities directly related to assets held for sale. In ...

  • Page 162
    ... Merck 2011 Consolidated Financial Statements Notes to the consolidated balance sheet ( 23 ) Intangible assets Patents, licenses and similar rights, brands, trademarks and other â,¬ million Finite useful life Indefinite useful life Goodwill Software Advance payments Total Acquisition cost...

  • Page 163
    ... intangible assets with finite useful lives totaled â,¬ 59.0 million. Of this amount, â,¬ 50.4 million was attributable to the Merck Serono division for cladribine, and â,¬ 8.6 million to the Performance Materials division. These impairments are disclosed in the income statement under "Amortization...

  • Page 164
    ... balance sheet The book values of "Patents, licenses and similar rights, brands, trademarks and other" as well as goodwill can be attributed to the divisions as follows: Remaining useful life in years â,¬ million Merck Serono Consumer Health Care Merck Millipore Performance Materials Total...

  • Page 165
    Merck 2011 161 Consolidated Financial Statements Notes to the consolidated balance sheet ( 24 ) Property, plant and equipment Land, land rights and buildings, including buildings on third-party land â,¬ million Acquisition cost January 1, 2010 Currency translation Plant and machinery Other ...

  • Page 166
    ...-Scale Biotech (LSB) production facility of the Merck Serono division in Corsier-sur-Vevey, Switzerland and is reported under "Other operating expenses". Property, plant and equipment amounting to â,¬ 3.2 million served as collateral (2010: â,¬ 8.1 million). Total government grants and subsidies...

  • Page 167
    ... of Beijing Skywing Technology Co. Ltd., Beijing, China. The deconsolidations relate to Merck Capital Asset Management, Malta, as well as the divestments of our Crop BioScience business and Serono Contracting Ltd., United Kingdom. A detailed presentation of this item can be found under "Scope of...

  • Page 168
    ...availablefor-sale were recognized in equity as of the balance sheet date: Available-forsale investments Available-forsale investments â,¬ million Available-forsale securities Total Dec. 31, 2011 Available-forsale securities Total Dec. 31, 2010 Fair values/Book values Amortized acquisition cost...

  • Page 169
    ... 2011 165 Consolidated Financial Statements Notes to the consolidated balance sheet ( 28 ) Financial liabilities This item comprised: â,¬ million current non-current Dec. 31, 2011 current non-current Dec. 31, 2010 Bonds Commercial paper Bank loans and overdrafts Liabilities to related...

  • Page 170
    ... of investors exercised the conversion right that resulted in the course of the acquisition. Millipore Corporation, USA, repaid the remaining outstanding interests with a nominal volume of US$ 27.2 million in 2011 for an amount of â,¬ 20.8 million. To meet short-term capital requirements, Merck KGaA...

  • Page 171
    Merck 2011 167 Consolidated Financial Statements Notes to the consolidated balance sheet ( 30 ) Other liabilities This item comprised: â,¬ million current non-current Dec. 31, 2011 current non-current Dec. 31, 2010 Liabilities to related parties Liabilities to affiliates Accrued ...

  • Page 172
    ... or cash outflows that could have material effects on the financial and earnings position of the Merck Group. As of the balance sheet date, Merck recorded provisions for litigation amounting to â,¬ 473.7 million (2010: â,¬ 482.0 million). In 2011, additional provisions for litigation were set up...

  • Page 173
    ... executives and employees of the Merck Group a long-term, profit-related compensation component. The Executive Board is excluded. The amount paid depends on the achievement of the two financial performance indicators "Underlying free cash flow on revenues (FCR)" and "Return on sales (ROS)" at...

  • Page 174
    170 Merck 2011 Consolidated Financial Statements Notes to the consolidated balance sheet The balance sheet item "Provisions for pensions and other post-employment benefits" can be broken down as follows: â,¬ million Dec. 31, 2011 Dec. 31, 2010 Present value of benefit obligations funded by ...

  • Page 175
    ... 2010 Fair value of the plan assets on January 1 Currency translation differences Expected return on plan assets Other effects recognized in income Actuarial gains/losses Funding CTA Merck KGaA Employer contributions Employee contributions Pension payments in the reporting period Transfers/Changes...

  • Page 176
    172 Merck 2011 Consolidated Financial Statements Notes to the consolidated balance sheet In 2011, actuarial gains (+) and losses (-) as well as the effects of limiting defined benefit assets in accordance with IAS 19.58 amounting to â,¬ -27.7 million (2010: â,¬ -170.7 million) were taken to ...

  • Page 177
    ... with Art. 30 (1) Articles of Association of Merck KGaA Basis for the appropriation of profits Profit transfer to E. Merck KG Ratio general partner's capital to total capital Profit transfer from E. Merck KG Ratio share capital to total capital Trade tax Corporation tax Net income (100%) (70.274...

  • Page 178
    ...2011 Consolidated Financial Statements Notes to the consolidated balance sheet In accordance with the provisions of the Articles of Association, E. Merck KG has a 70.274% interest in the profit/loss of Merck KGaA while Merck KGaA has an interest of 29.726% in the profit/loss of E. Merck KG. Merck...

  • Page 179
    ... structure of the Merck Group. Within the Merck Serono division, we focus on specialist therapeutic areas and market innovative prescription drugs of chemical and biotechnological origin. The Consumer Health Care division comprises Merck's business with high-quality over-the-counter products...

  • Page 180
    ... country and region Germany â,¬ million 2011 2010 France 2011 2010 Switzerland 2011 2010 Rest of Europe 2011 2010 Sales by customer location Sales by company location Total revenues Intangible assets Property, plant and equipment Research and development Number of employees 825.8 1,394.5 1,430...

  • Page 181
    Merck 2011 177 Consolidated Financial Statements Segment reporting Merck Millipore * 2011 2010 Performance Materials * 2011 2010 Chemicals 2011 2010 Corporate and Other 2011 2010 Group 2011 2010 2,382.6 10.2 2,392.8 1,387.5 -608.1 -16.0 -106.7 -104.6 -134.5 226.1 - 226.1 6,608.6 -335.4 105...

  • Page 182
    ... used for acquisitions. Investments in other financial assets totaled â,¬ 10.5 million (2010: â,¬ 16.0 million). The major acquisitions in fiscal 2011 were: â,¬ million Amnis Corporation Microbiology business Other Total 2011 Purchase price paid Cash and cash equivalents acquired Acquisitions...

  • Page 183
    ...sale of Merck Capital Asset Management Limited, Malta, to Merck Pensionstreuhand e.V., Darmstadt, resulted in cash inflows of â,¬ 218.1 million. Net cash outflows from changes in other financial assets amounting to â,¬ 1,057.7 million mainly results from short-term monetary deposits and the purchase...

  • Page 184
    ... in financial assets Disposal of non-current assets Purchase/sale of marketable securities Free cash flow External financing of pension obligations Merck KGaA (CTA) Acquisition-related payments Payments related to divestments of business Underlying free cash flow â,¬ million 2011 2010 1,271...

  • Page 185
    Merck 2011 181 Consolidated Financial Statements Other disclosures The strategy to hedge interest rate and foreign exchange rate fluctuations arising from future transactions is set by a Merck Group financial risk committee, which meets on a regular basis. A review period of up to 36 months ...

  • Page 186
    ... at 100% effectiveness. In 2011, no ineffectiveness for hedging transactions was recognized in income. ( 42 ) Management of financial risks Fluctuations in the price of currencies and interest rates can result in significant profit and cash flow risks for Merck. Therefore, Merck centralizes these...

  • Page 187
    ... would have an opposite effect of the same amount. ** Since 2011, the net foreign exchange risk from GBP is no longer considered a material risk factor for Merck and is therefore no longer presented. Furthermore, derivatives exist to hedge expected cash flows beyond the year 2012. If the euro were...

  • Page 188
    ... market value of assets and derivative financial instruments recognized at fair value would increase equity by â,¬ 11.1 million (2010: lowered by â,¬ 6.8 million) or lower it by â,¬ 11.8 million (2010: increased by â,¬ 6.8 million). Share price risks The share portfolio of publicly listed companies...

  • Page 189
    Merck 2011 185 Consolidated Financial Statements Other disclosures â,¬ million as of Dec. 31, 2011 Cash flows 2012 Book value Interest Repayment Cash flows 2013-2017 Interest Repayment Cash flows 2018-2023 Interest Repayment Debt securities and commercial paper Bank loans and overdrafts ...

  • Page 190
    ... â,¬ million Book value Dec. 31, 2011 Amortized cost At cost Fair value Non-financial items Assets Cash and cash equivalents Marketable securities and financial assets Held for trading (non-derivatives) Non-hedging derivatives Held to maturity Loans and receivables Available-for-sale Hedging...

  • Page 191
    Merck 2011 187 Consolidated Financial Statements Other disclosures Subsequent measurement according to IAS 39 Carrying value according to IAS 17 Fair value Dec. 31, 2011 Book value Dec. 31, 2010 Amortized cost At cost Fair value Non-financial items Fair value Dec. 31, 2010 937.8 - 6.4 27...

  • Page 192
    ...ups Fair value changes Disposal gains/losses Financial instrument of the category Held for trading Held to maturity Loans and receivables Available-for-sale Other liabilities - 15.2 5.2 10.8 -195.7 - -0.2 -72.4 -2.1 - - - 9.3 - - 18.3 - - - - - 1.5 - - - In 2011, taking into account the relevant...

  • Page 193
    Merck 2011 189 Consolidated Financial Statements Other disclosures The fair value of stocks and bonds is mainly based on the official market prices and market values quoted on the balance sheet date. The fair value of interest-bearing securities is determined by discounting future cash flows ...

  • Page 194
    ...grade rating, ensuring liquidity, limiting financial risks as well as optimizing the costs of capital are the objectives of our financial policy and set important framework conditions for capital management. Merck prefers to borrow capital via the capital markets and has a debt issuance program that...

  • Page 195
    Merck 2011 191 Consolidated Financial Statements Other disclosures Obligations to acquire intangible assets exist in particular within the scope of research and development collaborations. Here Merck has obligations to make milestone payments when its partner achieves certain objectives. In the ...

  • Page 196
    ... reported under cost of sales. ( 49) Auditors' fees The costs of the auditors (KPMG) of the financial statements of the Merck Group can be broken down as follows: 2011 2010 â,¬ million Merck Group thereof KPMG AG Merck Group thereof KPMG AG Audits of financial statements Other audit-related...

  • Page 197
    ... plans in accordance with IAS 19 can be found under Provisions for pensions and other post-employment benefits. There were no further material transactions with these pension funds. From January to December 2011, companies of the Merck Group supplied goods with a value of â,¬ 2.3 million (2010...

  • Page 198
    ..., additions to pension provisions of E. Merck KG include current service costs of â,¬ 1.1 million (2010: â,¬ 2.1 million) for members of the Executive Board of Merck KGaA. Subject to the approval of the Annual General Meeting on the proposed distribution of a dividend of â,¬ 1.50 per share, the...

  • Page 199
    ... GmbH Merck China Chemicals Holding GmbH Merck Consumer Health Care Holding GmbH Merck Export GmbH Merck Financial Services GmbH Merck Holding GmbH Merck Internationale Beteiligungen GmbH Merck Schuchardt OHG Merck Selbstmedikation GmbH Merck Serono GmbH Merck Shared Services Europe GmbH Merck...

  • Page 200
    ... 2011 Consolidated Financial Statements List of shareholdings Country Company Registered office Equity interest (%) thereof Merck KGaA (%) Switzerland Switzerland France France France France France France France France France France United Kingdom United Kingdom United Kingdom United Kingdom...

  • Page 201
    Merck 2011 197 Consolidated Financial Statements List of shareholdings Country Company Registered office Equity interest (%) thereof Merck KGaA (%) United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Italy Italy Italy Italy Italy Italy ...

  • Page 202
    ... States United States United States Merck Capital Holding Ltd. Merck Capital Ltd. Merck B.V. Millipore B.V. Millipore International Holding Company B.V. Millipore Ireland B.V. Serono Tri Holdings B.V. Merck AS Millipore AS Allergopharma Vertriebsgesellschaft m.b.H. Arcana Life-Science-Produkte GmbH...

  • Page 203
    Merck 2011 199 Consolidated Financial Statements List of shareholdings Country Company Registered office Equity interest (%) thereof Merck KGaA (%) United States United States United States United States United States Puerto Rico Canada Canada Canada Canada Bermuda Bermuda Latin America ...

  • Page 204
    ... International Co., Ltd. Suzhou Taizhu Technology Development Co., Ltd. Merck Ltd. Merck Specialities Pvt. Ltd. Millipore India Pvt. Ltd. P.T. Merck Tbk. Inter-Lab Ltd. InterPharm Industries Ltd. InterPharm Laboratories Ltd. Merck Serono Ltd. Biotest K.K. Merck Ltd. Merck Serono Co., Ltd. Merck...

  • Page 205
    ... Statements List of shareholdings Country Company Registered office Equity interest (%) thereof Merck KGaA (%) II. Companies not consolidated due to secondary importance Germany Germany Germany Germany Germany Germany Merck 11. Allgemeine Beteiligungs GmbH Merck Financial Trading GmbH Merck...

  • Page 206
    202 Merck 2011 Consolidated Financial Statements List of shareholdings Country Company Registered office Equity interest (%) thereof Merck KGaA (%) Latin America Curaçao Curaçao Applied Research Systems ARS Holding N.V. CMIP (Curaçao) B.V. Curaçao Curaçao Santo Domingo 100.00 100.00 ...

  • Page 207
    Merck 2011 Consolidated Financial Statements #05 More Information Responsibility Statement Auditor's Report Glossary Financial Calendar for 2012 204 205 206 212 203 212

  • Page 208
    ... principles, the consolidated financial statements of the Merck Group give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position...

  • Page 209
    ...Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Net Equity, and the Notes to the Group accounts, together with the Group Management Report for the business year from January 1 to December 31, 2011. The preparation of the consolidated financial statements...

  • Page 210
    ... funds and make payments until the term expires or the credit line is terminated. Cash flow CEFIC D /d Deutscher Aktienindex (German stock index): Its value is based on the stock prices of the 30 largest German companies by trading volume and free float market capitalization. Debt issuance program...

  • Page 211
    ... share F /f Free cash flow on revenues: FCR is calculated from the underlying free cash flow as a percentage of total revenues. This is a key performance indicator for steering the business. FDA Food and Drug Administration: U.S. government agency responsible for protecting and advancing public...

  • Page 212
    ... uncertain cash flows that especially result from future transactions. H /h I /i International Council of Chemical Associations. IFRS International Financial Reporting Standards (until 2001 known as International Financial Accounting Standards, IAS) are the standards that publicly traded companies...

  • Page 213
    ... occurs naturally in the human body and is utilized better by the body than folic acid. Folic acid and Metafolin ® are important for cell division and blood formation and therefore the development and growth of new life. Monoclonal antibodies Highly specialized targeted antibodies synthesized using...

  • Page 214
    ... and lamps. Organic growth Organic growth is the part of a company's growth that is not derived from acquisitions or currency effects. OTC Over-the-counter drugs is the term used for pharmaceuticals that are available at stores and pharmacies without a prescription. P /p A vermifuge used to fight...

  • Page 215
    ... the Pharmaceuticals business sector. Tax rate Underlying free cash flow VCI U /u V /v Free cash flow adjusted for acquisitions and divestments. Verband der Chemischen Industrie (German Chemical Industry Association) represents the economic-political interests of 1,600 German chemical companies.

  • Page 216
    212 Merck 2011 More Information Merck: Financial Calendar 2012 February ➝ January ➝ March ➝ 03 /12 04 /12 Annual General Meeting Friday, 04/20/2012 Annual Press Conference Tuesday, 03/06/2012 April ➝ 05 /12 May ➝ Report on the First Quarter Tuesday, 05/15/2012 July ➝ June ➝...

  • Page 217
    ... with 2011. â,¬ million 2002 2003 2004 Total revenues by division Pharmaceuticals Merck Serono Generics 1 Consumer Health Care Chemicals Merck Millipore Performance Materials Liquid Crystals 2 Performance & Life Science Chemicals 2 Electronic Chemicals 1 Laboratory Distribution Corporate and...

  • Page 218
    Merck 2011 2005 2006 2007 2008 2009 2010 2011 Change in % 5,887 3,905 1,817 1,712 376 1,906 - - 741 1,165 - - - 76 883 454 492 - -63 956 1,245 893 673 657 268 713 7,281 3,329 29,133 ...

  • Page 219
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