Letter from Karl-Ludwig Kley

"Dear Shareholders and Friends," (handwriting)

During 2010, we made further progress with the transformation of your company into a leading innovative and high-tech enterprise. As part of this process, we achieved several important milestones.

“We aspire to be a company where an

enjoyment of work and innovative

strength meet.”

Karl-Ludwig Kley

Dr. Karl-Ludwig Kley – Chairman of the Executive Board (photo)

We impressively proved Merck’s economic strength following the 2009 crisis year. Our total revenues increased by 20% to EUR 9.3 billion, a record high. The operating result jumped by 72% to EUR 1.1 billion. At nearly EUR 1.7 billion, underlying free cash flow significantly exceeded the billion-euro threshold for the first time. Profit after tax was 70% higher than in 2009. In view of these figures, we will propose to the Annual General Meeting on April 8 an increase in the dividend to EUR 1.25 per share.

With the acquisition of Millipore, we have given our business a decisive boost. By combining Merck and Millipore, we have become a leading global partner to the life science industry. With our portfolio, which ranges from laboratory chemicals to complete solutions for the production of biopharmaceuticals, we are helping our customers to succeed in research, development and production. At the same time, we are capturing opportunities to realize synergies with our own existing businesses and to enter new fields.

We have also set the course for the future with the recent changes in the composition of the Executive Board. On January 1, 2011, Dr. Stefan Oschmann succeeded Elmar Schnee, who left the company, as the Board Member responsible for the Pharmaceuticals business. I would also like to take this opportunity to thank Elmar Schnee, who decisively shaped the integration of Merck Serono and contributed greatly to the solid foundations on which we can further develop the business. Dr. Kai Beckmann will be joining the Executive Board, taking over responsibility for the newly created Executive Board position for Human Resources on April 1. And on June 1, 2011, Matthias Zachert will succeed Dr. Michael Becker as Chief Financial Officer. With this new team, we are creating the perfect conditions to start a new, successful chapter in the unique history of Merck.

We are in a position to develop the company further from the economically robust and highly innovative basis of 2010.

Merck Serono, our division for innovative prescription drugs, outperformed the average global market growth by posting an 8.3% increase in sales. Our two largest products, Rebif® and Erbitux®, continued to perform well. Their sales increased by 8.6% to nearly EUR 1,700 million and 18% to EUR 820 million, respectively. Core return on sales (ROS) was 22%. Yet we did not reach all our objectives. The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a final negative opinion regarding the marketing authorization application for cladribine tablets as a treatment for relapsing-remitting multiple sclerosis. In the United States, we are awaiting the FDA’s decision.

The Consumer Health Care division, which is responsible for our over-the-counter drugs business, continued its growth course, with the exception of our newly emerging business in China. The restructuring measures underway there not only slowed sales growth, but also adversely impacted profitability.

We began consolidating our life science business, including the acquired Millipore, into the new Merck Millipore division in July. Despite the ongoing integration work, we achieved a marked increased in sales. Adjusted for the acquisition, core ROS was 19%.

The Performance Materials division, which comprises our materials businesses, can look back at a very successful year. With sales increasing by 38%, it was our strongest growth driver. The Liquid Crystals business exceeded the EUR 1 billion sales threshold for the first time. The division’s ROS was 42%.

We were also successful on a regional basis. In Asia, our second-largest region after Europe, we grew by 37%, posting sales of EUR 2.3 billion. In the United States, sales increased by 32% to EUR 1.4 billion.

We are looking toward the future with optimism. No doubt we expect the global financial, economic and debt crises to have a further impact. No doubt key economies are still a long way from recovering their former stability and dynamism. The financial sector also remains vulnerable. Despite all the risks, we expect economic developments to be positive in 2011. For Merck, we expect total revenues to increase by between 13% and 18%. We aim to increase the operating result by between 35% and 45%.

Above all, however, we want to further develop the company strategically:

Based on our strong position in display materials, we want to expand into new fields and new technologies. After having successfully developed IPS, VA and PS-VA technologies that produce faster and sharper LCD images and consume less power, we are working on successors. At the same time, we are aiming to establish ourselves as a materials supplier in new fields, including innovative lighting materials based on LEDs and OLEDs, energy storage materials for the automotive sector, and products for the photovoltaics industry that will be used in the next generation of solar cells.

With Merck Millipore, we want to position ourselves as the leading supplier to the life science industry, for instance in the biopharmaceutical market, which is highly profitable and is currently growing at 12% a year. Cooperating with customers on research and development programs is a common feature of processes in modern biotech production where we transform our expertise in chemicals and pharmaceuticals into innovation. Once the production process has been approved for a drug, this leads to benefits for our customers, who seek joint, long-term success with a supplier they can trust.

At Merck Serono, we are concentrating on specialist therapeutic areas with high unmet medical needs. Our research activities are focused on three areas: Oncology, Neurodegenerative Diseases and Rheumatology. In parallel with the development of specific therapies, it is our aim to develop patient stratification methods: We want to focus even more closely on how our drugs act in certain groups of patients and how therapeutic efficacy can be predicted for individual patients.

We aspire to be a company where an enjoyment of work and innovative strength meet. Merck stands out because it offers an inspiring and motivating work environment in which all employees have the opportunity to make extraordinary achievements while developing themselves further.

And this is why our more than 40,000 employees apply themselves energetically to the benefit of customers and the company. We owe you, our shareholders and customers, our thanks for your support and trust. My Executive Board colleagues and I will continue to do everything we can to merit this trust.

Signature "Sincerely, Dr. Karl-Ludwig Kley" – Chairman of the Executive Board (handwriting)