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2010 roche annual report creating value for patients

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key figures roche group sales 2010 mchf index 2008 100 free cash flow mchf 47,473 4,699 2009 2008 research and development 2 2010 49,051 45,617 mchf 8,893 4,979 total dividend mchf 9,050 5,693 3 2009 2008 operating profit 2 2010 9,509 8,704 mchf 5,175 4,313 number of employees 80,653 16,591 2009 2008 income taxes 2 2010 16,272 15,068 mchf 81,507 80,080 total employee remuneration mchf 3,135 11,934 2009 2008 net income 2010 3,287 3,604 mchf 12,080 11,129 patients on clinical trials 4 327,804 8,891 2009 2008 core earnings per share 2010 8,510 10,844 chf 302,063 277,674 eco-efficiency rate 5 0.414 12.78 2009 2008 12.34 11.17 0.46 0.387 price development of non-voting equity security genussschein 2008 300 250 200 150 100 in chf 2009 2010 roche non-voting equity security swiss market index rebased 1 2 3 4 5 keyfiguresindexedto2008=100 coreresults proposedbytheboardofdirectors developmentphaseitoiv forcalculationoftheeco-efficiencyratesee www.roche.com/environment figuresfor2008asinannualreport2009 forafullindexofglobalreportinginitiativegri indicatorsusedinthereportsee www.roche.com/reporting_and_indices

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highlights 2010 january eu commission approves herceptin for treatment of her2positive advanced stomach cancer january fda approves actemra for the treatment of moderately to severely active rheumatoid arthritis february roche annual general meeting votes to increase shareholder dividend by 20 20 april roche acquires medingo to expand its position in the growing insulin delivery systems market june fda expands lucentis approval to include treatment of macular edema following retinal vein occlusion july athena clinical trial demonstrates high medical value of cobas 4800 hpv test which detects high-risk genotypes 16 and 18 in screening for cervical cancer 47,000women september fda clearance for cobas 8000 modular analyser series for highvolume lab testing september roche named healthcare supersector leader in dow jones sustainability indexes for second year running october encouraging new clinical data for avastin in ovarian metmab in lung and t­dm1 in breast cancer presented at esmo conference october we report promising phase ii results with rg7204 braf inhibitor a new targeted medicine for advanced melanoma november we launch the operational excellence initiative to maintain long-term innovation capabilities rg1678 a first-in-class gri for schizophrenia december creating value for patients means having the courage to go with first-in-class and phase ii study where needs are great others have failed available therapies effective against positive symptoms significant side effects positive symptoms often still occur in the stable phases between acute episodes compound rg1678 shows improvement in negative symptoms of schizophrenia rg1678 effective against negative symptoms potential to treat suboptimally controlled positive symptoms fewer side effects new mechanism of action affecting nearly 24 million people worldwide schizophrenia is a severe mental disorder that distorts the way a person thinks acts expresses emotions perceives reality and relates to others it is a lifelong disease that cannot be cured on average it shortens life expectancy by 20 years due to the higher risk of suicide and also due to cardiovascular and pulmonary events because of negative symptoms which usually have the greatest impact on quality of life patients may be unable to live independently hold jobs establish personal relationships and manage everyday social situations many drugs developed to treat negative symptoms have failed in clinical trials and the few available treatments offer only modest benefits rg1678 a glycine reuptake inhibitor gri developed at roche may be the first drug to treat the negative symptoms of schizophrenia representing an entirely novel approach rg1678 normalises glutamate neurotransmission by increasing synaptic levels of glycine thereby targeting an important pathway in psychiatric disorders it has the potential to become first-in-class compound of this type for the treatment of schizophrenia in addition rg1678 in combination with current treatments has the potential to treat suboptimally controlled positive symptoms with little or no increase in side effects its novel mode of action could also have valu able therapeutic applications in other psychiatric disorders 07_roche_ar10_eng_diagnostics.indd 72 28.01.2011 17:18:10

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to medical challenges through our research we create state-of-the-art diagnostics and pioneering medicines that help millions of people around the world our business innovation is our answer focus on personalised healthcare at roche we aim to develop novel medicines and diagnostics that will help patients live longer better lives we constantly strive for scientific excellence so that we can continue developing effective therapeutic options where previously there were none as the world s largest biopharmaceutical company and the number one supplier of in vitro diagnostics roche has brought many highly effective drugs to market including the industry s leading portfolio of cancer medicines we were also one of the first companies to recognise the potential of personalised medicine today our expertise in molecular biology is enabling us to develop targeted medicines for specific patient groups this contributes to better safer more cost-effective healthcare.

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contents inside cover key figures pharmaceuticals pipeline highlights 2010 letters to shareholders 4 letter from the chairman 8 letter from the ceo roche group 13 group results and outlook 16 group strategy pharmaceuticals 27 results 29 sales review 36 development highlights 45 research and development diagnostics 62 results 67 business area highlights 74 research and development corporate governance remuneration report 81 corporate governance 91 remuneration report corporate responsibility 104 stakeholder engagement 105 patients 115 people 122 society 124 responsible practices 131 safety security health and environmental protection independent assurance report 138 gri statement inside cover 1 4 12 24 56 80 102 137

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4 roche business report 2010 letter to shareholders franz b humer dear shareholders 2010wasachallengingyearforthepharmaceuticalindustry.marketconditions,as anticipatedforquitesometime,becameeventougher.inthewakeofthefinancial c risis,highgovernmentbudgetdeficitsaddedtopricingpressuresintheglobalhealthcaresector.ineuropemanygovernmentscutdrugpricessignificantly,whilehealthcare reformintheusresultedinhigherrebatesonprescriptiondrugs.ontheregulatory front,thehurdlesforgainingapprovalofnewmedicineswereraisedevenhigher,dramaticallyincreasingthecostofdrugdevelopmentanddelayingaccesstoinnovative treatments amidthesechallenges,rochepostedgoodfull-yearresults.however,wealsofeltthe effectsofthemarketchangesi vejustdescribed.injulytheusfoodanddrugadministrationfdarejectedourapplicationforacceleratedapprovaloft­dm1,even thoughthisnovelcompoundisexpectedtosignificantlyimprovethetreatmentofbreast cancer.thiswillincreasetheclinicaldevelopmentcostsfort­dm1anddelaythis

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letter to shareholders roche business report 2010 5 promisingdrug sapproval.lateintheyearthefdaannounceditsintentiontowithdraw approvalofavastinincombinationwithchemotherapyforfirst-linetreatmentofmetastaticher2-negativebreastcancer.whileawithdrawalwillnotaffectuspatients accesstoavastininitsotherapprovedcancerindications,itwouldadverselyimpact patientswiththisveryseriousdisease.thedaythefdamadeitsannouncement theeuropeanmedicinesagencyemaconfirmedavastin svalueinthefightagainst breastcancer.ineuropewomenwithadvancedbreastcancerwillthuscontinueto haveaccesstothistreatmentoption wearecloselymonitoringdevelopmentsinhealthcarepolicyaroundtheworld.precisely becausewebelieveourhighlyinnovativeproductscontributeinimportantwaysto moreeffective,cost-efficienthealthcaredelivery,weconsideritvitalforthefuturethat policymakersandhealthofficialslooknotonlyatthecostsofnewmedicinesbutalso attheinnovationtheyembodyandthebenefitstheyofferpatients.giventhemanydiseasesthatstillcannotbetreatedsatisfactorily,oratall,medicalprogressshouldbe viewedmoreasapublicgoodthatdeservesvigorouspoliticalsupport whenwediscussinnovationwemustbearinmindthatitisinherentlyrisky.pioneering researchanddevelopmenteffortssometimesproducebreakthroughs,buttheyalsocan sometimesnotachievethedesiredendpoints.taspoglutideisacaseinpoint.wesuspendedalate-stagedevelopmentprogrammeonthisnewtreatmentfortype2diabetes ataverylatestageofdevelopmentaftercarefulassessmentoftheavailablesafetyand efficacydata ourintenseresearchanddevelopmentactivitiesalsoyieldedsomeverystrongand promisingresultslastyear.wecurrentlyhavetwelvenewmolecularentitiesinlate-stage development,halfofwhicharedesignedfortargeteduseinspecificpatientpopulations withthehelpofcompaniondiagnostictests.wehavemadeenormousprogressin personalisedhealthcare,helpedbythecloseinterplaybetweenourpharmaceuticals anddiagnosticsdivisions.thesedevelopmentsrepresentmajorstridesandmakeus confidentthatwewillremainanindustryleader rocheconvincinglymetitssalesandearningstargetsfor2010.excludingsalesofour influenzamedicine,tamiflu,whichasexpectedweredownsharplyfortheyear,group salesrose5%inlocalcurrencies.netincomeattributabletorocheshareholders showedastrongincrease,advancing11%to8.7billionswissfrancsdespitethecosts associatedwiththe`operationalexcellence programmeamountingtoaconsiderable 1.3billionswissfrancs.coreearningspershare,akeyindicatorofunderlyingbusiness performance,increased10%inlocalcurrencies4%inswissfrancs inviewofthecompany shealthycashflowandpositiveoutlooktheboardofdirectors willproposeadividendincreasefor2010of10%to6.60swissfrancspershareand

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6 roche business report 2010 letter to shareholders non-votingequitysecurityupfrom6.00swissfrancsfor2009 subjecttoyour approvalattheannualgeneralmeetingagm thiswillberoche s24thconsecutive annualdividendincrease lookingaheadtotheannualgeneralmeetingon1march2011,iwouldliketomention theupcomingchangesontheboardofdirectors.walterfreyandwolfgangruttenstorferhavedecidednottostandforre-election.onbehalfoftheentireboard,iwould liketothankthembothfortheirdedicatedservicetoroche.duringhislongtenureon theboardmrfrey,whorunsahighlysuccessfulfamilycompany,hasmadesignificant contributionstothegroup sgrowthandsuccess.amongthestrengthsmrruttenstorfer broughttotheboard,hisexpertiseonthegrowthmarketsineasterneuropeandthe middleeasthasbeenparticularlyvaluable weintendtousethisopportunitytostrengthentheboardfurtherbynominatingaddi tionalindependentdirectors.asannouncedindecember,paulbulckeceonestlés.a hristophfranzchairmanandceodeutschelufthansaagandpeterr.voser c ceoroyaldutchshellplcwillbestandingforelectionasnewmembersoftheboard attheannualgeneralmeetingwewillalsoproposethatthetermofboardmembers bereducedfromthreetotwoyears.thiswillenableshareholderstoinfluencethecompositionoftheboardatshorterintervalsinfuture aftertenyearsofexceptionalserviceonthecorporateexecutivecommittee,erich hunzikerhasdecidedtoretirefromrocheattheendofmarch2011.erichhunzikerwas appointedchieffinancialofficerin2001,becomingdeputyheadofthecorporate executivecommitteein2005.duringhislongcareeratroche,erichhunzikerwasone ofthekeyarchitectsofthegroup ssuccessfuldevelopment.iwouldliketotakethis opportunitytothankerichhunzikersincerelyforhisoutstandingcontributiontothe group soverallsuccess theboardofdirectorshasappointedalanhippetosucceederichhunzikeraschief financialofficer.alanhippewilljoinrocheasamemberofthecorporateexecutive committeeasofapril2011.alanhippeservedasamemberoftheexecutiveboardof continentalagfrom2002to2009.sinceapril2009hehasbeencfoandamember oftheexecutiveboardofthyssenkruppag ourcompanywashonouredlastyearforoutstandingachievementsinanumberof areas.iamparticularlypleasedthatthedowjonessustainabilityindexesnamedusthe supersectorleaderinhealthcareforthesecondyearinarow,rankingrocheasthe world smostsustainablehealthcarecompany.wefirmlybelievethatsustainablecorporatepoliciesandpracticesultimatelycreatelong-termvalueandpromoteinnovation.

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letter to shareholders roche business report 2010 7 oursuccessasacompanyisbuiltonscientificexcellencethatbenefitspatients.the successfulintegrationofgenentechhasfurtherstrengthenedourinnovativecapabilitiesastheworld slargestbiotechcompanyandtheleadingsupplierofcancermedicines.weleadinpersonalisedhealthcare,aretheworld snumberonesupplierof in vitrodiagnosticsandhaveoutstandingproductportfoliosinboththepharmaceuticals andthediagnosticsdivision ourabilitytocreatevalueforallstakeholdersiscrucialtoourfuturesuccessandwe willcontinuetovigorouslypursuethisstrategy franzb.humer chairmanoftheboard

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8 roche business report 2010 letter to shareholders severin schwan dear shareholders sandrob.hadbeenrecentlydiagnosedwithmalignantmelanoma shortlyafterhis28th birthday.malignantmelanomaisoneofthedeadliest,mostaggressiveformsofskincancer withover160,000newcasesreportedworldwideeachyear.itishighlylikelytometastasise ataveryearlystage,andoncepatientshavedevelopedmetastasestherearealmostno treatmentoptionsavailabletothem.lifeexpectancyfollowingdiagnosisistypicallyamatter ofmonths.hisdoctorsgavehimfourmonthstolive sandrob.mettheinclusioncriteriaforaphaseiiclinicaltrialinwhichwearetestingour novelinvestigationaldrugrg7204inpatientswithadvancedmalignantmelanomawhose cancercellscarryaspecificgeneticmutation.adiagnostictestconfirmedthathehadthis mutation beforereflectinginmoredetailsonourclinicaltrials,iwouldliketobrieflyreviewthe group sbusinessperformancein2010.despitestrongpressureonpricesintheusandin europe,thepharmaceuticalsanddiagnosticsdivisionsbothpostedgoodresults.excluding tamiflusales,whichweredown2.3billionswissfrancsfortheyear,salesinthepharmaceuticalsdivisionadvanced5 abovetheoverallmarketgrowth.includingtamiflu,divisional salesdeclined2%inlocalcurrenciesto37.1billionswissfrancs.growthwasdrivenbykey

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letter to shareholders roche business report 2010 9 productsforoncology,ophthalmology,inflammatoryandautoimmunediseaseandanemia thankstocontinuedstrongdemandforouranticancermedicines,weexpandedourleadin thisimportantmarketsegment.inthediagnosticsdivisionsalesadvanced8%inlocal c urrencies,againsignificantlyoutpacingthemarketandsolidifyingroche spositionasthe leadingsupplierofin vitrodiagnostics.professionaldiagnosticsanddiabetescarewere thedivision sprimarygrowthdrivers thegroup scoreoperatingprofitgrewfasterthansales,risingbyarobust7%to16.6billion swissfrancsinlocalcurrencies.profitabilityimprovedfurther,withthecoreoperatingmarginsinthepharmaceuticalsanddiagnosticsdivisionsadvancing1.9percentagepointsto 39.9%and3.8percentagepointsto21.1 respectively.onceagain,theearningspower ofouroperatingbusinesseswasalsoreflectedinthegroup soperatingfreecashflow,which lastyearreachedastrong14.1billionswissfrancs.thankstoourstrongcashflow,by year sendwehadalreadyrepaidathirdofthedebtincurredinconnectionwiththegenentechtransaction earlierthanoriginallyplanned succeedinginourindustryistougherthanever.pricingpressuresarerisingsharplyandthe requirementsforapprovalandreimbursementofnewmedicinesarebecomingincreasingly stringent.atrocheweadditionallyexperiencedsetbackswithsomeofourlate-stagedevelopmentprojectslastyear,includingthediabetesdrugtaspoglutide inresponsetothesechallenges,mycolleaguesontheexecutivecommitteeandidecided totakeappropriateactionnowtoensureroche slong-termsuccess.innovember2010we launchedthecomprehensivegroup-wide`operationalexcellence programme,whichis designedtostrengthenthegroup sproductivityandinnovativecapacityintheyearsahead wehaveidentifiedawiderangeofopportunitiestoimproveprocessesandraiseproductivity andefficiency implementationoftheoperationalexcellenceprogrammeisalreadyunderwayandwillcontinuethrough2012.asaresultofthisinitiative,theworkforceofroughly82,000at30june 2010willbereducedby4,800positions,almost6%oftheglobalworkforce.thegreatest changeswillbeinthepharmaceuticalsdivision,wherewewillbeadjustingourglobalsales organisationandtakingstepstoimproveefficiencyandproductivityinproductdevelopment andoptimiseourmanufacturingnetwork.inthediagnosticsdivision,theco-locationof relatedbusiness,r d andoperationalfunctionsatselectedsiteswillenablethedivisionto streamlineitssitenetwork wearetakingthesemeasuresproactively,fromapositionofstrength.rocheistheworld s biggestbiotechcompany,with13productsandproductlinesthatgenerateannualsales ofoveronebillionswissfrancseach.anddespitelastyear ssetbacks,ourresearchand de elopmentpipelineremainsoneofthestrongestintheindustry.withourcombined v strengthsinpharmaceuticalsanddiagnosticsandprovenexpertiseinmolecularbiology,we

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10 roche business report 2010 letter to shareholders areuniquelypositionedtorealisethepromiseofpersonalisedhealthcaretomaketreatments saferandmoreeffective.therevolutionaryadvanceswearestartingtoseeinmolecular biologygiveusastrategiccompetitiveedgeacrossanumberofareas,includingourability toraiseresearchproductivity personalisedhealthcareparadigmsincreasinglyshapeourresearchanddevelopmentprogrammes.wecurrentlyhavetwelvenewmolecularentitiesinlate-stagedevelopment,half ofwhicharetailoredtospecificpatientpopulations.ourbrafinhibitorformalignant melanoma,metmabforlungcancer,t­dm1andpertuzumabforbreastcancerandother projectsinvirologyandinflammationallrepresentpotentialmajoradvancesforpatients similarly,ourdiagnosticsdivisionisdevelopinganumberofbiomarkerstosupporttherapeuticdecision-making.targetedtherapiesanddiagnosticteststhatcontributetobetter medicaldecisionsnotonlyimprovepatientcarebutalsohavehealtheconomicbenefitsthat makethemattractivetoregulatorsandpayers oneofthemostimpressiveexamplesofpersonalisedhealthcareisrg7204,thedrugused totreatmalignantmelanomawhichimentionedearlier.thankstoinsightsintospecific geneticchangesintumourcells,hugestridesarebeingachievednowinclinicaltrialsina diseaseonceconsideredvirtuallyuntreatable tumoursgenerallydevelopfromjustonecell.everycellcontinuouslyundergoeschanges knownasmutations,thataffectcertainsignallingpathwayswithinthecell.mostmutations arecorrectedspontaneously,butsomemanagetoevadethebody srepairmechanisms causingcellstodivideuncontrollablyandthusformtumours.scientistshavediscoveredthat inoverhalfofallmelanomapatients,thediseaseistriggeredbyahighlyspecificmutation ofthegenecodingforthebrafprotein,whichisinvolvedincellgrowth.abrafv600e mutationtriggersuncontrolledcellgrowthandthesecancerpatients sandrob.for e xample havevirtuallynoprospectofbeingcured rg7204,anoralcancerdrugco-developedwithourpartnercompanyplexxikon,actsvia ahighlyinnovativemechanismtoinhibitthebrafproteinimplicatedinthedisease.thenew drugspecificallydestroysthosecellscarryingthev600emutationanddoesnotattack healthycellswithoutthemutation wehavedevelopedadiagnosticassayforusewiththedrugwhichiscapableofdetecting thev600emutationintumours,andwillthushelpidentifypatientswhoareverylikelyto respondtothenewdrug.thismeansthenewdrugwillbeusedonlyinpatientslikelyto benefitfromthenewtreatment theinterimresultsofaphaseiiitrial,whichwepublishedinjanuary2011,arevery e ncouraging.forthefirsttime,apersonalisedinvestigationalmedicine,rg7204,hasshown asignificantsurvivalbenefitinmetastaticmelanoma.thisisanimportantadvance

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letter to shareholders roche business report 2010 11 forpeoplewiththebrafv600mutation-positiveformofthediseasewhohavehad extremelylimitedtreatmentoptions.fulldatawillbepresentedatamedicalmeetinglater thisyear.rocheisworkingcloselywithglobalhealthauthoritiessothatpatientsworld widecanalreadybetreatedwiththenewdrug thepursuitoftreatmentsofferingrealbenefitstopatientsisthecoreofourcorporate s trategy.consistentwiththatstrategy,wewillcontinuetodriveprogressonourpromising developmentportfolio.weexpectresultsfromatotalof19phaseiiandphaseiiitrials in2011and2012.basedonourcurrentlate-stageportfolio,weexpecttosubmituptoeight reguatoryfilingsforapprovalofnewmolecularentitiesbytheendof2013.moreover l wearecurrentlyworkingonmorethan20additionalindicationsforexistingproducts goingforward,innovationsthatbenefitpatientswillcontinuetodriveoursuccess.through excellenceinscience,westrivetodeveloppioneeringtreatmentsanddiagnosticteststhat prolongpatients livesandtangiblyimprovetheirqualityoflife rocheowesitssuccesstoitsemployees.thankstotheirtremendousdedicationandhard workweonceagainachievedourgoalslastyear,despiteanincreasinglychallengingmarket environment.onbehalfoftheentireexecutivecommittee,iwouldliketothankallour employeesfortheirimportantcontributions makingsurethatrocheremainsanemployerofchoiceisanimportantpriorityforme.so iamespeciallypleasedtoreportthatin2010ourcompanywasagainvotedatopemployer inpollsinanumberofcountries.beingatopemployerisnotjustaboutgivingasmany employeesaspossibleopportunitiestodevelopprofessionallyandmakethingshappenin thecompany.innovationdependsonadiversityofviewsandapproaches.oneoftheways we repromotingdiversityatrocheisbyfillingmoremanagerialpositionswithwomen.atthe startof2010,wesetourselvesthegoalofincreasingtheproportionofwomeninthetop 400leadershippositionsbyhalfto20%overthenextfiveyears.iamhappytoreportthat wemadeprogressonthisfrontaswelllastyear whathappenedtotheyoungmanwithmelanoma?likemanyoftheothertrialparticipants sandrob.hasrespondedwelltoournewdrugforskincancer.heisstillaliveanddoingwell thisisexactlywhatwehaveinmindwhenwetalkabouthelpingpatientsthroughexcellenceinscience severinschwan chiefexecutiveofficer

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roche group our group posted solid overall results in a challenging market in 2010 core operating profit grew faster than sales and core earnings per share increased at a double-digit rate we are steadily making progress in personalised healthcare of the twelve new molecular entities now in our late-stage pipeline half are targeted at specific patient populations.

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roche group roche business report 2010 13 group results and outlook overall results therochegrouppostedsolidoverallresultsin 2010.groupsaleswerestableinlocalcurrencies at47.5billionswissfrancs­3%inswissfrancs 1%inusdollars thegoodunderlyinggrowthof bothdivisionscompensatedfortheexpected declineintamiflusalesandtheimpactsofhealth carereformsandausteritymeasures.excluding t amiflu,salesincreasedby5%inlocalcurrencies thepharmaceuticalsdivisionrepresented78 ofgroupsalesandthediagnosticsdivisioncon tributed22 salesinthepharmaceuticalsdivisiondeclinedby 2%inlocalcurrenciesto37.1billionswissfrancs excludingtamiflu,localgrowthwas5 abovemarketgrowth.demandfortheoncologydrugsavastin mabthera/rituxan,herceptin,xelodaandtarceva continuedtogrowstrongly.additionalmajorgrowth driverswereactemra/roactemrainrheumatoid arthritis,mircerainanemiaandlucentisinophthalmology.actemra,whichisnowlaunchedinsome 50 countriesincludingtheunitedstates,theeuand japan,reachedsalesof397millionswissfrancsin 2010.thesepositivefactorscompensatedformostof theexpectedstrongdeclineintamiflusales,the reductionincellceptsalesduetouspatentexpiry inmay2009andtheimpactsoftheushealthcare reforms,europeanausteritymeasuresandpricecuts injapan thediagnosticsdivisionincreasedsalesto10.4billionswissfrancsin2010,growing8%inlocal c urrencies4%inswissfrancs;8%inusdollars therebystrengtheningitsleadingmarketposition majordriverswereprofessionaldiagnosticswith11 salesgrowthanddiabetescarewith4%sales growth thegroup scoreoperatingprofitincreasedby7%in localcurrencies2%inswissfrancs thepharmaceuticalsdivisionincreaseditscoreoperatingprofit by4%inlocalcurrencies,drivenprimarilybycost synergiesfromthegenentechintegrationandproductivityimprovements.coreoperatingprofitgrowth inthediagnosticsdivisionwas30%inlocalcurrencies,mainlyresultingfromsalesgrowthdueto newproductlaunchesandtheongoingoperational efficiencyprogrammes.thegroup scoreoperating profitmarginincreasedby1.7percentagepointsto 34.9 withthepharmaceuticalsdivisionimproving by1.9 percentagepointsto39.9%andthediagnosticsdivisionby3.8percentagepointsto21.1 in2010thegroup snetincomeincreasedby4%to 8.9billionswissfrancscomparedto2009.net incomeattributabletorocheshareholdersrose11 to8.7billionswissfrancs thegroup soperatingfreecashflowremainedstrong at14.1billionswissfrancs.afreecashflowof 4.7 billionswissfrancswasachievedin2010despite higherinterest,taxanddividendpayments the board of directors is proposing an increase of 10 in the dividend for 2010 to 6.60 swiss francs per share and non-voting equity security for approval at the annual general meeting ofthedebtraisedinearly2009,33%hadalready beenrepaidby31december2010.inaddition,the groupexerciseditsoptiontocallforredemption aportionoftheusdollarnotesdue1march2014 ofthetotalprincipalamountof2.75billionusdollars,1.0billionusdollarswillberedeemedinmarch 2011.thenetdebtpositionofthegroupis19.2 billionswissfrancs,adecreaseof4.7billionswiss francsfrom31december2009 theboardofdirectorsisproposinganincreaseof 10%inthedividendfor2010to6.60swissfrancs pershareandnon-votingequitysecurityforapproval attheannualgeneralmeeting.

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