Notes Audited

Preliminary remarks

The accompanying consolidated financial statements have been prepared with Merck KGaA – which manages the operations of the Merck Group – as parent company. In accordance with the provisions of the German financial reporting disclosure law (Publizitätsgesetz), consolidated financial statements are also prepared for E. Merck KG (until and including December 31, 2008: E. Merck OHG), the general partner of Merck KGaA with an equity interest of 70.3% as of December 31, 2008. These include Merck KGaA and its subsidiaries. The authoritative German versions of these financial statements are filed with the electronic German Federal Gazette (elektronischer Bundesanzeiger) and can then be accessed at www.ebundesanzeiger.de.

Application of International Financial Reporting Standards (IFRS)

The consolidated financial statements of the Merck Group – with Merck KGaA as parent company – have been prepared in accordance with consistent accounting policies. Pursuant to Section 315a HGB (German Commercial Code), the International Financial Reporting Standards (IFRS) in force on the reporting date and adopted by the European Union as issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have been applied.

The following amendments to standards as well as the following interpretations were effective for the first time in fiscal 2008:

• Amendments to IAS 39 and IFRS 7: “Reclassification of Financial Instruments”
• IFRIC 11: IFRS 2: “Group and Treasury Share Transactions”

The new rules had no material effects on the consolidated financial statements of the Merck Group.

The following standard and amendments to standards and the following interpretations will take effect as of fiscal 2009:

• IFRS 8 “Operating Segments”
• Revised version of IAS 1 “Presentation of Financial Statements: A Revised Presentation”
• Revised version of IAS 23 “Borrowing Costs”
• Amendment to IAS 32 and IAS 1: “Puttable Financial Instruments and Obligations Arising on Liquidation”
• Amendment to IFRS 1 and IAS 27: “Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Asscociate”
• Amendment to IFRS 2 “Share-based payment - Vesting Conditions and Cancellations”
• “Improvements to International Financial Reporting Standards”
• IFRIC 13 “Customer Loyalty Programmes”
• IFRIC 14: “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”

We do not expect the new rules to have any material effects on the consolidated financial statements.

In addition, the following amendments to standards were published by the International Accounting Standards Board (IASB) and the following interpretations published by the International Financial Reporting Interpretations Committee (IFRIC), but not yet adopted by the EU:

• Amendment to IAS 27 “Consolidated and Separate Financial Statements”
• Amendment to IAS 39 “Financial Instruments: Recognition and Measurement: Eligible Hedged Items”
• Amendment to IAS 39 and IFRS 7: “Reclassification of Fianancial Assets: Effective Date and Transition”
• Revised version of IFRS 1 “First-time Adoption of Internatioanl Financial Reporting Standards”
• Revised version of IFRS 3 “Business Combinations”
• IFRIC 12 “Service Concession Arrangements”
• IFRIC 15 “Agreements for the Construction of Real Estate”
• IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”
• IFRIC 17 “Distributions of Non-cash Assets to Owners”
• IFRIC 18 “Transfers of Assets from Customers”

We currently do not expect the new rules to have any material effects on the consolidated financial statements.

Companies consolidated

Including the parent company Merck KGaA, Darmstadt, 178 companies are fully consolidated in the annual financial statements of the Merck Group. One associate is included using the equity method. Due to secondary importance 40 investments are not consolidated and are presented under non-current financial assets. In fiscal 2008, ten companies were included in the consolidated financial statements for the first time, and 24 companies were deconsolidated, mainly as a result of company mergers.