[31] Net equity Audited

A strong equity position is important for Merck to ensure the continued existence of the company. Based on our financial strategy, the Executive Board regularly reviews various key figures that reflect the capitalization of the company. Gearing (ratio of net debt and pension provisions to net equity) and the equity ratio are important indicators here.

As of the balance sheet date, the number of shares issued totaled 64,621,126. The amount resulting from the issue of shares by Merck KGaA exceeding the nominal amount is recognized in the capital reserves. The reserves also contain the retained earnings and the net retained profit of the consolidated subsidiaries as well as the income and expenses taken directly to equity. The currency translation difference includes the differences not recognized in income from currency translation by subsidiaries abroad. Currency translation differences decreased equity in 2009 by € 20.1 million (2008: increased by € 878.0 million). Accordingly, as of December 31, 2009, cumulative currency translation differences in equity amounted to a gain of € 509.5 million (2008: gain of € 529.6 million).

The disclosure of minority interest is based on the stated equity of the subsidiaries concerned after any adjustment required to ensure compliance with the accounting policies of the Merck Group, as well as pro rata consolidation entries.

The interests of other shareholders in net equity mainly relates to the minority interests in Merck Ltd. India, Merck S.A. France, Merck Ltd., Thailand, and PT Merck Tbk, Indonesia.

In addition to the dividend payments to the shareholders of Merck KGaA and to minority shareholders in subsidiary companies of the Merck Group, the appropriation of profits includes the transfer of profits from Merck & Cie KG to E. Merck KG in accordance with the company agreements and the reciprocal transfer of profits between E. Merck KG and Merck KGaA in accordance with the Articles of Association. In accordance with the capital ratios, E. Merck KG has a 70.27% interest in the profit/loss of Merck KGaA while Merck KGaA has an interest of 29.73% in the profit/loss of E. Merck KG. Merck KGaA’s profit from ordinary activities adjusted for trade income tax, on which the appropriation of its profit is based, amounts to €  310.1 million. Merck KGaA transferred € 217.9 million of its profit to E. Merck KG (2008: € 126.5 million). In 2009, € 26.8 million was transferred from Merck & Cie KG to E. Merck KG (2008: € 34.9 million). The profit/loss of E. Merck KG, on which the appropriation of profit/loss is based, amounts to € 1.9 million (2008: € 5.9 million). Consequently, this results in a profit transfer to Merck KGaA of € 0.6 million (2008: € 1.8 million).

For 2008, a dividend of € 1.50 per share was distributed. The dividend proposal for fiscal 2009 will be € 1.00 per share, corresponding to a total dividend payment of € 64.6 million to shareholders.

The following tables show the development of changes taken directly to equity as a result of recognizing financial instruments at fair value in accordance with IAS 39.