[34] Net equity 

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 actuarial income and losses.

The disclosure of non-controlling 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 net equity attributable to non-controlling interests mainly relates to the minority interests in Merck Ltd. India, Merck Ltd., Thailand, Merck S.A. France, and PT Merck Tbk, Indonesia.

In addition to the dividend payments to the shareholders of Merck KGaA and to minority shareholders in subsidiaries of the Merck Group, the appropriation of profits includes the transfer of profits from Merck & Cie to E. Merck KG in accordance with the company agreements. It also includes the reciprocal transfer of profits between E. Merck KG and Merck KGaA in accordance with the Articles of Association, which is as follows:

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 KGaA’s profit from ordinary activities adjusted for trade income tax and extraordinary result, on which the appropriation of its profit is based, amounts to EUR 617.4 million (2009: EUR 310.1 million). Merck KGaA transferred EUR 433.9 million of its profit to E. Merck KG (2009: EUR 217.9 million). The profit/loss of E. Merck KG, on which the appropriation of profit/loss is based, amounts to EUR 12.3 million (2009: EUR 1.9 million). Consequently, this results in a profit transfer to Merck KGaA of EUR 3.7 million (2009: EUR 0.6 million).

Moreover, in 2010 EUR 43.0 million (2009: EUR 26.8 million) was transferred by Merck & Cie to E. Merck KG.

For 2009, a dividend of EUR 1.00 per share was distributed. The dividend proposal for fiscal 2010 will be EUR 1.25 per share, corresponding to a total dividend payment of EUR 80.8 million to shareholders.

The following table shows the development of transactions taken cumulatively and directly to the equity of shareholders of the parent company:

The increase in the currency translation difference results mainly from the decline in the value of the euro versus the Swiss franc and the U.S. dollar.