MARCO TEORICO

In the opinion of the Management of the Fresenius Group, the following accounting policies and topics are critical for the consolidated financial statements in the present economic environment. The influences and judgments as well as the uncertainties which affect them are also important factors to be considered when looking at present and future operating earnings of the Fresenius Group.

a) Recoverability of goodwill and intangible assets with indefinite useful lives

The amount of intangible assets, including goodwill, tradenames and management contracts, repre- sents a considerable part of the total assets of the Fresenius Group. At December 31, 2007 and December 31, 2006, the carrying amount of goodwill and non-regularly amortizable intangible assets with indefinite useful lives was € 7,411 million and € 7,457 million, respectively. This represented 48 % and 50%, respectively, of total assets.

In accordance with FAS142 (Goodwill and Other Intangible Assets), an impairment test of goodwill and non-amortizable intangible assets with indefinite useful lives is performed at least once a year, or if events occur or circumstances change that would indicate the carrying amount might be impaired (Impairment test).

To comply with the regulations of FAS142 and determine possible impairments of these assets, the fair value of the reporting units determined in accordance with FAS142 is compared to the reporting units’ carrying amount. The fair value of each reporting unit is determined using estimated future cash flows for the unit discounted by a weighted-average cost of capital (WACC)specific to that re- porting unit. Estimating the discounted future cash flows involves significant assumptions, especially regarding future reimbursement rates and sales prices, number of treatments, sales volumes and costs. In determining discounted cash flows, the Fresenius Group utilizes for every reporting unit its three-year budget, projections for years 4 to 10 and a corresponding growth rate for all remaining years. These growth rates are 0% to 4 % for Fresenius Medical Care, 2 % for Fresenius Kabi and 1 %

Notes

for Fresenius ProServe. This discount factor is determined by the WACCof the respective reporting unit. Fresenius Medical Care’s WACCconsisted of a basic rate of 7.34 % for 2007. This basic rate is then adjusted by a country specific risk rate within each reporting unit for determining the reporting unit’s fair value. In 2007, this rate ranged from 0 % to 7 %. In the business segments Fresenius ProServe and Fresenius Kabi the WACCwas 7.57 %, country specific adjustments did not occur. If the fair value of the reporting unit is less than its carrying amount, the difference is recorded as an impairment of the fair value of the goodwill at first. An increase of the WACCby 0.5 % would not have resulted in the recognition of an impairment loss in 2007.

A prolonged downturn in the health care industry with lower than expected increases in reimburse- ment rates and/or higher than expected costs for providing health care services could adversely affect the estimated future cash flows of certain countries or segments. Future adverse changes in a reporting unit’s economic environment could affect the discount rate. A decrease in the estimated future cash flows and/or a decline in the reporting unit’s economic environment could result in impairment charges to goodwill and other intangible assets with indefinite lives which could mate- rially and adversely affect the Group’s future operating results.

b) Legal contingencies

The Fresenius Group is involved in several legal matters arising from the ordinary course of its busi- ness. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows of the Fresenius Group. For details, please see Note 26, Commitments and contingent liabilities.

The Fresenius Group regularly analyzes current information about such claims for probable losses and provides accruals for such matters, including estimated expenses for legal services, as appro- priate. The Fresenius Group utilizes its internal legal department as well as external resources for these assessments. In making the decision regarding the need for a loss accrual, the Fresenius Group considers the degree of probability of an unfavorable outcome and its ability to make a reasonable estimate of the amount of loss.

The filing of a suit or formal assertion of a claim, or the disclosure of any such suit or assertion, does not necessarily indicate that an accrual of a loss is appropriate.

c) Allowance for doubtful accounts

Trade accounts receivable are a significant asset and the allowance for doubtful accounts is a signi- ficant estimate made by the Management. Trade accounts receivable were € 2,159 million and € 2,088 million in 2007 and 2006, respectively, net of allowance. Approximately two thirds of receiv- ables derive from the business segment Fresenius Medical Care and mainly relate to the dialysis care business in North America.

Notes

The major debtors or debtor groups of trade accounts receivable were USMedicare and Medicaid health care programs with 13 % as well as private insurers in the USwith 17 % at December 31, 2007. Other than that, the Fresenius Group has no significant risk concentration, due to its interna- tional and heterogenous customer structure.

The allowance for doubtful accounts was € 223 million and € 218 million as of December 31, 2007 and December 31, 2006, respectively.

Sales are invoiced at amounts estimated to be receivable under reimbursement arrangements with third party payors. Estimates for the allowance for doubtful accounts are mainly based on historic collection experience, taking into account the aging of accounts receivable and the contract partners. The Fresenius Group believes that these analyses result in a well-founded estimate of allowances for doubtful accounts. From time to time, the Fresenius Group reviews changes in collection experience to ensure the appropriateness of the allowances.

Deterioration in the ageing of receivables and collection difficulties could require that Fresenius Group increases the estimates of allowances for doubtful accounts. Additional expenses for uncollectible receivables could have a significant negative impact on future operating results.

d) Self-insurance programs

Under the insurance programs for professional, product and general liability, auto liability and worker’s compensation claims, the largest subsidiary of the Fresenius Group, located in North America, is partially self-insured for professional liability claims. For further details regarding the accounting policies for self-insurance programs, please see Note 1.IV.y, Summary of significant accounting policies.

2. ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES

The Fresenius Group made acquisitions of € 613 million and € 3,714 million in 2007 and 2006, re- spectively. Of this amount, € 444 million were paid in cash and € 169 million were assumed obliga- tions in 2007.

Fresenius Medical Care made acquisitions of € 257 million in 2007. The main acquisition took place on November 26, 2007, as Fresenius Medical Care completed the acquisition of all of the common stock of Renal Solutions, Inc., (RSI), an Indiana corporation with principal offices in Warrendale, Penn- sylvania, United States. The RSIacquisition agreement provides for total consideration of up to US$204 million, consisting of US$20 million, previously advanced to RSIin the form of a loan, US$100 million paid at closing, US$60 million payable after the first year which was recorded as a liability at closing,

US$3 million receivable related to a working capital adjustment and up to US$30 million in mile- stone payments over the next three years, contingent upon the achievement of certain performance criteria. Fresenius Medical Care recorded a liability of US$27.4 million representing the net present

Notes

value of the US$30 million milestone payments as it was deemed beyond reasonable doubt that the future performance criteria will be achieved. Furthermore, acquisitions of € 108 million are mainly attributable to the purchase of dialysis centers.

Fresenius Medical Care sold the perfusion business unit of Fresenius Medical Care Extracorporeal Alliance (FMCEA) during the second quarter of 2007. In 2006, FMCEA’s perfusion business contribu- ted revenue of approximately € 83 million. The USperfusion business was deconsolidated effective May 9, 2007.

In 2006, acquisitions of Fresenius Medical Care in an amount of € 3,561 million related mainly to the purchase of Renal Care Group, Inc. (RCG), a Delaware corporation with principal offices in Nashville, Tennessee, United States. On March 31, 2006, the acquisition was completed for an all cash purchase price, net of cash acquired, of US$4,158 million for all of the outstanding common stock and the retirement of RCGstock options. The purchase price included the concurrent repayment of US$658 million indebtedness of RCG. The operations of RCGare included in Fresenius Group’s consolidated statements of income and cash flows from April 1, 2006; therefore, the results of 2007 are not compa- rable with the results of 2006.

On November 14, 2006, Fresenius Medical Care acquired the worldwide rights to the PhosLo®_phos-

phate binder product business and its related assets of Nabi Biopharmaceuticals, Inc. PhosLo®_{is an}

oral application calcium acetate phosphate binder for treatment of hyperphosphatemia primarily in end-stage renal disease patients. Fresenius Medical Care paid cash of US$65.3 million including related direct costs of US$0.3 million plus a US$8 million milestone payment in December 2006 and a US$2.5 million milestone payment in 2007. An additional milestone payment of US$10.5 million will be paid over the next two to three years, contingent upon the achievement of certain perform- ance criteria. The purchase price was allocated to technology with an estimated useful live of 15 years (US$64.8 million), and in-process research and development project (US$2.8 million) which is imme- diately expensed, goodwill (US$7.3 million) and other net assets (US$0.9 million).

In connection with the transaction, Fresenius Medical Care also acquired worldwide rights to a new product formulation currently under development, which Fresenius Medical Care expects will be submitted for approval in the United States during 2009. Following the successful launch of this new product formulation, Fresenius Medical Care will pay Nabi Biopharmaceuticals, Inc. royalties on sales of the new product formulation commencing upon the first commercialization of the new product and continuing until November 13, 2016. Total consideration, consisting of initial payment, milestone payments and royalties will not exceed US$150 million.

In 2007, Fresenius Kabi spent € 178 million on acquisitions mainly related to the acquisition of Nestlé’s enteral nutrition businesses in France (Novartis Nutrition S.A.S.) and in Spain (Nestlé España S.A.), the artificial colloid product business of Kyorin Pharmaceuticals Co. Ltd., Japan, the purchase of the remaining shares in Pharmatel Fresenius Kabi Pty Ltd., Australia, as well as the acquisition of all shares of Laboratorios Filaxis S.A., Argentina. In December 2007, Fresenius Kabi has reached an agreement to acquire Laboratorio Sanderson S.A., Chile, and Ribbon S.r.L., Italy. Both acquisitions were closed in January 2008.

Notes

In 2006, Fresenius Kabi made acquisitions of € 14 million, mainly referring to subsequent costs for the acquisition of Endomed Laboratório Farmacéutico Ltda., Brazil, as well as the take over of a dis- tributor in South Africa.

In 2007, Fresenius ProServe spent € 175 million on acquisitions mainly related to the acquisition of the remaining 40% of the shares of HUMAINEKliniken GmbH (HUMAINE), Germany, and the acqui- sition of a majority stake of 75 % in the Krefeld Municipal Hospitals, Germany, by HELIOSKliniken GmbH (HELIOS).

In the first quarter of 2007, Fresenius ProServe closed the divestiture of its subsidiary Pharmaplan GmbH, Germany, to NNE A / S, Denmark. Furthermore, Fresenius ProServe sold its subsidiary Pharmatec GmbH, Germany, to Robert Bosch GmbH, Germany. This transaction was completed on June 30, 2007.

Fresenius ProServe made acquisitions in an amount of € 139 million, which mainly referred to the acquisition of 60% of the stakes in HUMAINEby HELIOSand additional stakes in HELIOSin 2006. Since the beginning of the third quarter of 2006, HUMAINEhas been consolidated.

In the fourth quarter of 2006, Fresenius Biotech signed a contract to acquire additional shares of Trion Pharma GmbH, Germany in an amount of € 9 million. Contingent upon the achievement of certain performance criteria, additional contractual milestone payments in a maximum amount of € 14 million have been agreed. The acquisition was closed in the first quarter of 2007.

IMPACTS ON THE FRESENIUS GROUP’S CONSOLIDATED FINANCIAL STATEMENTS