Corporate and Other Audited

Corporate and Other comprises Group administration expenses for Group functions such as Finance and Accounting, Tax, Procurement, Communications, Investor Relations and Human Resources that cannot be directly allocated to the divisions. Corporate costs also include expenses for central, non-allocated IT functions and corporate IT projects related to the expansion and harmonization of IT systems within the Merck Group. As a result, Corporate and Other has no sales to report. Gains or losses on currency hedging also are reported in Corporate and Other.

During 2012, administration expenses of Corporate and Other increased 7.1% to € 130 million (2011: € 122 million) primarily due to higher bonus accruals. Other operating expenses totaled € 243 million (2011: € 54 million). This increase was mainly driven by expenses classified as one-time items. They include costs of € 79 million related to discontinued businesses, € 9 million in Integration/IT related costs and € 74 million related to restructuring initiatives. These restructuring costs can relate to Group functions or are linked to mixed legal entities. Accordingly, the increase in other operating expenses lowered EBIT and EBITDA to € –381 million (2011: € –183 million) and € –373 million (2011: € –178 million), respectively. Adjusted for one-time items, EBITDA pre one-time items was € –211 million (2011: € –148 million). This change of € –63 million was almost fully attributable to the net losses from currency hedging. Merck started to book the result of currency hedging under Corporate and Other as of January 1, 2012. Until end of 2011, this result was recorded under the respective divisions.