On December 31, 2005 there were 37,600 employees in the Bayer Group in Germany and 93,700 worldwide. When the spin-off of LANXESS is taken into account, this was 2,000 more than at the beginning of the year. The average number of employees, at about 93,000, was above the 2004 level. A breakdown of employees by segment and region is provided in the notes to the financial statements. Personnel expenses decreased by 1.9 percent in 2005 to EUR 5,912 million, equivalent to 21.6 percent of sales. The value added per employee increased to EUR 102,487.

The total number of employees rose once again, particularly in the Asia-Pacific and Latin America regions, and our personnel structure improved through new hirings. At our German sites alone, about 200 university graduates were given jobs in 2005, while a further 1,000 young people entered company-sponsored vocational training programs and some 600 trainees were given full-time positions.

In 2005 our human resources policy focused on measures designed to enhance and make full use of the performance potential of our employees. We received awards in several countries for our numerous programs and activities aimed at helping employees reconcile family and career demands, motivating the workforce, improving human resources development, recruiting new talent and retaining employees within our company. For example, our companies in Argentina, Australia, New Zealand and Belgium were listed among the top employers in those countries by respected financial magazines and human resources consultants. In the United States, Bayer in 2005 was named one of the best employers for working mothers for the third time. And in Austria, the Federal Ministry of Economics and Labor presented us with the national “Knewledge 2005” prize, which is awarded to companies for outstanding achievements in human resources development and advancement.

At the beginning of 2006, the German Minister for Labor and Social Affairs awarded Bayer the
“Shaping Employment – Companies Demonstrate Responsibility” award in the category “Prospects for Young People” in recognition of the company’s commitment to vocational training. The jury singled out Bayer for the award because of its special program to prepare socially and educationally disadvantaged young people for vocational training courses.

We renewed our range of social benefits in 2005 and adapted them to current requirements. These benefits include counseling offers that are available to our employees in Germany and the United States for dealing with personal and job-related problems, preventive health care programs and a company pension plan that we offer to our employees in nearly every country in which we operate.

In shaping our company pension plans, we take account of both social responsibility aspects and the distribution of risk. We have therefore pursued the successive conversion of our global pension plans from defined benefit to defined contribution systems. This process reached a preliminary conclusion in 2005 with conversion of the systems in the United States, Canada and Brazil. In Germany, too, we correspondingly adjusted components of our pension systems.

During the reporting period we further developed our variable income component systems based on corporate performance – a core component of our remuneration policy – and harmonized these systems internationally. The budget for these is now dependent on the attainment of economic targets at all levels. Non-earnings-based one-time payments were consistently scaled back.

We also restructured the stock-based programs for our employees in 2005. With the launch last year of a new program named “Aspire”, we introduced a uniform Group-wide system for the executive management level. Under this program, participants can receive cash payments based on the performance of Bayer stock over a three-year period.

At the European level, the employees’ representatives met with Group management at the 14th Bayer European Forum to continue their cross-border information exchange and consultation process.

Accompanied by numerous measures around the world throughout 2005, we made our mission statement “Bayer: Science For A Better Life” the benchmark for our entrepreneurial activities. The values enshrined in the mission statement and the leadership principles derived from them have been integrated into our daily operations.

In October 2005 we once again conducted a survey of our managerial staff in which more than 10,000 managerial employees in all countries participated. The survey found that the mood within the company had once again improved significantly over the previous year and a half.