Management Report

Performance by Subgroup and Segment

Corporate structure

Our business activities are grouped into the HealthCare, CropScience and MaterialScience subgroups. There was no change to the corporate structure of the Bayer Group in the third quarter of 2008. The commentaries in this report relate exclusively to continuing operations, except where specific reference is made to discontinued operations or to a total value (total).

With the entry of the squeeze-out of the remaining minority stockholders of Bayer Schering Pharma AG in the commercial register on September 25, 2008, all shares of the minority stockholders of Bayer Schering Pharma AG were transferred by operation of law to Bayer Schering GmbH, a wholly owned subsidiary of Bayer AG. The remaining minority stockholders have received cash compensation of €98.98 per share. The required sum of €695 million, which had been held in escrow accounts for this purpose, was paid out to the stockholders at the beginning of October. No final decision has yet been issued in the main proceedings involving lawsuits brought by dissenting stockholders seeking to have the squeeze-out resolution set aside or declared null and void.

The names “Bayer Schering Pharma” or “Schering” as used in this report always refer to Bayer Schering Pharma AG, Berlin, Germany, or its predecessor, Schering AG, Berlin, Germany, respectively. The reference to Bayer Schering Pharma AG or Schering AG also includes business conducted by affiliated entities in countries outside Germany. Bayer Schering Pharma AG and Schering-Plough Corporation, New Jersey, U.S., are unaffiliated companies that have been totally independent of each other for many years.

Key Data by Subgroup and Segment

	Sales		EBIT before special items*		EBITDA before special items*		EBITDA margin before special items*
€ million	3rd Quarter 2007	3rd Quarter 2008	3rd Quarter 2007	3rd Quarter 2008	3rd Quarter 2007	3rd Quarter 2008	3rd Quarter 2007	3rd Quarter 2008
HealthCare	3,680	3,802	644	703	953	1,018	25.9%	26.8%
Pharmaceuticals	2,570	2,638	438	461	715	738	27.8%	28.0%
Consumer Health	1,110	1,164	206	242	238	280	21.4%	24.1%

CropScience	1,157	1,248	34	78	167	207	14.4%	16.6%
Crop Protection	985	1,067	60	88	175	197	17.8%	18.5%
Environmental Science, BioScience	172	181	(26)	(10)	(8)	10	(4.7)%	5.5%

MaterialScience	2,625	2,549	295	138	421	255	16.0%	10.0%
Systems	1,858	1,850	263	148	341	225	18.4%	12.2%
Materials	767	699	32	(10)	80	30	10.4%	4.3%

Reconciliation	331	349	(20)	(28)	18	13	5.4%	3.7%

Continuing operations	7,793	7,948	953	891	1,559	1,493	20.0%	18.8%

* for definition see Bayer Group Key Data, also Calculation of EBIT(DA) Before Special Items

	Sales		EBIT before special items*		EBITDA before special items*		EBITDA margin before special items*
€ million	First Nine Months 2007	First Nine Months 2008	First Nine Months 2007	First Nine Months 2008	First Nine Months 2007	First Nine Months 2008	First Nine Months 2007	First Nine Months 2008
HealthCare	11,007	11,267	1,908	2,005	2,870	3,062	26.1%	27.2%
Pharmaceuticals	7,648	7,836	1,274	1,327	2,137	2,276	27.9%	29.0%
Consumer Health	3,359	3,431	634	678	733	786	21.8%	22.9%

CropScience	4,505	5,030	743	1,031	1,147	1,421	25.5%	28.3%
Crop Protection	3,681	4,215	599	910	946	1,239	25.7%	29.4%
Environmental Science, BioScience	824	815	144	121	201	182	24.4%	22.3%

MaterialScience	7,856	7,683	876	672	1,239	1,034	15.8%	13.5%
Systems	5,593	5,624	777	687	1,008	930	18.0%	16.5%
Materials	2,263	2,059	99	(15)	231	104	10.2%	5.1%

Reconciliation	977	1,015	(14)	(72)	99	57	10.1%	5.6%

Continuing operations	24,345	24,995	3,513	3,636	5,355	5,574	22.0%	22.3%

* for definition see Bayer Group Key Data, also Calculation of EBIT(DA) Before Special Items