Aspire – Bayer’sLongterm Incentive

Program27. April 2006

Lars PellinatGlobal Head Compensation &

BenefitsBayer AG

Oliver FreigangHead UBS CEFS International

Bayer Group

* as at December 31, 2005* as at December 31, 2005

Bayer: Science For A Better Life

Bayer Group After the Strategic Realignment

•A clear focus for our future to meet shareholder expectations

Total Bayer Group: Sales € 27.4 billion Employees approx. 93,700

Source: Bayer Annual Report 2005

€ 9.4 billion € 5.9 billion € 10.7 billion

MaterialScience

• Polyurethanes

• Polycarbonates

• Coatings, Adhesives,Sealants

• Inorganic BasicChemicals

• H.C. Starck, WolffWalsrode

HealthCare

• Animal Health

• Biological Products

• Consumer Care

• Diagnostics

• Pharmaceuticals

CropScience

• Crop Protection

• EnvironmentalScience

• BioScience

Bayer HealthCare

as at December 31, 2005

Employees 33,800

Sales (2005) EUR 9,429 million

EBIT (2005) EUR 1,102 million

Chairman of theExecutive Committee Arthur J. Higgins

Animal HealthLivestock

Companion Animals

Consumer CareNon-prescription drugs

Vitamins

Diabetes CareBlood glucosemonitoring systems

DiagnosticsNear Patient Testing

Laboratory Testing

Molecular Testing

Pharmaceuticals*Cardiovascularrisk management

Hematology

Cancer

* The Biological Products and Pharmaceuticals divisions were combined into a new organizational unit effective January 1, 2006.

Bayer CropScience

as at December 31, 2005

Employees 18,800

Sales (2005) EUR 5,896 million

EBIT (2005) EUR 690 million

Chairman of theBoard of Management Friedrich Berschauer

Crop Protection

Insecticides

Fungicides

Herbicides

Seed Treatment

EnvironmentalScience

Professional Products

Consumer Products

BioScience

Vegetables

Agricultural Crops

New Business Ventures

Bayer MaterialScience

as at December 31, 2005

Polyurethanes

Polycarbonates

Coatings, Adhesives, Sealants

Thermoplastic Polyurethanes

Inorganic Basic Chemicals

H.C. Starck

Wolff Walsrode

Employees 18,800

Sales (2005) EUR 10,695 million

EBIT (2005) EUR 1,369 million

Chairman of theBoard of Management Hagen Noerenberg

Changes in Longterm Incentives

AOPfor GLCs

ABPfor all other employees

AIPfor Senior Mgrs.

(non-GLC)

No of Participants (2004)AOP: 150AIP: 160ABP: ca. 30,000

Change in 2005 ASPIREfor GLCs andnon-GLCs as

of VS 4.1

ABP(new design)

No of ParticipantsGLCs: 350Non-GLCs: 1,400

ABP: ca. 30,000

AOP:

• Annually repeating own investment

• Value based on Performance &Outperformance

• Individual Allocation Factor

Aspire:

• Share Ownership Guidelines (once-off)

• Value based on Matrix (Performance &Outperformance)

• Greater transparency: UBS tool with24/7 availability

Aspire Performance and Exercise Periods

• A three-year performance period will begin in January each year

• The periods will overlap and run concurrently

3-year Performance Period 2-year Exercise Period

2010

2009

2006

2007

2008

2011

Exercise Period

Exercise Period

Exercise Period

Jan 1, 2007to

Dec 31, 2009

Jan 1, 2008to

Dec 31, 2010

Jan 1, 2006to

Dec 31, 2008

Determining The Aspire Award

• The percentage change in the share price as measured from thebeginning to the ending period determines the award level

2008

2005

2006

2007

Performance Period

For both the Bayer Share and theEuroStoxx 50 prices

ν Average closing share price over last30 trading days of performance period(e.g., Mid Nov to Dec 2008)

Share price determined at end ofperformance period:

2009

2010

For both the Bayer Share and theEuroStoxx 50 prices

ν Average closing share price over last30 trading days prior to performanceperiod (e.g., Mid Nov to Dec 2005)

Share price determined prior toperformance period:

JAN

DEC

Performance Period – Jan 2006 – Dec 2008

Average Bayer Share Price: € 34.41

Average EuroStoxx 50 Price: € 3,519.67

Example Of How The Aspire-GLC Plan Works

• Base pay: € 150,000• Aspire target %: 20%• Aspire target opportunity: € 30,000• Bayer share at beginning: € 34.41• EuroStoxx 50 at beginning: € 3,519.67

• Bayer share at end: € 40.49• Bayer share price gain: 17.67%• EuroStoxx 50 at end: € 3,983.21• EuroStoxx 50 gain: 13.17%• Relative performance

[17.67% – 13.17%]: + 4.50%

Aspire Target Opportunity € 30,000 x 140%

Equals Aspire Earned Award Amount € 42,000

Aspire Award: 140%

Aspire Award Schedule for non-GLCs

• Each year a performance award schedule is established by theBayer Holding Board

• January 2006 beginningshareprice is € 34.41

ν Bayer share price gain is 5%or € 36.14 Award = 50% ofAspire target opportunity

ν Bayer share price gain is 15%or € 39.58 Award = 100% ofAspire target opportunity

ν Bayer share price gain is 20%or € 41.30 Award = 150% ofAspire target opportunity

Jan 2006 – Dec 2008 PerformanceAspire Award Schedule

Share appreciation will increase the award until the maximum level is reached

Aspire Award Distribution

• Earned Aspire awards will be available one month after the endof any performance period

• You decide whether you want to receive your Aspire award:

• immediately in cash; or

• converted into performance units which can be laterexercised within a two year period (e.g., Feb 2009 throughFeb 2011)

2010

2009

Exercise Period20

06

2007

2008

2011

Performance Period

2005

Award is Available (e.g., Feb 2009)XX

JAN

DEC

FEB

FEB

Award Converted into Performance Units

• Divide your Aspire award by the ending period share price

Using the previous example, your Aspire award is:

€ 42,000 = € 30,000 X 140%

Award in Euros € 42,000

Your Performance Units

=1,038

=Share Price at End of Period

÷€ 40.49

÷

Exercising Your Units

• You may exercise your units between the date your award isconverted into units and the end of the two year exercise period

• The closing share price on the day before exercise will be usedto value your award

2010

2009

Exercise Period

2006

2007

2008

2011

Performance PeriodFEB

FEB

Your Performance Units 1,038

Award in Euros=

€ 44,634=

Share Price at Exercise € 43.00x x

Aspire Communication

• Step 1: Brochure & letter from CEO

• Step 2: Presentations

• Step 3: UBS tool – available 24 / 7 (as of mid December)• All former AOP tranches

• All Aspire tranches

• Present / actual values

• Current share price &outperformance

• Essential plan details

Implementation Challenges

• Unique Compensation Plan design: target awards subject to a performance periodbased on DJSTOXX50 and Bayer share performances.

• Launch in US with US project group prior to global rollout for ROW population withproject group in HQ

• Three distinct phases with overlapping timelines in different regions:

• Performance Phase

• Election Phase

• Exercise / Distribution Phase

• Complexity of performance and election forms

• Variety of election choices by region and grade

Participant Homepage

Hyperlinks to currentPerformance forms,closed performanceforms and electionforms

Performance Form (I)

Target Award Details

Performance Details

Performance Form (II)

Election Form

Award distributionelection

Award distributiondate election

Questions?

Thank you for your participation