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Asset and Capital Structure

Bayer Group Summary Balance Sheets	Dec. 31, 2007	Dec. 31, 2008	Change
	€ million	€ million	%
Noncurrent assets	34,712	35,351	+1.8
Current assets	16,582	17,152	+3.4
Assets held for sale and discontinued operations	84	8	– 90.5
Total current assets	16,666	17,160	+3.0
Total assets	51,378	52,511	+2.2

Stockholders’ equity	16,821	16,340	– 2.9
Noncurrent liabilities	23,945	22,336	– 6.7
Current liabilities	10,436	13,822	+32.4
Liabilities directly related to assets held for sale and discontinued operations	176	13	– 92.6
Total current liabilities	10,612	13,835	+30.4
Liabilities	34,557	36,171	+4.7
Total stockholders’ equity and liabilities	51,378	52,511	+2.2

Total assets increased by €1.1 billion compared with December 31, 2007, to €52.5 billion.

Noncurrent assets rose by €0.6 billion to €35.4 billion. They included goodwill of €8.6 billion resulting primarily from the acquisition of Schering AG, Berlin, Germany. Current assets increased by €0.5 billion from the previous year, to €17.2 billion.

Stockholders’ equity fell by €0.5 billion to €16.3 billion. A positive effect came particularly from the Group net income of €1.7 billion. Stockholders’ equity was diminished mainly by the dividend payment of €1.0 billion made in 2008, an €0.7 billion increase in pension obligations that did not affect earnings, and negative currency effects of €0.4 billion. Our equity ratio (equity coverage of total assets) was 31.1% as of December 31, 2008 (2007: 32.7%).

Liabilities increased by €1.6 billion compared with December 31, 2007, to €36.2 billion. Current and noncurrent financial liabilities rose by €2.4 billion to €16.9 billion.

Net Pension Liability

Net Pension Liability	Dec. 31, 2007	Dec. 31, 2008
	€ million	€ million
Provisions for pensions and other post-employment benefits	5,501	6,347
Prepaid benefit assets	(533)	(351)
Net pension liability	4,968	5,996

The net pension liability increased by €1.0 billion compared with December 31, 2007, to €6.0 billion, mainly because the fair value of plan assets was lower than in the previous year.

Balance Sheet and Financial Ratios		2007	2008
Cost of sales ratio (%)	Cost of goods sold	50.5	50.0
Cost of sales ratio (%)	Sales	50.5	50.0
R&D expense ratio (%)	Research and development expenses	8.0	8.1
R&D expense ratio (%)	Sales	8.0	8.1
Inventory turnover	Cost of goods sold	2.6	2.5
Inventory turnover	Inventories	2.6	2.5
Receivables turnover	Sales	5.6	5.5
Receivables turnover	Trade accounts receivable	5.6	5.5
EBIT margin before special items (%)	EBIT before special items	13.2	13.2
EBIT margin before special items (%)	Sales	13.2	13.2
EBITDA margin before special items (%)	EBITDA before special items	20.9	21.1
EBITDA margin before special items (%)	Sales	20.9	21.1
Asset intensity (%)	Property, plant and equipment + intangible assets	61.6	61.1
Asset intensity (%)	Total assets (continuing operations)¹	61.6	61.1
D&A/capex ratio (%)	Depreciation and amortization³	128.3	129.7
D&A/capex ratio (%)	Capital expenditures³	128.3	129.7
Liability structure² (%)	Current liabilities	30.7	38.2
Liability structure² (%)	Liabilities	30.7	38.2
Gearing	Net debt + pension provisions	1.1	1.3
Gearing	Stockholders’ equity	1.1	1.3
Free operating cash flow (€ million)	Net cash flow less cash outflows for additions to property, plant, equipment and intangible assets	2,423	1,849
Equity ratio² (%)	Stockholders’ equity	32.7	31.1
Equity ratio² (%)	Total assets	32.7	31.1
Return on stockholder’s equity² (%)	Income after taxes	31.8	10.4
Return on stockholder’s equity² (%)	Average stockholders’ equity	31.8	10.4
Return on assets (%)	Income before taxes and interest expense	6.9	7.0
Return on assets (%)	Average total assets for the year based on segment table	6.9	7.0
1 total assets (continuing operations) = noncurrent and current assets minus the balance sheet item “assets held for sale and discontinued operations” 2 Ratio refers to the total of continuing and discontinued operations. 3 property, plant and equipment + intangible assets