Obligation Bayer AG 5% ( XS0225369403 ) en EUR

Bayer AG

100 % ▼

Allemagne

XS0225369403 ( en EUR )

5% par an ( paiement annuel )

Perpétuelle

Prospectus brochure de l'obligation BAYER AKTIENGESELLSCHAFT XS0225369403 en EUR 5%, échéance Perpétuelle

1 000 EUR

1 300 000 000 EUR

29/07/2026 ( Dans 117 jours )

Bayer Aktiengesellschaft est une société multinationale allemande spécialisée dans les sciences de la vie, active dans les domaines pharmaceutique, agricole et des matériaux de haute performance.

L'Obligation émise par Bayer AG ( Allemagne ) , en EUR, avec le code ISIN XS0225369403, paye un coupon de 5% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le Perpétuelle

Prospectus as of July 25, 2005
BAYER AKTIENGESELLSCHAFT
(incorporated in the Federal Republic of Germany)
7 1,300,000,000 Subordinated Fixed to Floating Rate Callable Bonds
due 2105
Issue Price: 98.812 %
Bayer Aktiengesellschaft (the "Issuer") will issue 5 1,300,000,000 principal amount of Subordinated Fixed to Floating
Rate Callable Bonds (the "Bonds") on July 29, 2005 at an issue price of 98.812 % of the principal amount of such Bonds.
The Bonds will bear interest from and including July 29, 2005 to but excluding July 29, 2015 at a rate of 5.00 % per
annum, payable annually in arrear on July 29 in each year, commencing July 29, 2006. Thereafter, unless previously
redeemed, the Bonds will bear interest the Euro-zone inter-bank offered rate for three-month Euro deposits plus 1.80 %
plus a step-up of 1.00 %, payable quarterly in arrear on October 29, January 29, April 29 and July 29 in each year (each a
"Floating Rate Interest Payment Date").
In the case of a Cash Flow Event (as defined in "Conditions of Issue Interest"), the Issuer shall not pay interest on the
Bonds. The Issuer is entitled to pay voluntarily such unpaid interest within one year following the Relevant Interest Pay-
ment Date on which no interest was paid due to a Cash Flow Event and must pay such unpaid interest under certain
circumstances described in "Conditions of Issue Interest". The Issuer is also entitled, in its sole discretion, to defer
payments of interest on an Optional Interest Payment Date (as defined in "Conditions of Issue Interest"). The Issuer
may pay such voluntarily deferred interest (in whole or in part) at any time upon due notice and it shall pay such volun-
tarily deferred interest (in whole, but not in part) (i) if it decides to pay interest on an Optional Interest Payment Date
thereafter, or (ii) under certain other circumstances, but generally no later than 10 years from the date on which such
interest was voluntarily deferred, as described in "Conditions of Issue Interest".
The Bonds will be redeemed on July 29, 2105.
The Bonds are redeemable in whole but not in part at the option of the Issuer at their principal amount together with any
interest accrued thereon, on July 29, 2015 and on any Floating Rate Interest Payment Date thereafter. The Issuer may also
redeem the Bonds in whole but not in part at any time before July 29, 2015 following a Tax Event or a Gross-up Event (as
defined in "Conditions of Issue Redemption and Purchase") at their Early Redemption Amount (as defined in "Condi-
tions of Issue Redemption and Purchase").
The obligations of the Issuer under the Bonds constitute unsecured and subordinated obligations of the Issuer ranking
pari passu among themselves and in the event of the liquidation, dissolution, insolvency, composition or other proceed-
ings for the avoidance of insolvency of the Issuer rank junior to all other present and future obligations of the Issuer,
whether subordinated or unsubordinated, except as otherwise required by mandatory statutory law. In the event of the
liquidation, dissolution, insolvency, composition or other proceedings for the avoidance of insolvency of the Issuer, the
obligations of the Issuer under the Bonds will be subordinated to the claims of all unsubordinated and subordinated
creditors of the Issuer so that in any such event no amounts shall be payable in respect of the Bonds until the claims of
all unsubordinated and subordinated creditors of the Issuer shall have first been satisfied in full. The obligations of the
Issuer under the Bonds will be senior to the claims of all classes of the shareholders.
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier ("CSSF"), has been filed
with said authority and will be published in electronic form on the website of the Luxembourg Stock Exchange
(www.bourse.lu). It will also be available free of charge upon request at the specified office of the Paying Agent in
Luxembourg.
Application has been made to list the Bonds on the regulated market (as defined below) of the Luxembourg Stock
Exchange. The Bonds will be issued in bearer form in denominations of 5 1,000.
The Issuer has requested CSSF to provide the competent authorities in the Federal Republic of Germany, the United King-
dom of Great Britain and Northern Ireland and The Netherlands with a certificate of approval attesting that the Prospectus
has been drawn up in accordance with the Loi relative aux prospectus pour valeurs mobilires which implements Directive
2003/71/EC of the European Parliament and the Council of 4 November 2003 into Luxembourg law ("Notification").
Joint Lead Managers/Joint Bookrunners
Deutsche Bank
JPMorgan
Structuring Advisor
Co-Lead Managers
BNP PARIBAS
Citigroup
Goldman Sachs International

2

Responsibility Statement
The Issuer with its registered office in Leverkusen, Germany accepts responsibility for the informa-
tion contained in this Prospectus (the "Prospectus") and hereby declares that, having taken all rea-
sonable care to ensure that such is the case, the information contained in this Prospectus for which it
is responsible is, to the best of its knowledge, in accordance with the facts and contains no omission
likely to affect its importance.
The Issuer further confirms that (i) this Prospectus contains all information with respect to the Issuer
and its subsidiaries and affiliates taken as a whole (the "Bayer Group") and to the Bonds which is
material in the context of the issue and offering of the Bonds, including all information which, accord-
ing to the particular nature of the Issuer and of the Bonds is necessary to enable investors and their
investment advisers to make an informed assessment of the assets and liabilities, financial position,
profits and losses, and prospects of the Issuer and the Bayer Group and of the rights attached to the
Bonds; (ii) the statements contained in this Prospectus relating to the Issuer, the Bayer Group and the
Bonds are in every material particular true and accurate and not misleading; (iii) there are no other
facts in relation to the Issuer, the Bayer Group or the Bonds the omission of which would, in the con-
text of the issue and offering of the Bonds, make any statement in the Prospectus misleading in any
material respect and (iv) reasonable enquiries have been made by the Issuer to ascertain such facts
and to verify the accuracy of all such information and statements.
Notice
No person is authorised to give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such information or representations must not be
relied upon as having been authorised by or on behalf of the Issuer or the managers set forth on the
cover page (each a "Manager" and together, the "Managers"). Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Issuer or any of its affiliates since the date of this Prospectus, or
that the information herein is correct at any time since the date of this Prospectus.
Each investor contemplating purchasing any Bonds should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness of the Issuer. This
Prospectus does not constitute an offer of Bonds or an invitation by or on behalf of the Issuer or the
Managers to purchase any Bonds. Neither this Prospectus nor any other information supplied in con-
nection with the Bonds should be considered as a recommendation by the Issuer or the Managers to
a recipient hereof and thereof that such recipient should purchase any Bonds.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or solicitation
by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to
whom it is unlawful to make such offer or solicitation.
The offer, sale and delivery of the Bonds and the distribution of this Prospectus in certain jurisdictions
is restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer
and the Managers to inform themselves about and to observe any such restrictions. In particular, the
Bonds have not been and will not be registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), and are subject to U. S. tax law requirements. Subject to certain lim-
ited exceptions, the Bonds may not be offered, sold or delivered within the United States or to U. S.
persons.
The legally binding language of this Prospectus is the English language; except for the Conditions of
Issue where the legally binding language is the German language.
The Bonds will be listed on the regulated market of the Luxembourg Stock Exchange the Luxem-
bourg Stock Exchange's "regulated market" is a regulated market for the purposes of Directive 2004/
39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instru-
3

ments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the Euro-
pean Parliament and of the Council and repealing Council Directive 93/22/EEC.
IN CONNECTION WITH THE ISSUE OF THE BONDS, DEUTSCHE BANK AG, LONDON BRANCH (AS
CO-ORDINATING STABILIZING MANAGER) AND J. P. MORGAN SECURITIES LTD. (OR PERSONS
ACTING ON THEIR BEHALF) MAY OVER-ALLOT BONDS (PROVIDED THAT THE AGGREGATE PRINCIPAL
AMOUNT OF BONDS ALLOTTED DOES NOT EXCEED 105 % OF THE AGGREGATE PRINCIPAL
AMOUNT OF THE BONDS) OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MAR-
KET PRICE OF THE BONDS AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL.
HOWEVER, THERE IS NO ASSURANCE THAT DEUTSCHE BANK AG, LONDON BRANCH OR J. P. MOR-
GAN SECURITIES LTD. (OR PERSONS ACTING ON THEIR BEHALF) WILL UNDERTAKE STABILISA-
TION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADE-
QUATE PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFER OF THE BONDS IS MADE AND, IF
BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF
30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF THE ALLOT-
MENT OF THE BONDS. SUCH STABILISING SHALL BE IN COMPLIANCE WITH ALL LAWS, REGULA-
TIONS AND RULES OF ANY RELEVANT JURISIDICTION.
4

TABLE OF CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
Conditions of Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
Description of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
Subscription and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
5

SUMMARY
The following constitutes the summary (the "Summary") of the essential characteristics of, and risks
associated with, the Issuer and the Bonds. This Summary should be read as an introduction to this
Prospectus. It does not purport to be complete and is taken from, and is qualified in its entirety by, the
remainder of this Prospectus. Any decision by an investor to invest in the Bonds should be based on
consideration of this Prospectus as a whole. Where a claim relating to the information contained in
this Prospectus is brought before a court, the plaintiff investor might, under the national legislation of
such court, have to bear the costs of translating the Prospectus before the legal proceedings are
initiated. Civil liability attaches to those persons who have tabled this Summary including any trans-
lation thereof, and applied for its notification, but only if the Summary is misleading, inaccurate or
inconsistent when read together with the other parts of this Prospectus.
Words and expressions defined in "Conditions of Issue" below shall have the same meanings in this
section.
Summary in respect of the Bonds
Issuer:
Bayer Aktiengesellschaft.
Principal Amount:
5 1,300,000,000.
Managers:
Deutsche Bank AG, London Branch
J. P. Morgan Securities Ltd.
BNP PARIBAS (London Branch)
Citigroup Global Markets Limited
Goldman Sachs International
Principal Paying
JPMorgan Chase Bank, N. A.
Agent:
Luxembourg Listing
J. P. Morgan Bank Luxembourg S. A.
Agent and Paying
Agent:
Issue Price:
98.812 %.
Denomination:
The Bonds will be issued in a principal amount of 5 1,000 each.
Form of Bonds:
The Bonds are in bearer form and are issued pursuant to U. S. Treasury Regula-
tion Section 1.163-5(c)(2)(i)(D) (the "TEFRA D Rules"). The Bonds will initially
be represented by a temporary global bearer bond (the "Temporary Global
Bond") without interest coupons which will be deposited with a common
depositary for Clearstream Banking, sociØtØ anonyme, Luxembourg, and Euro-
clear Bank S. A./N. V. as operator of the Euroclear System (together the "Clear-
ing System"). The Temporary Global Bond will be exchangeable for a perma-
nent global bearer bond (the "Permanent Global Bond") without interest cou-
pons not earlier than 40 and not later than 180 days after the issue of the Tem-
porary Global Bond upon certification as to non-U. S. beneficial ownership in
accordance with the rules and operating procedures of the Clearing System.
Payments on the Temporary Global Bond will only be made against presenta-
tion of such certifications. No definitive securities or interest coupons will be
issued.
Maturity:
July 29, 2105.
Early Redemption:
The Bonds are redeemable in whole but not in part at the option of the Issuer
on July 29, 2015 or any Floating Rate Interest Payment Date thereafter at their
6

principal amount plus any interest accrued until the redemption date (exclu-
sive) and all outstanding Arrears of Interest to the redemption date. The Issuer
may also redeem the Bonds in whole but not in part at any time before July 29,
2015 following a Tax Event or a Gross Up Event at their Early Redemption
Amount.
Interest:
The Bonds will bear interest from and including the Issue Date to but excluding
July 29, 2015 at a rate of 5.00 % per annum on their aggregate principal
amount, payable annually in arrear on July 29 of each year, commencing on
July 29, 2006. Thereafter, unless previously redeemed, the Bonds will bear in-
terest at the Euro-zone inter-bank offered rate for three-month Euro deposits
plus 1.80 % plus a step-up of 1.00 %, payable quarterly in arrear on October 29,
January 29, April 29 and July 29 of each year. In case of a Cash Flow Event, the
Issuer shall not pay interest on the Bonds. The Issuer is entitled to voluntarily
make up such unpaid interest within one year following the Relevant Interest
Payment Date on which no interest was paid due to a Cash Flow Event and
must make up such unpaid interest under certain circumstances. In addition,
the Issuer is entitled, in its sole discretion, to defer payments of interest on an
Optional Interest Payment Date. The Issuer may pay such voluntarily deferred
interest (in whole or in part) at any time upon due notice to the Bondholders
and the Issuer shall pay such voluntarily deferred interest (in whole, but not in
part) (i) if it decides to pay interest on an Optional Interest Payment Date there-
after, or (ii) under certain other circumstances, but generally no later than 10
years from the date on which such interest was voluntarily deferred.
Taxation:
All payments in respect to the Bonds will be made free and clear of, and with-
out deduction or withholding at source for or on account of any present or
future taxes, duties, assessments or governmental charges of any nature what-
soever imposed, levied, withheld, assessed or collected by or on behalf of the
Federal Republic of Germany or by or on behalf of any political subdivision or
authority thereof having power to tax, unless such deduction or withholding is
required by law. In such event, the Issuer shall pay such additional amounts
necessary for the Bondholders to receive net amounts after such deduction or
withholding, which are equal to the amounts which would have been received
by them without such deduction or withholding, subject to customary excep-
tions as set out more fully in the Conditions of Issue.
Status of the Bonds: The obligations of the Issuer under the Bonds constitute unsecured and subor-
dinated obligations of the Issuer ranking pari passu among themselves and in
the event of the liquidation, dissolution, insolvency, composition or other pro-
ceedings for the avoidance of insolvency of the Issuer rank junior to all other
present and future obligations of the Issuer, whether subordinated or unsubor-
dinated, except as otherwise required by mandatory statutory law. In the event
of the liquidation, dissolution, insolvency, composition or other proceedings
for the avoidance of insolvency of the Issuer, the obligations of the Issuer
under the Bonds will be subordinated to the claims of all unsubordinated and
subordinated creditors of the Issuer so that in any such event no amounts shall
be payable in respect of the Bonds until the claims of all unsubordinated and
subordinated creditors of the Issuer shall have first been satisfied in full.
Negative Pledge:
The Conditions of Issue will not contain a negative pledge provision.
Cross Default:
The Conditions of Issue do not contain a cross default clause of the Issuer.
Listing:
Application has been made for listing of the Bonds on the regulated market of
the Luxembourg Stock Exchange.
Governing Law:
The Bonds will be governed by German law.
7

Selling Restrictions:
There will be specific restrictions on the offer and sale of Bonds and the distri-
bution of offering materials in the European Economic Area, the United States
of America and the United Kingdom of Great Britain and Northern Ireland.
Jurisdiction:
Exclusive place of jurisdiction for any legal proceedings arising under the
Bonds is Frankfurt am Main, Federal Republic of Germany.
Clearance and
The Bonds will be accepted for clearing through Clearstream Banking, sociØtØ
Settlement:
anonyme, Luxembourg and Euroclear Bank S. A./N. V., as operator of the Euro-
clear System.
Summary in respect of the Issuer
Bayer AG was established on December 19, 1951 under the name "Farbenfabriken Bayer Aktienge-
sellschaft". Its name was changed to "Bayer Aktiengesellschaft" by resolution of the Meeting of the
Stockholders on June 14, 1972.
The objective of Bayer AG is the manufacturing, marketing and other industrial activities or provision
of services in the fields of health care, agriculture, polymers and chemicals, as well as the transaction
of all other business which is related to, or directly or indirectly serves, the object of Bayer AG.
Bayer is a global company offering a wide range of products, including ethical pharmaceuticals, diag-
nostics and other health care products, agricultural products and polymers. Bayer AG is headquar-
tered in Leverkusen, Germany and is the management holding company of the Bayer Group, which
includes approximately 350 consolidated subsidiaries (including LANXESS companies).
Following Bayer's strategic alignment culminating in the spin-off of the LANXESS subgroup, Bayer's
business operations are now organized in three subgroups:
·
Bayer HealthCare (consisting of Bayer's four health care segments: Pharmaceuticals, Biological
Products; Consumer Care; Diabetes Care, Diagnostics; Animal Health) develops, produces and
markets products for the prevention, diagnosis and treatment of human and animal diseases.
·
Bayer CropScience (consisting of Bayer's two CropScience segments: Crop Protection and Envir-
onmental Science, BioScience) is active in the area of chemical crop protection and seed treat-
ment, non-agricultural pest and weed control and plant biotechnology.
·
Bayer MaterialScience (comprising Bayer's Materials segment and Bayer's Systems segment) pri-
marily develops, manufactures and markets products in the polyurethane, polycarbonate, cellu-
lose derivatives and special metals field.
Three service organizations provide support functions to the three subgroups, Bayer AG and third
parties. They are:
·
Bayer Technology Services, which provides engineering functions.
·
Bayer Business Services, which provides information management, accounting and reporting,
consulting and administrative services.
·
Bayer Industry Services, which operates the Bayer Chemical Park network of industrial facilities in
Germany and provides site-specific services. Since July 1, 2004, Bayer Industry Services GmbH &
Co. OHG is held by Bayer AG (60 percent) and by LANXESS (40 percent).
For the year ended December 31, 2004, Bayer reported total sales of 5 29,758 million, an operating
result of 5 1,808 million, and a net income of 5 603 million. As of December 31, 2004, Bayer employed
113,000 people worldwide. Based on customers' location, Bayer's activities in the Europe region
accounted for 43 percent of the group's total sales in 2004; North America for 28 percent of sales; the
Asia/Pacific region amounted to 17 percent; and the region Latin America/Africa/Middle East
accounted for 12 percent of total sales.
8

Since February 28, 2003, the Board of Management consists of the following members: Werner Wen-
ning, Chairman, Klaus Kuehn, Dr. Udo Oels, Dr. Richard Pott. The members of the Supervisory Board
are: Dr. Manfred Schneider, Erhard Gipperich, Dr. Paul Achleitner, Dr. Josef Ackermann, Andreas
Becker, Karl-Josef Ellrich, Thomas Hellmuth, Prof. Dr.-Ing. e. h. Hans-Olaf Henkel, Dr. rer. pol.
Dipl.-Kfm. Klaus Kleinfeld, Dr. h. c. Martin Kohlhaussen, John C. Kornblum, Petra Kronen, Wolfgang
Schenk, Hubertus Schmoldt, Dieter Schulte, Prof. Dr.-Ing. Dr. h. c. Ekkehard D. Schulz, Dipl.-Ing. Dr.-
Ing e. h. Jürgen Weber, Siegfried Wendlandt, Thomas de Win, Prof. Dr. Dr. h. c. Ernst-Ludwig Win-
nacker. The auditors of Bayer AG are PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprü-
fungsgesellschaft (formerly PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsge-
sellschaft).
Selected Historical Financial Information:
December 31,
December 31,
March 31,
March 31,
2004 (1)
2003 (1)
2005
2004 (2)
5 million
Net sales / Total revenue . . . .
29,758
28,567
6,704
5,792
Income after taxes . . . . . . . . .
600
(1,349)
645
425
Net cash flow . . . . . . . . . . . . . .
2,450
3,293
(258)
(299)
Total assets . . . . . . . . . . . . . . .
37,804
37,445
35,457
38,193
Stockholder's Equity . . . . . . . .
12,268
12,213
10,627
11,547
(1) Financial information as published in the annual report 2004
(2) The financial information for the First Quarter 2004 is adjusted due to new accounting standards and the changed
business situation regarding the Plasma business. See also the expalnation in "IFRS regulations and changes in
Group and reporting structure".
There has been no material change in the financial or trading position of Bayer Group since March 31,
2005 and there has also been no material adverse change in the prospects since the date of the last
published financial statements.
Summary in respect of Risk Factors
The Bonds
An investment in the Bonds involves certain risks associated with the characteristics of the Bonds
which could lead to substantial losses the Bondholders would have to bear in the case of selling
their Bonds or with regard to receiving interest payments. Risks especially arise due to the fact that
the Issuer may defer interest payments if certain requirements are satisfied, that the payment obliga-
tions of the Issuer under the Bonds constitute subordinated obligations of the Issuer, that the Bonds
may be subject to early redemption following a Gross-up Event or a Tax Event, that there is no restric-
tion on the amount of debt which the Issuer may issue, and that there are certain risks in connection
with the Bonds due to the specific conditions on the capital markets.
The Issuer
Bayer's business activities involve the following primary risks:
As a manufacturing company active in numerous areas of the health care and chemicals industry,
Bayer is subject to the procurement market risk that the raw materials and utilities needed to manu-
facture its products may not be available or that their quality or quantity may be insufficient. During
the reorganization process, therefore, the existing procurement structures were adapted to the new
holding company structure with independent operating subgroups. The ongoing development of the
procurement system into a flexible network structure allows Bayer to more easily identify risks on the
procurement markets at an early stage, respond to changes and ensure a constant supply of raw
materials. The holding company structure also ensures that Bayer can leverage its position as a sin-
gle enterprise to achieve more favorable prices and supply terms for the Group as a whole.
9

Bayer guards against exchange and interest rate risks by financing its business in local currencies or
by hedging currency and interest positions using derivative financial instruments that serve no other
purpose. Such instruments are employed according to the respective risk assessments and on the
basis of detailed guidelines.
Bayer addresses product and environmental risks by way of suitable quality assurance measures.
These include certifying its operations to international standards, continuously upgrading its plants
and processes, and developing new and improved products. Strict quality requirements are met by
applying uniform standards throughout the world. Bayer places great importance on the safety of its
products and their proper usage by customers.
Bayer Group is committed to the international Responsible Care initiative of the chemical industry
and to its own safety and environmental management system, which Bayer reports on at regular
intervals. Specially developed guidelines on product stewardship, occupational safety and environ-
mental protection are designed to ensure that all of its employees act competently and responsibly.
To guard against possible liability risks and compensation claims, Bayer has concluded insurance
agreements to keep the potential consequences within reasonable limits or exclude them completely.
The level of insurance coverage is continuously reexamined.
To counter risks that could arise from the numerous tax, competition, patent, antitrust and environ-
mental regulations and laws, Bayer makes its decisions and engineers its business processes on the
basis of comprehensive legal advice provided both by its own experts and by acknowledged external
specialists. Bayer establishes provisions in the balance sheet for risks resulting from new laws or
legal judgments that apply retroactively.
The extent to which the German government's emissions trading plans affect Bayer's earnings
depends on the legislative implementation of these measures.
Business risks also include those pertaining to acquisitions, capital expenditures and research and
development activities. These future-oriented activities are vital to the continued existence of Bayer
Group, yet they also harbor risks because of the related uncertainties.
In addition to the risks described above, further risks could exist for its business that Bayer Group
currently is unaware of or regards as negligible.
10