Strategy and Management Management Systems One of the prime objectives of the Bayer Group is to achieve profitable growth in order to steadily increase the enterprise value and sustain the company as a going concern. Economic planning and management for the company takes place within a framework for the segments determined by the Board of Management in the course of the strategic management process and translated into specific targets during operational planning. Continuous monitoring of business developments complements the planning and management process, and key management and performance indicators are regularly updated. This process also involves implementing strategic objectives and adopting countermeasures in the event of deviations from the budget. Moreover, the Board of Management uses targets and performance indicators to steer the company’s sustainable alignment. We use the following indicators to plan, manage and monitor the development of our business: Operational management indicators The main parameters in economic management within the Bayer Group at the operational level are figures for sales, earnings and tied-up capital, which therefore also significantly affect short-term variable compensation. Growth is measured primarily in terms of the change in sales after adjusting for currency and portfolio effects (Fx & portfolio adj.) in order to reflect the operational business development of the Group and the segments. A key measure of profitability at the Group and segment levels is EBITDA before special items. The EBITDA margin before special items, which is the ratio of EBITDA before special items to sales, serves as a relative indicator for the internal and external comparison of operational earning power. Another important profitability indicator for the Bayer Group is core earnings per share, which is the core net income divided by the weighted average number of shares. Strategic value-based indicator: return on capital employed (ROCE) Return on capital employed (ROCE), which measures the company’s economic success in relation to the capital employed, supplements the operational management indicators. As a strategic indicator, ROCE measures the periodic capital return. This can then be compared with the weighted average cost of capital. If ROCE is greater than the cost of capital, this indicates that a contribution is being made to increasing the enterprise value, as the expectations of the capital market have been exceeded. Monitoring ROCE over time supports the analysis of long-term business development, while comparing ROCE between business areas is a process that aids portfolio analysis.