ANÁLISIS DEL ENTORNO

> Focusing on Employee Development: Future Requirements

As of the reporting date March 31, 2006 the Heidelberg Group had 18,716 employees worldwide. Following several years of hefty declines, for the first time in several years this figure was stable compared with the previous year. As can be seen in the graph below, by far the most employees work in the Press Division; 68 percent of our employees are working in Germany.

As previously announced, we reduced staff costs further. The Manage- ment Board and staff representatives signed an agreement to this effect cov- ering our German units. The provisions went into effect on May 1, 2005 and run through March 31, 2008 and in some cases up to 2010. Our pact to secure the future will have a decisive impact on human resources policies in the coming years. The annual savings through financial year 2007/2008 accumu-

late to approximately €100 million. We already benefited noticeably from

the pact during the reporting year.

Pact to Secure the Future Strengthens Competitiveness

A glance at the most important points of the pact makes clear that it does not only focus on reducing staff costs and job protection, but also on the compre- hensive enhancement of competitiveness:

> Working time was increased by approximately 5 percent without compen-

sation, and opportunities to enhance flexibility were expanded. In general, overtime bonuses are no longer paid. In return, an annual pension com- ponent was agreed upon that runs up to 2010.

> A commitment was made to budget investments in research and develop-

ment as well as production through financial year 2007/2008 in an amount equal to the average R&D outlays over the past three years. Moreover, agree- ment was reached to maintain a training quota of approximately 6 percent and to intensify specialized further training.

March 31, 2006 March 31, 2005 Number of employees E M PLOYE E S Press 16,684 16,653 Postpress 1,946 1,946 Financial Services 86 80 Heidelberg Group 18,716 18,679 18,716 18,679 0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000

> Company bonus payments were reduced and the method of calculation revised.

> Depending on business developments, as a matter of principle there will

be no business-related terminations during the life of the agreement.

> The new uniform collective wage agreement for workers and employees

(known by the abbreviation ‘E RA’ from the German term ‘Entgeltrahmen- Tarifvertrag’) will go into effect on January 1, 2007. Some future increases under the collective bargaining agreement will be taken into account.

Introduction of ERA:

Complete Implementation Beginning on January 1, 2007

We will wholly implement the master collective bargaining agreement – in short, E RA based on the German term ‘Entgeltrahmen-Tarifvertrag’ – begin- ning on January 1, 2007. For the first time, both blue-collar and white-collar employees will then be treated equally under the collective bargaining agree- ment. E RA thus provides us with a modern compensation system that reflects the requirements of today’s workplace, offering greater transparency and more justice in all job groups. The work of each employee is systematically recorded and measured according to an extensive catalog of criteria. The right information and communications measures are important for us. Addi- tionally, all the members of senior management are being extensively trained to be in a position to discuss in detail all the aspects of E RA with their sub- ordinates.

Approval of Company Pension System Based on Defined Contributions

We made the decision to switch from a defined benefit Company pension plan to a defined contribution system. This change has meanwhile been partially implemented, thereby permitting us to more clearly foresee future develop- ments and make it possible to better take into consideration Heidelberg’s cost trends in our planning.

High Level of Qualifications – High Level of Product Quality

Our determination to always provide exclusively the highest quality in every aspect of our solutions is only possible due to the high qualification of our employees. Our global network of Print Media Academies benefits us in partic- ular in the area of specialized further training of our sales and marketing specialists.

Acquiring and retaining highly qualified and motivated employees and members of management is a key focus of our human resources policy. This policy is furthered, for example, by our highly regarded international Heidel- berg Graduate Development Program. We cultivate our good reputation as

an employer, among other things, by promoting university marketing. The alternative work forms we offer also help us in competition with other employers. Ensuring the compatibility of the family and one’s profession is an important factor here.

Need for Specialized Further Training: Recording and Supplying Systematically

It is crucial for our effectiveness that we maintain our employees’ high level of motivation and qualifications – a task that we secure by means of a system- atic and networked process. How do we undertake this? We use all possible internal sources of information in order to record the extent to which our employees need specialized further training to ensure that they are in a posi- tion to deal with future requirements as well as possible. Crucial in this are the results of employee talks, which are based on corporate goals.

Increasing the Effectiveness of Specialized Further Training by Diverse Methods

In our specialized further training programs we not only favor external pro- grams, but also make use of a wide variety of methods in order to ensure that our employees gain qualifications in an effective manner. In doing so, with our extensive e-learning offerings and project work we support the trend to independent learning. These procedures are showing a direct and consider- able benefit – and compared with external training programs, they are very low in cost.

The development of our members of senior management is especially important for us. We successfully continued the programs for members of senior management during the reporting year. Additionally, we introduced the ‘Heidelberg Leadership & Management’ system worldwide. This program establishes uniform requirements for the management of both business processes and employees.

Corporate Suggestion Programs: Successful Idea Management

During the reporting year, we expanded our corporate suggestion program into modern idea management. The result: a total of 4,456 ideas were sub- mitted – over 20 percent more than in the previous year. We were able to increase the benefit accrued from new suggestions by 47 percent. The corpo-

rate suggestion program resulted in overall savings of€2.7 million during

Research and Development –