As filed with the Securities and Exchange Commission on March 18, 2004



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

Amendment No. 1

(Mark One)

|o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934 | 
|- | ---------------------------------------------------------------------------------------------- | 

OR

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 | 
|- | ------------------------------------------------------------------------------------ | 

For the fiscal year ended December 31, 2003

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 | 
|- | ---------------------------------------------------------------------------------------- | 

For the transition period from  to

Commission file number: 1-15909

BASF AKTIENGESELLSCHAFT(Exact name of Registrant as specified in its charter)

BASF CORPORATION*(Translation of Registrant's name into English)

Federal Republic of Germany(Jurisdiction of incorporation or organization)

Carl Bosch Strasse 38
Ludwigshafen, GERMANY 67056(Address of principal executive offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredAmerican Depositary Shares representing
BASF ordinary shares of no par value

New York Stock ExchangeBASF ordinary shares of no par value

New York Stock Exchange**


Securities registered or to be registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual
Report.

As
of December 31, 2003, there were 556,643,410 BASF ordinary shares of no par value outstanding.

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item
18 ý



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EXPLANATORY NOTE

This Annual Report on Form 20-F/A (the "Form 20-F/A"), filed on March 18, 2004, amends Item 4 of the Annual Report on Form 20-F
filed by BASF Aktiengesellschaft on March 17, 2004 (the "Form 20-F").

The
Form 20-F/A amends the following:

Item
4 "Information on the Company", Page 53, in the subsection entitled "Research and Development" the table of projects has been corrected.

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BASF Aktiengesellschaft is incorporated as a stock corporation organized under the laws of the Federal Republic of Germany. As used in this Annual Report, "BASF Aktiengesellschaft"
refers solely to the ultimate parent company of the BASF Group. "BASF" refers to BASF Aktiengesellschaft and its consolidated subsidiaries.

The
Consolidated Financial Statements of BASF are based on the accounting and valuation principles of the German Commercial Code
(Handelsgesetzbuch), the accounting standards issued by the German Accounting Standards Board (GASB) and the German Stock Corporation Act
(Aktiengesetz), collectively known as "German GAAP."

The
accounting principles conform to U.S. generally accepted accounting principles (U.S. GAAP) to the extent permissible under the German Commercial Code. The reconciliation of remaining
significant deviations to U.S. GAAP is described in Note 4 to the Consolidated Financial Statements included in Item 18.

The
translation of euros into dollars has been made solely for the convenience of the reader at the noon buying rate of the Federal Reserve Bank of New York (the "Noon Buying Rate") on
December 31, 2003, which was U.S. $1.2597 = €1.00. No representation is made that such amounts in euros could have been or could be converted into dollars at that or any
other exchange rate on such date or any other dates.

Forward-Looking Information May Prove Inaccurate

This Annual Report contains certain forward-looking statements and information relating to BASF that are based on the current expectations,
estimates and projections of its management and information currently available to BASF. These statements include, but are not limited to, statements about BASF's strategies, plans, objectives,
expectations, intentions, expenditures, and assumptions and other statements contained in this Annual Report that are not historical facts. When used in this document, the words "anticipate,"
"believe," "estimate," "expect," "intend," "plan" and "project" and other similar expressions are generally intended to identify forward-looking statements.

These
statements reflect the current views of BASF with respect to future events. They are not guarantees of future performance and involve certain risks and uncertainties that are
difficult to predict. In addition, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.

Many
factors could cause the actual results, performance or achievements of BASF to be materially different from any future results, performance or achievements that may be expressed or
implied by such forward-looking statements. These factors include, among others:



1

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Many
of these factors are macroeconomic in nature and are, therefore, beyond the control of BASF's management. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended, planned or projected. BASF does not
intend, and does not assume any obligation, to update the forward-looking statements contained in this Annual Report.

2

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TABLE OF CONTENTS

|         |  |                                                                              |  |     
|-------- |  | ---------------------------------------------------------------------------- |  | ----
|         |  | PART I                                                                       |  |     
|         |  |                                                                              |  | Page
|Item 1.  |  | Identity of Directors, Senior Management, and Advisors                       |  | 5   
|Item 2.  |  | Offer Statistics and Expected Timetable                                      |  | 5   
|Item 3.  |  | Key Information                                                              |  | 7   
|Item 4.  |  | Information on the Company                                                   |  | 16  
|         |  | History and Development of the Company                                       |  | 16  
|         |  | Business Overview                                                            |  | 16  
|         |  | Organizational Structure                                                     |  | 69  
|         |  | Description of Property                                                      |  | 70  
|Item 5.  |  | Operating and Financial Review and Prospects                                 |  | 71  
|         |  | Overview                                                                     |  | 71  
|         |  | Basis of Presentation                                                        |  | 71  
|         |  | Results of Operations                                                        |  | 74  
|         |  | Liquidity and Capital Resources                                              |  | 96  
|         |  | Exchange Rate Exposure and Risk Management                                   |  | 101 
|         |  | Research and Development                                                     |  | 102 
|Item 6.  |  | Directors, Senior Management and Employees                                   |  | 105 
|Item 7.  |  | Major Shareholders and Related Party Transactions                            |  | 117 
|Item 8.  |  | Financial Information                                                        |  | 119 
|Item 9.  |  | The Offer and Listing                                                        |  | 122 
|Item 10. |  | Additional Information                                                       |  | 125 
|Item 11. |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 130 
|Item 12. |  | Description of Securities Other than Equity Securities                       |  | 142 
|         |  | PART II                                                                      |  |     
|Item 13. |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 143 
|Item 14. |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 143 
|Item 15. |  | Controls and Procedures                                                      |  | 144 
|Item 16. |  | A Audit Committee Financial Expert                                           |  | 145 
|         |  | B Code of Ethics                                                             |  | 145 
|         |  | C Principal Accountant Fees and Services                                     |  | 145 
|         |  | PART III                                                                     |  |     
|Item 17. |  | Financial Statements                                                         |  | F-1 
|Item 18. |  | Financial Statements                                                         |  | F-1 
|Item 19. |  | Exhibits                                                                     |  | E-1 

3

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PART I

Item
1.    Identity of Directors, Senior Management and Advisers

Not applicable.

Item
2.    Offer Statistics and Expected Timetable

Not applicable.

5

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Item 3.    Key Information

SELECTED FINANCIAL DATA

The following selected financial data for each of the years in the five-year period ended December 31, 2003 are excerpted from
the Consolidated Financial Statements of BASF, which have been audited by Deloitte & Touche GmbH, independent accountants during this period. These data are set forth in accordance with
generally accepted accounting principles in Germany (German GAAP) and U.S. GAAP for all periods presented.

BASF's
accounting and valuation methods conform to U.S. GAAP to the extent permissible under the German Commercial Code based on the accounting standards issued by the German Accounting
Standards Board (GASB). See Notes 1 and 4 to the Consolidated Financial Statements in Item 18 for further information. In 2001, BASF changed its accounting for deferred income taxes and the method of
depreciating certain fixed assets as described in Note 2 to the Consolidated Financial Statements. As a result, the selected financial data for 2001 are not directly comparable to that of prior
years. The selected financial data presented below in accordance with U.S. GAAP for the years 2001, 2002 and 2003 have been derived from the Consolidated Financial Statements included in Item 18. The
reconciliation of the differences between German GAAP and U.S. GAAP is described in Note 4 to the Consolidated Financial Statements.

The
translation of euros into U.S. dollars for 2003 has been made solely for the convenience of the reader at the noon buying rate of the Federal Reserve Bank of New York (the "Noon
Buying Rate") on December 31, 2003, which was U.S. $1.2597 = €1.00. No representation is made that such euro amounts could have been or could be converted into dollars at
that or any other exchange rate on such date or any other dates.

7

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|                                                             |                                                
|------------------------------------------------------------ | -----------------------------------------------
|
|
|Income Statement Data                                        |                                                
|German GAAP                                                  |                                                
|Sales, net of petroleum and natural gas taxes(1)             |                                                
|Gross profit on sales                                        |                                                
|Income from operations                                       |                                                
|                                                             | Thereof special items                          
|Income from ordinary activities                              |                                                
|Extraordinary income before taxes                            |                                                
|Income before taxes and minority interests                   |                                                
|Income before minority interests                             |                                                
|Net income                                                   |                                                
|Basic earnings per share                                     |                                                
|Balance Sheet Data                                           |                                                
|German GAAP                                                  |                                                
|Fixed assets                                                 |                                                
|Current assets including deferred taxes and prepaid expenses |                                                
|                                                             |                                                
|Total assets                                                 |                                                
|                                                             |                                                
|Stockholders' equity                                         |                                                
|                                                             | Thereof subscribed capital                     
|Provisions and Liabilities                                   |                                                
|                                                             | Thereof long-term                              
|                                                             |                                                
|Total stockholders' equity and liabilities                   |                                                
|                                                             |                                                
|Capital Expenditures and Depreciation                        |                                                
|Additions to fixed assets                                    |                                                
|Depreciation and amortization of fixed assets                |                                                
|U.S. GAAP Reconciliation                                     |                                                
|Net income                                                   |                                                
|                                                             | Thereof from continuing              operations
|Basic earnings per share                                     |                                                
|                                                             | Income from continuing operations per share    
|Diluted earnings per share                                   |                                                
|Stockholders' equity                                         |                                                
|Key Ratios                                                   |                                                
|Return on sales (%)(2)                                       |                                                
|Return on assets (%)(3)                                      |                                                
|Return on equity after
taxes (%)(4)                          |                                                

8

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Weighted Average of Shares Outstanding Used in Determining Earnings per Share:

|                          
|--------------------------
|
|Basic earnings per share  
|Diluted earnings per share

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9

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REPORTABLE OPERATING SEGMENT DATA

|                                                                     |                      
|-------------------------------------------------------------------- | ---------------------
|
|
|Chemicals                                                            |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Plastics                                                             |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Performance Products                                                 |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Agricultural Products and Nutrition(1),thereof Agricultural Products |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Fine Chemicals                                                       |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Pharmaceuticals  discontinued operations                            |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Oil & Gas                                                            |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      
|Others                                                               |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|Assets                                                               |                      
|BASF Group                                                           |                      
|Sales                                                                |                      
|Income from operations                                               |                      
|                                                                     | Thereof special items
|Assets                                                               |                      

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10

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Dividends

The Board of Executive Directors and the Supervisory Board of BASF Aktiengesellschaft propose dividends based on BASF Aktiengesellschaft's
year-end unconsolidated financial statements. The proposal is then voted on at BASF's Annual Meeting, which is usually held at the end of April/beginning of May of the following year.
Official invitation to the Annual Meeting is issued about six weeks in advance.

Since
all BASF Shares are in bearer form, dividends are either remitted to the custodian bank on behalf of the stockholder, generally within two business days following the Annual
Meeting, or, in the case of stockholders personally possessing certificates, available immediately following the Annual Meeting upon submission of the dividend coupon at the offices of BASF
Aktiengesellschaft in Ludwigshafen, Germany, or the offices of BASF Aktiengesellschaft's appointed paying agents. On the dividend record date record holders of BASF's American Depositary Receipts
(ADRs) will be entitled to receive payment in full of the declared dividend in respect of the year for which it is declared. Cash dividends payable to ADR holders will be paid to The Bank of New York,
as depositary, in euros and, subject to certain exceptions, will be converted by the depositary into U.S. dollars. The amount of dividends received by holders of ADRs may be affected by fluctuations
in exchange rates. See "Exchange Rate Information" for further information.

The
following table lists the annual dividends payable per BASF Share in euros and the U.S. dollar equivalent for each of the years indicated. The table also discloses the dividend
amount per BASF Share for 2003 proposed by the Supervisory Board and the Board of Executive Directors for approval at the Annual Meeting to be held on April 29, 2004. The table does not reflect
the related tax credits available to eligible taxpayers. See "Item 10. Additional Information  Taxation of Dividends" for further information.

|    
|----
|
|
|2003
|2002
|2001
|2000
|1999

---

The euro dividend amounts are translated solely for the convenience of the reader into U.S. dollars (rounded to the nearest cent) at the Noon
Buying Rate on the dividend payment date. For the dividend proposed to be paid in 2004 for the year ended December 31, 2003, the euro amount is translated into U.S. dollars (rounded to the
nearest cent) on the basis of the Noon Buying Rate on December 31, 2003 of $1.2597 = €1.00.

Exchange Rate Information

On January 1, 2002 the euro became the sole legal tender for business transactions in Germany and the other eleven countries participating
in the European Monetary Union.

Since
January 4, 1999, BASF Shares have been quoted in euros on the Frankfurt Stock Exchange. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect,
among other things, the U.S. dollar amount received by holders of BASF's ADRs upon conversion by the depositary of any cash dividends paid in euros on BASF Shares. It will also affect the U.S. dollar
equivalent of the euro price of BASF Shares on the Frankfurt Stock Exchange, which will affect the market price of the ADRs on the New York Stock Exchange.

11

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The
table below sets forth, for the periods and dates indicated, the high, low, period-average and period-end Noon Buying Rates for euros expressed in U.S. dollars for one
euro. No representation is made that the euro or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or euros, as the case may be, at any particular rate.

|    
|----
|
|2003
|2002
|2001
|2000
|1999

---

The high and low exchange rates for the euro for each month during the previous six months is set forth below:

|               
|---------------
|
|
|February, 2004 
|January, 2004  
|December, 2003 
|November, 2003 
|October, 2003  
|September, 2003

The
Noon Buying Rate for the euro on March 5, 2004 was quoted by the Federal Reserve Bank of New York at 1.2401 U.S. dollars for one euro.

As
of January 4, 1999, the commencement date of euro trading, the Noon Buying Rate for the euro was quoted at $1.1812 = €1.00.

Because
a substantial portion of the BASF Group's revenues and expenses are denominated in currencies other than the euro, results of operations and cash flows may be materially affected
by movements in the exchange rate between the euro and the respective currencies to which the Group is exposed. For a discussion of the effect exchange rate fluctuations have on the BASF Group's
business and operations and also the hedging techniques used to manage the Group's exposure to such fluctuations, see "Item 5. Operating and Financial Review and Prospects  Exchange Rate
Exposure and Risk Management" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

Risk Factors

BASF's business, financial condition or results of operations could suffer material adverse effects due to any of the following risks. While all
the risks considered material are described below, these are not the only risks BASF faces. Additional risks not known by BASF or not presently considered material may also impair BASF's business
operations.

Continuing weakness in the market for chemical products and in the global economy generally may adversely affect BASF's sales and earnings

Continued weak demand for chemical products in the United States, as well as ongoing economic weakness in Europe and Asia could have an adverse effect on both
sales and earnings. Those areas that are subject to commoditization, such as BASF's basic inorganic chemicals, petrochemicals, intermediates and plastics operations are particularly vulnerable,
whereas BASF's agricultural,

12

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nutrition,
and cosmetics operations and natural gas trading are less likely to suffer. BASF is also regionally diversified, and therefore less likely to suffer from weakness in a specific region.

Changes in regulatory controls could reduce the profitability of BASF's current products and could delay BASF's introduction of new products

BASF must comply with a broad range of regulatory controls on the testing, manufacturing and marketing of many of its products. BASF expects that regulatory
controls worldwide, and especially in the European Union (EU), will become increasingly demanding. The proposed new EU chemicals policy could require a significant increase in testing for chemical
products. These tests could be very cost intensive and time consuming and could lead to increased costs and reduced operating margins for BASF's chemical products.

In
addition, the EU Directive on Emissions Trading could reduce BASF's growth opportunities in Europe. Governments have to impose total CO2 (carbon dioxide) caps on specific
energy intensive installations. These caps aim to enable EU member states to meet their Kyoto targets e.g., Germany (21)% and Belgium (7.5)%, based on 1990 carbon dioxide emission levels. Further
details will be defined by the National Allocation Plans (NAPs), which must be submitted to the EU Commission for acknowledgment by March 2004. These NAPs might entail disadvantages for our
European sites. Compliance with the directive could require significant capital expenditures by BASF and could limit BASF's ability to pursue its growth strategy.

BASF is exposed to foreign currency and interest rate risks

BASF conducts a significant portion of its operations outside of Europe and therefore is exposed to risks associated with the fluctuations of foreign currencies.
BASF is subject to interest rate risks in the ordinary course of its business.

Risk
management is centralized at BASF Aktiengesellschaft and BASF Group companies designated for that purpose, and BASF hedges against financial risks through derivative instruments
such as forward exchange contracts, currency options, interest rate and currency swaps and combined instruments. There can be no assurance, however, that BASF's hedging strategy will be effective and
that foreign currency and interest rate fluctuations will not adversely affect BASF's results of operations. See "Item 11. Quantitative and Qualitative Disclosures About Market Risk" and
Note 29 to the Consolidated Financial Statements for additional information about the nominal value and market value of BASF's financial instruments.

BASF
is also subject to credit risks to the extent that counterparties to transactions may not be able to perform their contractual obligations. Although BASF aims to limit the risk of
default by entering into transactions only with top-rated financial institutions and by adhering to fixed limits, defaults with respect to significant contracts may adversely affect BASF's
operating results.

Significant variations in the cost and availability of raw materials, energy, precursors and intermediates may adversely affect BASF's operating results

BASF uses significant amounts of raw materials and energy in manufacturing a wide variety of products. Significant variations in the cost and availability of raw
materials, energy, precursors and intermediates may adversely affect BASF's operating results. To control these price and supply risks, BASF purchases raw materials through negotiated
long-term contracts, with prices that periodically float. Additionally required purchases on spot markets are made using optimized procedures. Supply contracts for the most strategically
important raw materials are negotiated and concluded centrally for the BASF Group. For more information, see "Item 4. Information on the Company  Supplies and Raw Materials."

13

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BASF's
individual business units constantly monitor changes in their relevant supply markets and take action to minimize their risks accordingly.

Cyclicality may adversely affect BASF's operating margins

The results of BASF's Chemicals, Plastics and Performance Products segments are affected by cyclicality in various industries in which they operate, including the
automotive, construction, electric and electronics as well as the textile industries. BASF's strategy to deal with these risks is to constantly expand its cyclically resilient businesses, such as
agrochemicals, active ingredients
for pharmaceuticals and nutrition, and trading and transmission of natural gas. In cyclical businesses, BASF seeks to maintain cost leadership.

The results of BASF's crop protection business are dependent on weather conditions and can be affected by local and regional economic circumstances

Sales volumes of BASF's crop protection products are subject to the agricultural sector's dependency on weather conditions. Adverse weather conditions in a
particular growing region could materially adversely affect the results of operations of BASF's crop protection business. Demand for crop protection products is further influenced by the agricultural
policies of governments and multinational organizations. In addition, BASF's crop protection products typically are sold pursuant to contracts with long payment terms. These extended payment periods
make BASF's crop protection business susceptible to losses from receivables during local or regional economic crises and may adversely affect BASF's operating results.

Exploration risk may adversely affect the business of BASF's Oil & Gas segment

The future growth of the exploration and production unit of our Oil & Gas segment is to a large extent dependant on successful findings. The search for new
oil and natural gas reserves involves certain geological risks that relate to the availability of hydrocarbon products and the quality thereof. The exploration and production industries are
experienced in dealing with these risks diligently. We diversify our risks through a balanced exploration portfolio.

Failure to develop new products and production technologies may harm BASF's competitive position and operating results

BASF's operating results depend on the development of commercially viable new products and production technologies. BASF devotes substantial resources to research
and development. Because of the lengthy development process, technological challenges and intense competition, there can be no assurance that any of the products BASF is currently developing, or may
begin to develop in the future, will become market-ready and achieve substantial commercial success.

Negative developments in equity and bond markets may make extraordinary contributions to pension funds necessary

The fund assets required to cover future pension obligations are actuarially determined using assumptions concerning the expected return on plan assets. The plan
assets are partially comprised of equity investments. Declining returns on equity and bond markets could trigger additional contributions to the pension plan to cover future pension obligations. The
amortization of additional contributions, which are deferred as prepaid pension, increase future pension expenses.

14

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BASF is dependent upon hiring and retaining highly qualified management and technical personnel

Competition for highly qualified management and technical personnel is intense in the industries in which BASF operates. BASF's future success depends in part on
its continued ability to hire, integrate and retain highly-skilled employees.

BASF is subject to the risks associated with the use of information technology

BASF is dependent upon technology for the distribution of information within the BASF Group and to customers and suppliers. This information technology is subject
to risks associated with defects, errors, failures and computer viruses. To control potential risks relating to information technology, BASF uses the latest hardware and software and has integrated
uniform information technology infrastructures, backup systems, replicated databases, virus and access protection, encoding systems and a high degree of internal networking. There can be no assurance,
however, that BASF's information technology systems will not fail and cause material disruptions to BASF's business.

BASF is subject to security risks

Assessing security risks on a worldwide basis and determining their potential impact on BASF has become an extremely difficult undertaking since the terrorist
attacks in the United States. BASF's corporate security is in close contact with local security offices through its group-wide network, and takes controlled precautionary steps with the
help of constantly updated security measures and recommendations (e.g., travel restrictions, tighter access
controls for production plants, up-dating of rescue and evacuation plans, emergency services, etc.) to protect the company and its employees.

Litigation could harm BASF's operating results and cash flows

For further information see "Item 8. Financial Information  Legal Proceedings" and Note 27 to the Consolidated Financial Statements.

15

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Item 4.    Information on the Company

HISTORY AND DEVELOPMENT OF THE COMPANY

BASF Aktiengesellschaft was incorporated as a stock corporation under the laws of the Federal Republic of Germany on January 30, 1952 under
the name "Badische Anilin- und Soda-Fabrik AG." In 1973, the company changed its name to BASF Aktiengesellschaft. BASF Aktiengesellschaft's headquarters are located in Ludwigshafen,
Germany; its registered office is located at Carl Bosch Strasse 38, 67056 Ludwigshafen, Federal Republic of Germany, telephone 011-49-621-60-0. The
company's agent for U.S. federal securities law purposes is BASF Corporation, located at 3000 Continental Drive-North, Mount Olive, New Jersey 07828-1234, telephone
(973) 426-2600.

BUSINESS OVERVIEW

Introduction

BASF is a transnational chemical company that is comprised of the parent company, BASF Aktiengesellschaft of Ludwigshafen, Germany, and 153
consolidated subsidiaries. The company has customers in more than 160 countries and operates production sites in 41 countries.

For
the year ended December 31, 2003, BASF reported sales of €33,361 million, income from operations of €2,658 million, and net
income after taxes and minority interests of €910 million. Based on customer location, BASF's activities in Europe accounted for 57.3% of BASF's total sales in 2003; North
America (which includes the United States, Mexico and Canada) accounted for 21.5% of sales; the Asia, Pacific Area, Africa region accounted for 15.9% of sales; and South America accounted for 5.3% of
sales.

Structure

BASF has five separate business segments: Chemicals, Plastics, Performance Products, Agricultural Products & Nutrition and Oil &
Gas. These business segments encompass BASF's 12 operating divisions. For financial reporting purposes, the two operating divisions of BASF's Agricultural Products & Nutrition business segment
are separate reportable operating segments: Agricultural Products and Fine Chemicals. Major recent acquisitions and divestitures include the following: BASF purchased the worldwide engineering
plastics business of Honeywell International, Morris Township, New Jersey and sold its worldwide nylon fibers business to Honeywell on May 1, 2003. The Plastics and Fibers segment was
thereafter renamed Plastics. BASF acquired the insecticide fipronil, and certain fungicides for seed treatment from Bayer CropScience on March 21, 2003.

BASF's
business segments are linked with what is referred to as the "Verbund" structure. Verbund loosely translates as "integration", but the meaning encompasses far more than what is
traditionally associated with backward or forward integration. In production processes, BASF does not simply look forward and backward to find potential efficiencies, but rather examines every input
and every output of these processes. At Verbund sites BASF uses byproducts of chemical reactions that might otherwise have to be disposed of, as raw materials for other processes. In addition, many
chemical processes give off heat energy, which BASF converts into steam and then uses to drive other processes within a Verbund site. This allows our Verbund sites to consume less fossil fuel than
would otherwise be required. The closely linked plants at a Verbund site also allow the use of pipelines to transport intermediate products, instead of railcars, barges or trucks, thus resulting in
further savings. By reusing byproducts and residual materials, using energy and other raw materials efficiently, and keeping the distances that substances need to be transported to a minimum, BASF
reduces the impact on the environment and saves money. In addition to production, this concept is applied to other areas; from R&D to purchasing to customer connections, the advantages of Verbund are
applied throughout BASF.

16

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Group Strategy

In response to the evolving global chemical industry, BASF announced in December 2003 a renewed strategy: BASF 2015. As an evolution of
BASF's previous strategy, four strategic guidelines, along with a new logo and a new slogan ("BASF: The Chemical Company") were introduced. The new strategic guidelines; earning a premium on our cost
of capital, helping our customers to be more successful, forming the best team in the industry, and ensuring sustainable development, will guide BASF's business in the future. As the world's largest
chemical company, based on sales of €33,361 million in 2003, BASF aims to actively capitalize both on the structural and technological changes that will affect the global
chemical industry, and economy as a whole over the next decade.

Earning a premium on our cost of capital

BASF's measures its performance based on earnings before interest and taxes (EBIT) minus cost of capital employed. The expected cost of capital for the year 2004
is 10% before taxes. EBIT after cost of capital will also be used as a key performance indicator for our divisions.

Helping BASF's customers to be more successful

BASF aims to offer tailor-made solutions for our customers' problems and thereby be the partner of choice for specialty products. In order to do this
we must understand our customer's businesses as well as we understand our own. By starting to cooperate with the customer at a very early stage in the product development process, and also continuing
cooperation in the further improvement of established products, applications and processes, we can ensure our own success.

BASF
seeks to offer our standard products reliably, in a defined quality, and at an appropriate price. To be profitable in this area we need highly efficient and lean structures and the
lowest manufacturing costs for our products. We ensure this by using cost-efficient raw material purchasing, innovative production methods and intelligent marketing approaches.

Forming the best team in the industry

Attracting and developing the best talent is a critical success factor. BASF considers its committed and skilled employees to be one of the company's particular
strengths and also believes the company benefits from the national and cultural diversity of its staff. Furthermore, BASF supports
teamwork and believes it has an impact in particular on the effectiveness of the company's research and development activities.

Ensuring sustainable development

For BASF, sustainable development means combining business success, environmental protection and social responsibility. Our successful eco-efficiency
analysis is a good example. With it we can show which products and processes are superior from environmental as well as economic viewpoints. This is becoming increasingly important to our customers
and partners and gives us a competitive advantage in the market. BASF further demonstrates its commitment to sustainable development by setting long-term environmental goals for itself,
such as a 40% reduction of air pollution, and a 60% reduction of organic substances to water by 2012. BASF also takes pride in its membership in the Dow Jones Sustainability World Index for the third
year running.

Continuing with proven strategies

BASF considers these new guidelines to be a refinement of our existing strategies, and not a revolutionary change of direction. Elements of BASF's existing
strategies therefore remain in place.

17

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Specific
plans for achieving our goals, in particular earning a premium on our cost of capital, include the following:



BASF's financial yardstick, EBIT after cost of capital will guide its selection of areas in which to invest its resources. To expand our business portfolio
profitably in the next decade and beyond, BASF will exploit the commercial benefits of its innovations, expand manufacturing capacities for its most profitable products and actively manage its
portfolio.

BASF
discontinues business activities that are unlikely to show long-term profitability and acquires innovative businesses with a high potential for growth. Between 1994 and
2003, BASF sold businesses, which at the time of their divestiture, generated sales valued at
approximately €10.5 billion. During the same period, the company acquired businesses, which at the time of their acquisition, generated sales valued at approximately
€10 billion. BASF also enters into strategic alliances with the aim of achieving profitable growth in our key businesses and value-adding chains.



BASF believes that cost leadership is crucial to the company's long-term competitiveness. To achieve this, BASF relies on both technological advances
in its production processes, and the inherent efficiency in its integrated large-scale plants to maintain high operational efficiency. BASF relies on the technology platforms in its research and
development units to develop and implement process and product innovations effectively.

BASF's
goal is to operate the most competitive sites in the chemical industry. BASF believes that to continue to secure its long-term performance in the chemicals business,
it must use the highly integrated nature of its major manufacturing sites (Verbund sites) as effectively and extensively as possible while consolidating the company's portfolio of production sites.
Where appropriate, BASF capitalizes on the cost advantages of its Verbund structures by building new plants at existing Verbund sites or by building new Verbund sites such as those in Nanjing, China,
and Kuantan, Malaysia. However, for customers who place a high value on being served locally, BASF can gain a competitive advantage by operating regional sites for manufacturing customized products.

BASF's
marketing and sales competence and its access to competitively-priced raw materials, energy and precursors are also of strategic importance. Where necessary, BASF ensures access
by using its technological and market strength to enter into partnerships and alliances with strong global or regional partners.

BASF
continuously seeks to reduce costs, especially those relating to our standard products. At our Ludwigshafen site alone, BASF aims to eliminate €450 million in
annual costs by 2005 as part of the Ludwigshafen Site Concept. To this end BASF has introduced a series of optimization measures for raw materials, energy consumption, processes and personnel at its
most important Verbund site in Ludwigshafen, Germany. By the end of 2003 BASF had already made changes projected to save €100 million annually.



BASF focuses its resources on expanding selected businesses in specific regions. Building production capacities in growth markets is a crucial element of BASF's
strategy, as it allows the company to supply regional markets locally. Local production also increases the company's flexibility and reduces the risks posed by temporary currency fluctuations and weak
regional growth.

BASF
estimates that by 2010 the chemical market in Asia  excluding Japan  will be approximately as large as the market for chemicals in Europe. Asia is
therefore a key market for BASF. The company

18

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aims
to establish itself quickly as one of the most important chemical manufacturers in this market. In Europe and North America, BASF is concentrating its resources on growth markets in which the
company believes it has competitive advantages.

BASF
aims to be among the top three competitors in the markets it serves. The company already derives more than two-thirds of its sales from product groups in which it is one
of the top three suppliers, and it aims to further increase this proportion.

CHEMICALS

Segment Overview

BASF's Chemicals segment is one of the largest chemical producers in the world based on sales. The Chemicals segment produces a wide range of
products, from basic petrochemicals and inorganic chemicals to higher-value intermediates, allowing BASF to exploit fully the benefits of its Verbund approach to integration. Key information is
provided in the following table:

|                                                      
|------------------------------------------------------
|
|
|Sales to third parties                                
|Percentage of total BASF sales                        
|Intersegmental transfers                              
|Income from operations                                
|Capital expenditures on tangible and intangible assets

The
Chemicals segment produces a wide variety of chemicals that are sold to a multitude of industries including the chemical, construction, automotive, electrical, electronics,
detergents, colorants, coatings, health and nutrition industries.

The
Chemicals segment exemplifies the benefits of BASF's Verbund approach to integration because its divisions both intensively consume and manufacture products along the company's core
value-adding chains. Virtually all products that the segment sells to external customers are produced within this integrated network. Although most of the segment's sales are to external customers,
31.8% of the segment's total sales are intersegmental transfers to other BASF operations for the manufacture of higher-value products. The products manufactured for captive use include many basic and
intermediate chemicals.

Segment Strategy

The Chemicals Segment represents the foundation for BASF's Verbund approach to integration of chemical production. It focuses on the supply of
cost-efficient standard chemicals for internal demand and on offering a broad range of intermediate and higher-value products for external customers. Success factors for the chemicals
segment in a competitive environment are cost leadership, including competitively priced raw materials, economies of scale, leading technology and efficient production processes. The high and steady
internal demand for the basic chemical building blocks produced by the Chemicals segment ensures a high capacity utilization of BASF's world-scale plants, e.g., steam crackers, ammonia plants, etc.
BASF's capital expenditures and research and development efforts are focused on building world-scale plants, as well as on developing new technologies, improved processes and new products.

The
Chemicals segment's global strategy is to maintain its leading market position in Europe, improve its cost structure in North America, and expand its operations in Asia. In Europe,
BASF conducted scheduled upgrades for several production plants. In 2003, parts of the existing production plants for chlorine in Ludwigshafen, Germany, were modernized; changing the process to the
more cost-efficient membrane process. Also, the capacity for ethylene oxide was increased in Ludwigshafen.

19

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In
North America, the Chemicals segment improved its production structure with the completion of the world's largest naphtha steam cracker in Port Arthur, Texas, at the end of 2001.
Operated in conjunction with its 40% partner, ATOFINA S.A, this steam cracker supplies propylene, ethylene and other products to BASF's Verbund sites in Geismar, Louisiana, and Freeport, Texas. In
2003, the mechanical construction of the C4 complex, financed jointly by BASF and its partners ATOFINA S.A. and Shell, was completed. The C4 complex includes an extraction unit
for butadiene, an inalkylation, as well as a metathesis unit. The latter will produce an additional 300,000 tons of propylene per year. The C4 complex is integrated into the steam cracker
in Port Arthur, Texas and is planned to start operations by the end of the first quarter 2004. The closure of two out of three ethylene oxide plants in 2002 and the capacity expansion of the remaining
plant in Geismar, Louisiana, in 2003 improve BASF's cost structure by optimizing economies of scale.

In
Asia, BASF has a number of major projects underway. These include the expansion of the Verbund site in Kuantan, Malaysia with our joint venture partner PETRONAS. BASF began
manufacturing at the site in mid-2000. During 2003, BASF completed construction of a new butanediole complex in Kuantan, Malaysia. The output of this plant will be a precursor for our new
polybutyleneterephthalate (PBT) plant, which we are constructing with our joint venture partner Toray. BASF is also constructing a new Verbund site in Nanjing, China with our joint venture partner
Sinopec. The construction work is well in progress and proceeding according to
schedule. BASF expects plants at the Nanjing site to begin operations in 2005. In addition, in 2003 BASF started the construction of a new plant for tetrahydrofuran (THF) and polytetrahydrofuran
(PolyTHF®) in Caojing, China.

In
2003, the Chemicals segment invested approximately €108 million in research and development. Research activities are focused on improving value-adding
production chains that serve the segment and on developing higher-value products. BASF is developing new products and production processes, in particular for organic and inorganic intermediates and
industrial chemicals.

The
main capital expenditure projects of the Chemicals segment currently include:

|                  
|------------------
|
|Caojing, China    
|                  
|Nanjing, China    
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|Port Arthur, Texas
|                  

20

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Inorganics

Overview

BASF's Inorganics division sells approximately 750 products of which approximately 55% are allocated for captive use. This allows BASF's other divisions to
benefit from reduced energy, transportation and infrastructure costs and from improved efficiencies in purchasing and logistics. These internal transfers are based on market prices, and include large
amounts of chlorine, sodium hydroxide, ammonia, formaldehyde, methanol and nitric acid as startup materials to create higher-value products. This captive use within BASF provides steady demand that
helps maintain high capacity utilization rates at the division's production plants. The remaining amount is sold to external customers worldwide in a broad range of industries.

The
principal raw materials used in the Inorganics division are natural gas, sulfur and salt. The division purchases approximately 30% of its raw materials from other BASF operations.
Natural gas, the main raw material, is acquired through BASF's joint venture WINGAS GmbH. All other
principal raw materials are purchased from external sources. BASF does not rely on any dominant supplier for the raw materials of its Inorganics division.

The
most important production site for the Inorganics division is BASF's Verbund site in Ludwigshafen, Germany, where the division produces its entire range of products. The division
also produces basic inorganic chemicals such as ammonia, formaldehyde, nitric acid and sulfuric acid at the company's Verbund site in Antwerp, Belgium.

In
September 2003 BASF has completed the acquisition of the Callery Chemical Division of Mine Safety Appliances Company. The acquisition includes Callery's production site in
Evans City, Pennsylvania. The transaction broadens the Inorganics division's portfolio in the field of high margin inorganic specialties such as alcoholates as well as boron and potassium specialties.
Moreover the acquisition supports an expansion into the important non-cyclical life science markets. Offering customers inorganic specialties and innovative products, especially in the
areas of electronic grade chemicals, catalysts and powder injection molding products allows BASF to maintain a competitive edge and thus contributes to division's profitability. BASF aims to expand
its business in inorganic specialties and catalysts for which the company can obtain higher margins.

The
Inorganics division's sales to third parties were €738 million in 2003.

Products

The Inorganics division consists of four major product lines:



BASF offers a wide range of inorganic specialties which includes carbonyl iron powder, hydroxylamine free base, hydroxylammonium sulfate, boron trifluoride and
BASF's innovative Catamold® line of products for powder injection molding of metal and ceramic components. The Catamold® line is especially suited for manufacturing tiny,
intricate devices such as watch casings and orthodontic appliances. BASF sells these products globally to manufacturers in the automotive, construction and medical sectors, among other industries.
BASF also produces some inorganic specialties in electronic grade, such as hydroxylamine free base, for use in manufacturing semiconductors, light-emitting diodes, flat screens and plasma screens. The
strategic goal for inorganic specialties is the extension of our product portfolio, which shall be achieved by internal growth and targeted acquisitions.

21

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BASF produces inorganic chemicals through value-adding chains of production based on nitrogen, sulfur and sodium chloride. Some of these are starting materials
for superabsorbers, fertilizers, and other high-value chemicals. The products range from basic chemicals such as chlorine, sodium hydroxide, nitric acid and sulfuric acid to inorganic
salts such as sodium and potassium alcoholates to ammonium salts. More than half of these products are for captive use within BASF's Verbund. The remaining products are sold primarily to other
chemical companies. The strategic goal is to guarantee the BASF group a cost-effective supply of basic inorganic chemicals.



BASF offers a wide variety of tailor-made, wood-to-wood adhesives. These adhesives are used to bind together the particles,
fibers and strands found in all types of particleboards, and are also used for surface bonding of wooden components. In addition, BASF produces impregnating resins, which are used to manufacture
decorative paper and laminated flooring. BASF is also a producer of glues and impregnating resin raw materials such as ammonia, formaldehyde, methanol, urea and melamine. Europe is the primary market
for this group of products. The strategic goal for the product line is profitable growth through new
products developed in cooperation with selected customers and through an increased global presence with high margin specialties, particularly in Asia.



Catalysts are substances that are frequently added to chemical processes to facilitate the target reaction. Developing and manufacturing catalysts plays an
important role in BASF's strategy to protect and expand its technological leadership because catalysts often help increase product yields, and reduce energy usage. BASF's catalysts are used in
internal processes and are also sold to customers around the world. The strategic goal for our catalyst business is to grow faster than the chemical industry average, with high margin products.

22

---

The
production capacities as of December 31, 2003 for the Inorganics division's major products are as follows:

|                                            
|--------------------------------------------
|
|Ammonia                                     
|                                            
|Chlorine                                    
|                                            
|Formaldehyde condensation products          
|Formaldehyde                                
|                                            
|Hydroxylamine free base 50% aqueous solution
|                                            
|Methanol                                    
|                                            
|Melamine                                    
|                                            
|Sulfuric acid and oleum                     
|                                            
|Sulfur dioxide                              
|                                            
|Sodium hydroxide                            
|                                            
|Urea                                        
|                                            

Markets and Distribution

In 2003, Europe accounted for 79% of the Inorganics division's sales to external customers; North America for 9%; South America for 2%; and the Asia, Pacific
Area, Africa region for 10%.

The
Inorganics division competes on the basis of strong customer relationships, comprehensive product service and price. In the market for specialty products, the division also competes
based on its ability to offer innovative products, such as catalysts. The Inorganics division sells its products primarily through BASF's own sales force.

The
Inorganics division's main competitors include ATOFINA S.A., Norsk Hydro and Gentek Inc. In the market for catalysts, the division?s main competitors include
Süd-Chemie AG, Criterion Catalyst & Technology Company and Procatalyse S.A., while in the market for glues and impregnating resins, Nordkemi Oy and ATOFINA S.A. are
among BASF?s competitors.

23

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Petrochemicals

Overview

The Petrochemicals division sells more than 200 different products and represents the first step in BASF's Verbund approach to integration for the company's
petrochemical-based, high-value products. The principal raw materials used in this division are naphtha and natural gas. The Petrochemicals division purchases approximately 10% of its raw
materials from other BASF operations, the majority of which is natural gas acquired from WINGAS GmbH. All other principal raw materials are bought from external sources. BASF does not rely on any
dominant supplier for the raw materials of the Petrochemicals division.

The
Petrochemicals division's principal products include the basic building blocks of petrochemicals, which are produced primarily in steam crackers. In a steam cracker, steam is used to
crack naphtha mainly into ethylene and propylene. Other materials produced in this process include aromatics such as benzene, and C4 cuts (a mixture of C4 hydrocarbons)
 a source of butadiene, isobutene and n-butenes. BASF also produces acetylene  a chemical based on natural gasand provides industrial gases for
consumption at BASF's Verbund sites in Ludwigshafen, Germany, and Antwerp, Belgium.

The
division's products, which are used internally in BASF's value-adding chains of production, include large amounts of ethylene, propylene, butadiene, benzene, acetylene, oxo alcohols,
phthalic anhydride, ethylene oxide, ethylene glycols, propylene oxide, propylene glycol and industrial gases. This captive use within BASF provides steady demand that helps maintain high capacity
utilization rates at the division's production plants.

In
Europe, BASF operates steam crackers in Ludwigshafen, Germany, and Antwerp, Belgium. Although the steam crackers mainly supply products for captive use within the company, BASF
maintains positions in the merchant markets for ethylene to ensure high capacity utilization. Since the end of 2001, BASF and its 40% partner ATOFINA S.A. have run a steam cracker at ATOFINA's
refinery located in Port Arthur, Texas, with an annual production capacity of 920,000 metric tons of
ethylene and 550,000 metric tons of propylene. It supplies olefins and aromatics to BASF's Verbund sites in Geismar, Louisiana, and Freeport, Texas.

In
Asia, the Petrochemicals division is expanding its operations. In Nanjing, China, a steam cracker and several downstream production facilities are expected to start operations in
2005.

The
Petrochemicals division's sales to third parties were €3,264 million in 2003.

Products

The following are the Petrochemicals division's main product lines:



BASF produces the entire range of cracker products from ethylene and propylene to benzene and C4 cuts. Of these, propylene is the most important
starting product for BASF's value-adding chains of production in petrochemicals. Benzene is used captively both in Ludwigshafen and Antwerp, while the residues from benzene extraction are sold as
gasoline components. Butadiene is used captively to produce dispersions and ABS (acrylonitrile-butadiene-styrene) and is also sold in the merchant market. Isobutene (a C4 hydrocarbon)
serves as the starting material for the polyisobutene value-adding chain of gasoline additives as well as the basic building block in vitamin synthesis. In Europe, all n-butenes are used
in the synthesis of plasticizers and detergent alcohols. Higher olefins are marketed to the adhesives industry.

24

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These products include industrial gases such as hydrogen, carbon monoxide and oxygen and are largely for captive use within BASF to manufacture higher-value
chemicals.



Ethylene oxide derived from ethylene is used mainly to produce surfactants, ethanolamines, glycols and glycol ethers. BASF is one of Europe's largest producers of
ethylene glycol, a product used in antifreeze in the automotive industry. BASF also supplies ethylene glycol to polyester manufacturers for the production of fibers, films and PET (polyethylene
terephthalate) plastic bottles. Propylene oxide is synthesized from propylene and serves as a base for a wide variety of products, including surfactants, hydraulic fluids, solvents and propylene
glycol.



BASF offers a wide range of oxygenated, halogen-free solvents that are used to dissolve other chemicals and facilitate chemical reactions. BASF is the
world's largest producer of oxo alcohols and is also a major producer of acetates, glycol ethers and glycol ether acetates, as well as the specialty solvents dimethylformamide (DMF), dimethylacetamide
(DMAC) and cyclohexanone. BASF sells most of these products globally, primarily to the coatings, pharmaceuticals and cosmetics industries.



BASF manufactures standard and specialty plasticizers, which are used in chemical processes to make rigid plastics flexible. BASF also sells the plasticizer
precursor phthalic anhydride for use in dyestuffs and unsaturated polyester resins, and markets plasticizers based on higher alcohols.

25

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Production
capacities as of December 31, 2003 for the major products in the Petrochemicals division are as follows:

|                                             
|---------------------------------------------
|
|Ethylene                                     
|                                             
|Propylene                                    
|                                             
|Benzene                                      
|                                             
|Acetylene                                    
|                                             
|Oxo C4 alcohols
(calculated as butyraldehyde)
|                                             
|Phthalic anhydride                           
|                                             
|Higher oxo alcohols                          
|                                             
|Plasticizers                                 
|                                             
|Ethylene oxide                               
|                                             
|Propylene oxide                              
|                                             
|Ethylene glycols                             
|                                             
|Propylene glycol                             
|                                             
|Glycol ethers                                
|                                             

Markets and Distribution

In 2003, Europe accounted for 48% of the Petrochemicals division's sales to external customers; North America for 44%; South America for 1%; and the Asia, Pacific
Area, Africa region for approximately 7%.

26

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The
Petrochemicals division sells products through BASF's own sales force as well as through wholesalers. Specialty chemical and other chemical companies are the primary external
customers of this division, and some of the customers are also competitors of BASF. Approximately 40% of the division's sales are to other BASF divisions. The remaining amount is sold to approximately
2,200 customers worldwide.

The
Petrochemicals division produces commodities that are subject to strong cyclicality in pricing. Changes in the costs of raw materials have an almost immediate effect on the
division's financial performance. Competition in the market is based on strong customer relationships, comprehensive product services and price.

BASF
considers Shell Chemicals and BP Chemicals plc; Eastman Chemicals Corp.; Exxon Chemicals Company; The Dow Chemical Co.; SABIC EuroPetrochemicals B.V.; and European Oxo GmbH to be
the main competitors in its Petrochemicals division.

Intermediates

Overview

The Intermediates division manufactures approximately 600 products that are sold to around 3,000 customers worldwide. These customers typically purchase the
division's chemical products as precursors for their higher-value chemicals. Customers of the Intermediates division are largely active in the manufacture of plastics, polyurethanes, textile fibers,
resins, paints, surfactants, colorants, coatings, pharmaceuticals and agricultural products.

The
Intermediates division purchases approximately 80% of its feedstock from other BASF operations. The principal raw materials that the division uses are methanol, formaldehyde,
acetylene, C4 aldehyde, acrylonitrile, ammonia, ethylene oxide, hydrogen, carbon monoxide, butane, ethylene and chlorine.

Many
of the Intermediates division's products are more resilient to economic cycles than the products in the Chemicals segment's other divisions, and many are the result of
multi-step production processes within BASF before intermediates are sold to external customers. The division additionally satisfies high demand within BASF for cost-efficient
precursors for the production of agricultural products, pharmaceuticals, paint resins, plastics, adhesives, dyes, pigments and process chemicals for the textile, leather and paper industries. Internal
transfers to other BASF operations, in particular of amines, account for approximately 25% of the division's total sales.

The
keys to the Intermediates division's success are achieving technological and cost leadership, offering customized products and, increasingly, developing a global production presence.
Currently, we are building plants representing a wholly-owned investment for tetrahydrofuran and polytetrahydrofuran (PolyTHF®) in Caojing, China. The plants will utilize BASF's newly
developed proprietary technology to convert butane directly to tetrahydrofuran and subsequently to PolyTHF®. This innovative technology will ensure BASF's leading cost position.

The
Intermediates division's sales to third parties were €1,750 million in 2003.

Products

The Intermediates division has three major product areas:



BASF is among the world's top three producers of amines, which are principally used to make detergents and cleaning products, process chemicals and agricultural
products as well as pharmaceuticals. BASF offers approximately 140 different amines worldwide. Key products include

27

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ethanolamines,
ethyleneamines, alkylamines, alkylalkanolamines and several specialty and aromatic amines. Amines are sold globally, but Europe is BASF's primary market for these products.



BASF produces and sells the products of this area globally: BASF is the world's largest manufacturer of 1,4-butanediol, which is a chemical building
block for products such as polyesters and polyurethanes. Its derivatives are used to produce products ranging from fibers to paints and include tetrahydrofuran, PolyTHF®,
gamma-butyrolactone and N-methylpyrrolidone. The polyalcohols such as 1,6-hexanediol and neopentylglcol (Neol®) are used as raw materials for a wide range of
coatings.



This product group is comprised of both commodity acid products and specialty intermediate products. Carbon acids such as formic acid, propionic acid,
2-ethylhexanoic acid and adipic acid can be used to manufacture preservatives for the feed and food industries, as well as auxiliaries for textile and leather applications. The
Intermediates division sells these products globally. In contrast, BASF regards the following products as specialty intermediates: Derivatives of phosgene like acid chlorides and chloroformates,
glyoxal and its derivatives, glutardialdehyde and various other chemicals such as formamide, triphenylphosphine and several chiral intermediates. These chemicals are often used in the manufacture of
paper, polymers, textiles and leather products and are of increasing importance for pharmaceuticals and agricultural products. Europe is BASF's primary market for these products, but BASF has targeted
Asia as well as North America for future substantial growth.

28

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As
of December 31, 2003 the production capacities of the major products of the Intermediates division are as follows:

|                                                 
|-------------------------------------------------
|
|Alkylamines                                      
|                                                 
|Ethanolamines/
alkylalkanolamines/
ethyleneamines
|                                                 
|Specialty amines                                 
|                                                 
|Acid and alkyl chlorides,
chloroformates         
|                                                 
|1,4-Butanediol                                   
|                                                 
|Polytetrahydrofuran
(PolyTHF®)                   
|                                                 
|N-Methylpyrrolidone                              
|                                                 
|Glyoxal® (40% solution)                          
|                                                 
|1,6-Hexanediol                                   
|                                                 
|Formic acid/propionic acid                       
|                                                 
|Formamide                                        
|                                                 
|Maleic anhydride                                 
|                                                 
|Neopentylglycol (Neol®)                          
|                                                 
|Trimethylolpropane                               
|                                                 
|Chiral intermediates (ChiPros)                  
|                                                 

Markets and Distribution

In 2003, Europe accounted for approximately 55% of the Intermediates division's sales to external customers. North and South America together accounted for
approximately 20% and the Asia, Pacific

29

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Area,
Africa region for approximately 25%. BASF sells this division's products through its own sales force as well as through distributors.

BASF
is among the top three producers worldwide in the main products of its three strategic intermediates' business units. In the amines markets, BASF considers its main competitors to
be Air Products Corporation, The Dow Chemical Company and Huntsman Corporation. In BASF's diols and polyalcohols activities, the company's major competitors are respectively: International Specialty
Products Inc., Invista Inc., Lyondell Chemical Company, Dairen Chemical Company, Mitsubishi Chemicals Corporation, Eastman Chemical Company and Ube Industries, Ltd. Finally the
main competitors in BASF's acids and specialty intermediates business are Sydsvenska Kemi OY, BP Amoco plc and Celanese AG.

PLASTICS

Segment Overview

BASF is one of the world's leading plastics manufacturers, and offers one of the industry's most comprehensive product ranges. The segment is
organized into three divisions: Styrenics, Performance Polymers, and Polyurethanes. On May 1, 2003 BASF took over the worldwide engineering plastics business of Honeywell International, Morris
Township, New Jersey and transferred its worldwide nylon fibers business to Honeywell. At the same time the segment was renamed Plastics.

|                                                       | 
|------------------------------------------------------ | 
|
|
|Sales to third parties                                 | 
|Percentage of total BASF sales                         | 
|Intersegmental transfers                               | 
|Income from operations                                 | 
|Capital expenditures on tangible and intangible assets | 

Segment Strategy

BASF's goal is to strengthen its position as one of the leading global competitors in the plastics industry  a position which is
based primarily on its styrenics, nylon and polyurethane value-adding chains of chemistry.

To
achieve this goal, BASF is pursuing the following strategy in this segment:



30

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In
2003, the Plastics segment spent approximately €142 million on research and development activities. These included: improving existing manufacturing processes,
developing cost-effective manufacturing alternatives, building partnerships and working together with customers to develop innovative applications and products.

The
main capital expenditure projects of the Plastics segment currently include:

|                 
|-----------------
|
|Caojing, China   
|                 
|                 
|Yeosu, Korea     
|                 
|Altamira, Mexico 
|                 
|Antwerp, Belgium 
|                 
|Kuantan, Malaysia
|                 

Styrenics

Overview

BASF is one of a small number of global producers of styrenics, supplying customers in all major geographic markets of the world. The Styrenics division purchases
approximately 40% of its raw materials from within BASF. The division's principal raw materials are benzene, ethylene, butadiene and acrylonitrile. BASF continues to fine-tune Verbund
structures at its production sites and to carry out backward integration where appropriate.

BASF
believes that cost efficient business processes with an appropriate number of products manufactured in highly competitive world-scale plants are crucial to ensuring the continued
competitiveness of its styrenics products. Major projects over the last two years included a repositioning of the standard product portfolio; modernizing the ethyl benzene and styrene plants in
Ludwigshafen, Germany, and Antwerp, Belgium; and setting up a joint venture with Shell Eastern Petroleum Pte. Ltd. to bring a world-scale SM/PO (styrene monomer/propylene oxide) plant in
Singapore on stream in the second half of 2002. We are consolidating our North American expandable

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polystyrene
(EPS) production with the phased closure of our 90,000 ton EPS plant in South Brunswick, New Jersey by the end of 2004, and the transfer of production to our joint venture in Altamira,
Mexico.

In
Asia, which BASF views as a long-term growth market for the Styrenics division, the company aims to expand its market presence by improving the capacity of existing plants
in
the region. In Europe, the division is focusing on efficient ethyl benzene and styrene operations and competitive polystyrene production. In North America, BASF is aiming to improve the performance of
its polystyrene and styrene copolymers businesses by concentrating its production activities, improving logistics and streamlining its workforce.

The
Styrenics division's sales to third parties were €3,626 million in 2003.

Products

The Styrenics division's key product lines include:



BASF's polystyrene products range from rigid and transparent general-purpose plastics to high impact-resistant grades that customers shape using injection
molding, extrusion and blow molding. Styrolux complements BASF's polystyrene product portfolio and combines toughness with transparency.

Primary
applications:





BASF sells expandable polystyrene under the brand name Styropor®. Styropor® is a leading product in the building insulation market.
Neopor®, a new product with superior insulation capabilities, has been introduced in the European market. Expandable polystyrene's advantages include heat insulation, high compressive
strength, shock absorption, low weight, and moisture resistance.

Primary
applications:



Terluran® is the trade name for BASF's top styrene copolymer plastic. It offers superior surface quality, mechanical properties and chemical
resistance.

Primary
applications:



32

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Luran® S is the trade name for BASF's styrene copolymer plastic modified with rubber to make it resistant to weathering, aging and chemicals.

Primary
applications:





Luran® is BASF's trade name for SAN plastic. It is transparent, chemical and dishwasher resistant and offers a high degree of stiffness and resistance
to temperature change.

Primary
applications:





Terlux® is the trade name for BASF's MABS plastic. It offers transparency, luster, toughness and resistance to chemicals.

Primary
applications:





Terblend® N is the trade name for BASF's blend of plastics that offers a very high degree of toughness, excellent processibility and luster.

Primary
applications:





BASF sells extruded polystyrene under the brand name Styrodur®. It is a green, extruded, rigid polystyrene foam that is made using environmentally
friendly carbon dioxide as a blowing agent. Sales of Styrodur®; which offers heat insulation, low water absorption, and compressive strength, are concentrated in Europe.

Primary
application: Building insulation

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BASF sells expandable polypropylene, which is often used to make foam components, under the brand name Neopolen® P. Sales are concentrated in Europe
and North and South America.

Primary
applications:





BASF sells melamine resin foam under the brand name Basotect®. It is a flexible foam material that absorbs sound and offers high heat resistance and
good flame retardant attributes. The product's primary markets are Europe, the United States and Japan.

Primary
applications:



Production
capacities as of December 31, 2003 for the major products in the Styrenics division are as follows:

|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|
|Styrene and styrene-based polymers (styrene monomer, polystyrene, expandable polystyrene, copolymers)
|                                                                                                     
|XPS (extruded polystyrene)                                                                           
|                                                                                                     
|MF (melamine resin foam)                                                                             
|                                                                                                     

Markets and Distribution

In 2003, Europe accounted for approximately 46% of the Styrenics division's sales; North America for approximately 19%; the Asia, Pacific Area, Africa region for
approximately 30%; and South America for 5%.

The
Styrenics division sells products primarily through its own regional sales force, supported by BASF technical and marketing experts. The Styrenics division is increasingly relying on
e-commerce (BASF?s PlasticsPortal, EDI and VMI) for distributing its products.

The
market for styrenics is global and characterized by intense price competition. Demand for styrenics continues to rise due to overall economic growth in both industrial and emerging
markets.

34

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The
principal global competitors of the Styrenics division are The Dow Chemical Company and ATOFINA. The division also competes in North America with Nova Chemical Corporation and in
Europe with Enichem. In Asia, BASF competes with other regional competitors, such as Chi Mei and Loyal and LG Chem.

Performance Polymers

Overview

BASF is one of the world's leading producers of engineering plastics and fiber intermediates. In 2003 BASF divested the nylon fibers business to, and purchased
the engineering plastics business from, Honeywell International Inc.

Products
are sold to more than 2000 customers worldwide, more than 85% of which are engineering plastics customers. This customer base consists largely of high-performance
plastic molders and plastic component manufacturers in the automotive, consumer electronics, electrical equipment and packaging industries. These customers often rate product performance and customer
support as important, but prices are becoming increasingly critical to customers in choosing a supplier. To further strengthen its market position, particularly in North America, BASF acquired the
nylon 6,6 business of Ticona and the technical polymers business of Celanese AG, effective December 31, 2003.

To
compete effectively in this market, the Performance Polymers division seeks to increase its preferred supplier status with global customers, many of whom demand collaboration in
developing specific plastic applications. The division works with suppliers to automotive manufacturers to develop specific applications for parts such as engine components, airbag housings and
electronic connectors.

In
Europe and North America, the division is continuing with a restructuring program to improve the division's long-term earnings potential. This includes consolidating its
product portfolio by eliminating unprofitable product lines, entering into strategic alliances for its specialty products and streamlining its workforce in these regions. BASF is also expanding the
division's activities in Asia, a region to which many customers have relocated operations, to support both regional consumption and exports. The restructuring measures of the last year include the
discontinuation of the Ultraform® acetal production at the BASF plant in Theodore, Alabama. This plant was dismantled during the first half of 2003.

The
Performance Polymers division's principal raw materials are cyclohexane, ammonia and propylene, which are purchased mostly from external suppliers. BASF does not rely on any dominant
supplier for the raw materials of its Performance Polymers division.

The
Performance Polymers division's sales to third parties were €2,239 million in 2003.

Products

The Performance Polymers division offers the following product lines:



Ultramid®, Capron® and Nypel® (from Honeywell) are the trade names for BASF's plastics based on nylon 6, nylon 6,6 and other
copolymers manufactured by BASF. They offer toughness and strength as well as both heat and chemical resistance.

Primary
applications:



35

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Ultradur® is the trade name for BASF's plastic based on PBT. It features high stiffness, strength, dimensional stability and heat and aging
resistance.

Primary
applications:





Ultraform® is the trade name for BASF's POM plastic. It offers high stiffness and strength, resilience and low wear.

Primary
applications:



Ultrason® S and E are the trade names for BASF's PES and PSU plastics. The most important features of Ultrason are stiffness, and resistance to water
and oily substances even at high temperatures. Other important features include electrical insulation properties and dimensional stability.

Primary
applications:





Caprolactam forms the basis for manufacturing polycaprolactam, the main precursor for nylon 6. BASF sells a variety of caprolactam products, including caprolactam
in its pure form, nylon 6, for use in engineering plastics and Ultramid BS®, a nylon 6-based spinning polymer. Adipic acid, acrylonitrile and hexamethylenediamine form the
basis for nylon 6,6. BASF sells a variety of nylon 6,6 products, including adipic acid and hexamethylenediamine in their pure forms, Ultramid A®, which is used for engineering plastics,
and Ultramid AS®, a nylon 6,6-based spinning polymer. BASF sells most of these products globally.

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Primary applications include precursors for fibers used in:



Production
capacities as of December 31, 2003 for the major products in the Performance Polymers division are as follows:

|                    
|--------------------
|
|Polyamide           
|                    
|PBT                 
|                    
|POM                 
|                    
|PES and PSU         
|                    
|Polyamide precursors
|                    

Markets and Distribution

In 2003, Europe accounted for 49% of the Performance Polymers division's sales; North America for 29%; the Asia, Pacific Area, Africa region for 21%; and South
America for 1%.

The
division's customers for engineering plastics, particularly in the automotive industry, are primarily global companies that demand uniform worldwide standards for products and
services in all major markets. BASF sells engineering plastics products primarily through its own regional sales force supported by BASF's technical centers in Germany, the United States and Japan.
These centers not only help customers develop applications, but also independently research new markets and applications in which plastics can replace more conventional materials such as metal. In
Asia the division is expanding its sales force to build on its solid position in the market.

The
markets for caprolactam and the other fiber intermediate products are characterized by cyclicality, price competition and commodity pricing.

The
Performance Polymers division is increasingly relying on e-commerce as a channel for distributing its products, and operates its own website; PlasticsPortal.

Major
global competitors include: Bayer AG, Celanese AG, E.I. du Pont de Nemours and Company, General Electric Company, DSM N.V., Solutia Inc., and Rhodia.

Polyurethanes

Overview

BASF's Polyurethanes division is one of the world's three largest producers of polyurethanes; important specialty plastics used to produce a wide spectrum of
rigid, flexible, foamed and compact components for consumer products.

BASF
offers over 3,500 customized polyurethane solutions. These products are often used to make a variety of automotive parts, including bumpers, steering wheels and instrument panels.
BASF's polyurethanes can also be found in household goods, such as mattresses and upholstery, and in sports equipment, such as in-line skates and athletic shoes. The fashion industry is
increasingly using BASF's polyurethanes, particularly to manufacture synthetic leathers.

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The
Polyurethanes division sells its products to customers in two principal ways:

Polyurethane Basic Materials:The Polyurethanes division sells individual polyurethane basic materials (isocyanates and
polyols) to customers. The customers then apply their own technology to formulate the liquid basic materials so that when combined they will react and solidify into a material with particular
properties.

Polyurethane Systems: A polyurethane system consists of pre-fabricated, ready-to-use formulations of
isocyanates and polyols. The Polyurethanes division sells these specially formulated, tailor-made isocyanates and polyols to customers. When the customer combines them, these liquid
chemicals react and solidify into a material that possesses the technical properties specified by the customer.

The
Polyurethanes division also sells polyurethane special elastomers, which are specialized end products used mainly in the automotive and electrical industry.

The
Polyurethanes division's principal raw materials are toluene, benzene and propylene. The division benefits significantly from BASF's Verbund approach to integration, purchasing
approximately 80% of its precursors from other BASF operations. The Polyurethanes division sells the vast majority of its products to external customers.

To
build on its strong relationships with customers, the Polyurethanes division is expanding its regional activities, focusing above all on the Asian market. In Yeosu, Korea a new plant
for the production of TDI (Toluene Diisocyanate) based on new technology went onstream in the third quarter of 2003. For the support of our growth in
Asia the expansion of the existing MDI-plant (Diphenylmethane Diisocyanate) was commenced, and is expected to be completed in the third
quarter of 2004. In Caojing, China, BASF commenced construction of an integrated manufacturing facility for MDI and TDI with its local and international joint venture partners that is scheduled to
come onstream in 2006.

For
polyurethane systems and special elastomers, strong relationships with leading industry customers are crucial because of the highly individualized nature of these products. To
strengthen its relationships with customers, BASF has established a global network of system houses. System houses are production sites that work closely with customers to provide specially formulated
products for individual needs. The Polyurethanes division currently has 24 system houses around the world in locations near customers. BASF will continue to establish or acquire more.

The
Polyurethanes division's sales to third parties were €2,922 million in 2003.

Products

The Polyurethanes division's product lines include:



The Polyurethanes division sells basic materials globally to customers that make polyurethane plastics by reacting isocyanates with polyols.



MDI is a versatile chemical that can be used to make flexible foams as well as semi-rigid and rigid polyurethane plastics.

Primary
applications:



38

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TDI is a chemical used primarily in the manufacture of flexible foams.

Primary
applications:



Polyether polyols are combined with isocyanates to make virtually all polyurethane products, other than those made with polyester polyols.

Primary
applications:





Polyester polyols are combined with isocyanates to make primarily semi-rigid polyurethane plastics.

Primary
applications:



BASF's worldwide polyurethane systems group offers tailor-made polyurethane products for a wide variety of applications. BASF develops
ready-to-use polyurethane systems for customers, fulfilling customers' specific engineering requirements at its system houses around the world. Automotive OEM (original
equipment manufacturer) suppliers comprise a significant customer group for polyurethane systems. OEM suppliers make seats, steering wheels, fenders and dashboards using BASF's polyurethane systems.



BASF sells polyurethane special elastomers, consisting of TPU (thermoplastic polyurethane elastomers) and cellular elastomers, mainly in Europe, South America,
North America and Japan.



BASF sells TPU under the trade name Elastollan®. Elastollan is based on both polyether polyols and polyester polyols. It is supplied in granular form
to customers who use it primarily to make flexible plastic cable coverings. Customers for these products are primarily in the automotive and cable and wire industries.

39

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The trade names for BASF's cellular elastomers, or shock-absorbing, rigid plastics, are Cellasto®, Elastocell® and Emdicell®.
BASF is the world's largest producer of microcellular polyurethane parts for antivibration applications and sells them, for example, as molded end-products for use as shock absorbers and
buffers in the automotive industry.

Production
capacities as of December 31, 2003 for the major products in the Polyurethanes division are as follows:

|                                
|--------------------------------
|
|Isocyanates                     
|                                
|Polyols                         
|                                
|TPU (thermoplastic polyurethane)
|                                
|Propylene oxide(1)              
|                                

Markets and Distribution

In 2003, Europe accounted for approximately 42% of the Polyurethanes division's sales; North America for approximately 29%; the Asia, Pacific Area, Africa region
for approximately 26%; and South America for approximately 3%.

Global
demand for all polyurethane products is expected to continue growing as the global economy continues to expand. The market for polyurethane basic materials is less cyclical than
the market for most other standard plastics, primarily because polyurethane basic materials are relatively specialized. Competition in the market for basic materials is based primarily on price,
although product quality and technical application assistance are also important to customers.

The
markets for polyurethane systems and special elastomers are even less cyclical than those for polyurethane basic materials. Competition in the market for polyurethane systems and
special elastomers is based primarily on a supplier's ability to satisfy customers' technical application needs by providing tailor-made formulations of isocyanates and polyols and also on
a supplier's ability to accommodate customers' just-in-time manufacturing by delivering customized products quickly and at the appropriate time.

The
main competitors of the Polyurethanes division are Bayer AG, The Dow Chemical Company, Huntsman, Lyondell Chemical Company and Shell Chemicals U.K.

PERFORMANCE PRODUCTS

Segment Overview

BASF is a leading global producer of performance chemicals, coatings and functional polymers through its Performance Products segment. This
segment produces a broad range of high-value chemicals, formulations and integrated chemical systems that it sells to many global companies in the

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automotive,
coatings, oil, paper, packaging, printing, textile, leather, detergent, sanitary care, construction, and chemical industries. Key information is provided in the following table:

|                                                      
|------------------------------------------------------
|
|
|Sales to third parties                                
|Percentage of total BASF sales                        
|Intersegmental transfers                              
|Income from operations                                
|Capital expenditures on tangible and intangible assets

The segment's products often represent the final stages in many value-adding chains within BASF's Verbund approach to integration. The key
elements of the segment's success are developing products, integrated chemical systems and application technologies tailored to the specific requirements of customers. Establishing and expanding
regional manufacturing plants and application development centers also allows us to better serve regional customers.

Segment Strategy



The Performance Chemicals division aims primarily to differentiate itself from competitors on the basis of product quality and performance. To compete
successfully with low-cost suppliers and new competitors especially from Asia, the division undertook restructuring measures over the past years to improve its cost structures, and focus
its capital spending on the most efficient technologies and processes available. The division aims to further strengthen its position in major markets through close cooperation with key customers. In
this division, BASF is intensifying its marketing activities in Asia and North America.



The division focuses on four product lines  automotive coatings, automotive refinish coatings, industrial coatings and, for the South American
market, decorative paints. The division has developed the "system supplier for coating materials" partnership model, which in combination with a new pricing mechanism contributes to optimizing the
quality and cost of automotive finishing, to the mutual benefit of paint suppliers as well as their customers within the automotive industry.



The Functional Polymers division aims to build on its position as a leading supplier of acrylic acid and its derivatives, to improve its cost and technology
leadership, to expand its businesses in all regions and to grow profitably by introducing innovative products. BASF is currently building new plants for acrylic acid and acrylic esters in Nanjing,
China, which are expected to be in operation by 2005.

The
main capital expenditure projects for the Performance Products segment currently include:

|              
|--------------
|
|Nanjing, China
|              

In 2003, capital expenditures for the Performance Products segment totaled €236 million. The segment also spent
€240 million on research and development activities in 2003.

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Performance Chemicals

Overview

BASF is one of the world's largest manufacturers of high-value performance chemicals, which the company sells to over 10,000 customers worldwide in a
wide variety of industries including the detergent, printing, coating, leather, automotive, oil, and textile industries.

BASF
believes that its Verbund approach to integration gives the Performance Chemicals division an advantage over small and medium-sized companies that lack the cost advantages of
integration. The Performance Chemicals division purchases approximately 45% of its raw materials from other BASF operations. The division consumes a multitude of raw materials and has no principal raw
materials or dominant suppliers. The Performance Chemicals division sells roughly 90% of its products to external customers.

The
Performance Chemicals division is made up of business units, which are each responsible for marketing and selling the division's products to specific industries. BASF views the
detergents industry as one of the division's most important markets. The company is one of the largest producers of nonionic surfactants. Surfactants enhance cleansing efficiency and are used for
example in household detergents and dishwashing agents as well as in industrial and institutional cleaning applications.

In
the business units servicing the pigment, textile and leather industries, the division has adapted its capacity by narrowing its product line, by restructuring and consolidating
production sites and
by transferring production capacity from Europe to Asia, where the fastest-growing customer base is located.

The
Performance Chemicals division's sales to third parties were €3,147 million in 2003.

Products

The Performance Chemicals division sells its products globally. The major product groups of the Performance Chemicals division are:



The Performance Chemicals division offers organic and inorganic pigments, pigment preparations, non-textile dyes, process chemicals and resins. Resins
are film-forming components used in UV (ultraviolet) curing coatings, urethane systems, and melamine based coatings. Pigments are insoluble dry coloring materials for paints, plastics,
inks and other special applications. BASF's pigments and resins are used primarily in automotive, decorative, and industrial paint applications, as well as in the plastics industry.



The printing systems product group offers a complete range of commercial inks for different print technologies and plates for flexography and letterpress print
processes. BASF offers printing inks for use in the printing industry, to produce print media such as newspapers and magazines, color advertising materials, books and brochures. BASF also sells
printing inks for use in the packaging industry as well as pigments for printing inks.



Isobutene is the starting material for polyisobutene, the most important component for BASF's branded fuel additives. Through its highly reactive polyisobutenes,
BASF has established a new standard in the fuel and lubricant additives market. BASF is the only industry supplier with a product

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portfolio
spanning low to ultra high molecular polyisobutenes, and is also one of the world's largest manufacturers of polyisobutene derivatives such as polyisobuteneamine.



BASF produces a wide range of nonionic surfactants based on aliphatic alcohols, ethylene and propylene oxide. Such products are used in detergents and cleaners,
textile and leather auxiliaries.



BASF produces several chelating agents based on hydrocyanic acid, which serve as process chemicals in various industries. Applications include pulp manufacturing,
electroplating, laundry detergents, cleaners and photographic chemicals.



BASF offers textile and dyeing auxiliaries, pigment preparations for textile printing as well as inks for ink-jet printing technology. BASF's product
range covers a wide spectrum of textile applications.



BASF is one of the world's leading producers of leather chemicals and dyes, producing a full range of products for nearly every aspect of the leather production
process.

Production
capacities for the major products in the Performance Chemicals division as of December 31, 2003 were:

|                    
|--------------------
|
|Organic pigments    
|                    
|HDI                 
|                    
|Printing inks       
|                    
|Printing plates     
|                    
|Polyisobutene       
|                    
|Nonionic surfactants
|                    

Markets and Distribution

In 2003, Europe was the Performance Chemicals division's principal market, accounting for 59% of its sales. The Asia and Pacific Area accounted for 20%;
North America for 16%; and South America for 5%.

BASF's
own regional sales network sells most of the Performance Chemicals division's products. Distributors sell the balance of products, primarily to smaller customers. The Performance
Chemicals division's principal competitors vary according to industry.



BASF considers itself to be among the industry leaders along with Ciba, Clariant and Bayer in supplying pigments, resins, and additives to the coatings, plastics
and specialties industries. BASF sells these products primarily in Europe from large production sites in Germany, but also supports its regional marketing activities through production sites in Brazil
and China.

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The primary market for BASF's printing systems products is Europe, but Asian competitors such as DIC/Sun Group are the global market leaders.



This business unit sells the division's fuel additives mainly in North America and Europe. BASF's main competitors include Ethyl, Clariant, Shell, and Infineum.



BASF and Sasol Chemical Industries Ltd., are the leading suppliers of nonionic surfactants to the detergents industry. Other major suppliers include Shell
International B.V., and Cognis Corp. In chelating agents, BASF, Akzo Nobel N.V. and The Dow Chemical Company are the worldwide leading suppliers.



BASF, Clariant and Ciba are the world's top three producers of performance chemicals for textiles. BASF is concentrating its sales and marketing activities of
these products on Asia and Europe.



In leather dyes and chemicals, BASF and Clariant are the world's leading producers. Other important competitors include Bayer, TFL Ledertechnik GmbH & Co.
KG, Stahl International B.V., and a host of small regional producers. The most important markets for BASF's leather products are Asia, Europe and South America. BASF manufactures these products in 12
countries to best meet the needs of a highly fragmented market comprised primarily of small and mid-sized customers.

Coatings

Overview

BASF is one of the world's leading producers of high-quality coating products, offering innovative and environmentally friendly products for the
automotive industry, including
both finishes and refinishes, and for particular segments of the industrial coatings market. BASF also sells decorative paints in South America for interior and exterior use in residential and
commercial buildings.

BASF's
Coatings division provides customers with innovative high-solid, waterborne and powder coating systems that reduce or eliminate solvent emissions and are considered
environmentally and economically efficient. BASF sees significant growth opportunities for the zero emission clearcoat SlurryGloss®, which has been launched recently. This innovative
technology can be used in existing paint shops and offers an outstanding product performance.

The
key to the Coatings division's success is maintaining preferred supplier status with major customers by working with them to develop system solutions, which are
tailor-made products and services. These system solutions help the division differentiate its product offerings from those of its competitors and foster lasting relationships with
customers. In developing these system solutions, the Coatings division also draws on advances stemming from BASF's research and development activities. Currently, the Coatings division is focusing its
research activities on the further development of future technologies for the automotive industry such as coil coatings and on developing environmentally friendly coating technologies with high
quality characteristics such as scratch resistance, e.g., ultraviolet (UV) curing and dualcure technologies (the combination of UV and thermal curing). These offer a huge potential for further quality
improvements as well as process time reduction.

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Being
able to deliver tailor-made products quickly is also important to the division's success. Customers that use automotive and industrial coatings require in particular
quick delivery of coatings at specified times to accommodate their just-in-time manufacturing. To satisfy these needs, BASF's Coatings division locates its operations near its
customers' production sites.

The
Coatings division purchases approximately 15% of its raw materials from other BASF operations. The division's principal raw materials are pigments, solvents, resins and additives.
The division does not rely on a dominant supplier. The Coatings division sells all of its products to external customers.

The
Coatings division's sales to third parties were €2,015 million in 2003.

Products

The Coatings division's products are sold on a global basis, with the exception of decorative paints, which are only sold in South America. The division has the
following product lines:



BASF offers complete automotive coatings solutions and extensive technical support to major vehicle manufacturers. All of the world's leading automobile
manufacturers are long-standing customers of BASF.



For the refinishing of automobiles and coatings for commercial vehicles, BASF offers topcoat and undercoat materials through coating systems under the
well-known brand names Glasurit®, R-M® and Salcomix®. Most of these systems, which are sold to paint distributors and automotive repair and
body shops, increasingly use solvent-reducing waterborne coatings as well as high-solid systems.



BASF offers environmentally efficient systems for coating industrial products. Application technologies include powder, liquid, electro-deposition, and coil
coatings that are used on household appliances, commercial vehicles, industrial buildings and radiators components. Wood finishes in the furniture and construction industry represent another use for
BASF's industrial coatings. BASF is the second largest coil coatings producer.



BASF is the leading producer of decorative paints for interior and exterior use in the South American market. BASF's dispersion and building paints are marketed
under the Suvinil® trademark and enjoy a high level of customer recognition.

Production
capacities as of December 31, 2003 for the major products in the Coatings division are as follows:

|                              
|------------------------------
|
|Electrodeposition coatings    
|                              
|Powder coatings               
|                              
|Solventborne coatings         
|                              
|Waterborne coatings           
|                              
|Waterborne (decorative paints)
|                              

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Markets and Distribution

In 2003, Europe accounted for 47% of the Coatings division's sales. North America accounted for 30% and South America for 14%, while the Asia, Pacific Area,
Africa region accounted for 9% of the division's sales.

BASF
sells products of the Coatings division to customers, particularly those in the automotive industry, primarily through its own sales force. Third-party distributors also sell
products of the automotive refinish coatings, industrial coatings and South American decorative paint businesses.

The
Coatings division also uses e-commerce as an important distribution channel, in particular for its automotive refinish coatings. In North America, customers of BASF's
automotive refinish technologies business can order products online at bodyshopmall.com. For customers in Europe the division has established similar e-commerce portals to sell its
Glasurit® and R-M® brands.

Although
price is important to the division's customers, competition is also based on the ability of coatings suppliers to collaborate with customers and quickly deliver
tailor-made products and applications, particularly to vehicle manufacturers using just-in-time manufacturing. BASF's Suvinil® line of decorative paints
competes in South America primarily on the basis of brand recognition, product quality and price.

BASF
considers E.I. du Pont de Nemours and Company, PPG Industries, Inc. and Akzo Nobel N.V. to be the primary global competitors of the Coatings division, while Nippon Paint
Company Ltd. and Kansai Paint Company Ltd. are considered to be the division's competitors in Asia.

Functional Polymers

Overview

BASF's Functional Polymers division is one of the largest producers of acrylic acid and its derivative products, which are mainly superabsorbents and dispersions.
Dispersions are used in a multitude of industries, including the manufacture of paper, decorative paints, adhesives, non-woven materials, carpets, fibers and plastics. The Functional
Polymers division also manufactures wet-end chemicals for paper production. The most important customers of the Functional Polymers division are the paper, construction, adhesive, sanitary
care and coatings industries.

The
Functional Polymers division operates cost effective plants in all regions. Most plants are part of the company's Verbund. Approximately 70% of the division's raw materials are
purchased from other BASF operations through this Verbund. Such raw materials include styrene, butadiene, oxo alcohols and above all propylene, which is used to produce acrylic acid. The division
sells most of its products to external customers, but also sells approximately 10% of its products to other BASF operations.

The
Functional Polymers division continues to strengthen its position in Asia, the fastest growing region worldwide. BASF is constructing its second Asian Verbund site in Nanjing, China,
where the division will start the production of acrylic acid and its esters by 2005. In China and Indonesia, new capacities for dispersions production will come onstream within the next two years.

The
Functional Polymers division's sales to third parties were €2,471 million in 2003.

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Products

The Functional Polymers division sells its products globally. The division has the following four major product groups that are to a significant extent based on
acrylic acid and its derivatives:



BASF is the world's largest producer of acrylic monomers, which are sold directly to internal and external customers in the form of acrylic acid, acrylic esters
and special acrylics. Acrylic monomers are used as precursors to manufacture dispersions, superabsorbents, detergents, flocculants and fibers for a wide range of industries.



BASF's polymers products consist mainly of polymer dispersions for the manufacture of adhesives, paints and finishes, as well as non-woven materials
and chemicals for the construction industry. BASF is especially strong in its technical expertise and technology for adhesive raw materials, as well as in dispersions for paints and other coating
materials.



BASF offers the paper industry a comprehensive range of chemical products for many aspects of the paper production process, including the manufacture of untreated
paper, paper finishing and wastewater treatment. The Functional Polymers division's product range of paper chemicals consists of paper-processing chemicals, paper dyes and dispersions for paper
coating.



BASF sells superabsorbents globally to the personal hygiene industry, which uses these products to manufacture diapers and other sanitary care products.

Production
capacities as of December 31, 2003 for the major products of the Functional Polymers division are as follows:

|                
|----------------
|
|Acrylic monomers
|                
|Superabsorbents 
|                

Markets and Distribution

The biggest market for the Functional Polymers division is Europe, which accounted for 49% of the division's sales in 2003. North America accounted for
approximately 27%; the Asia, Pacific
Area, Africa region for 19%; and South America for 5% of sales in 2003. The Functional Polymers division's strategic goal is to increase market share in rapidly growing markets, especially in Asia.

BASF
sells the vast majority of the division's products primarily through its own regional sales network. Some smaller customers purchase products through distributors. Many of the
division's products, particularly dispersions, contain up to 50% water. To minimize transportation costs, BASF manufactures these products at local plants and markets and sells them on a regional
basis. Acrylic monomers and superabsorbents, however, are distributed globally from production sites in all regions. The largest plants are located at BASF's verbund sites in Ludwigshafen, Germany;
Antwerp, Belgium; Freeport, Texas; Kuantan, Malaysia; and from 2005, Nanjing, China.

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The
Functional Polymers continues to develop e-commerce as a distribution channel for its products. The division is selling acrylic monomers through Elemica
Holding Ltd., an independent business-to-business e-commerce company. The division's participation in WorldAccount, BASF's integrated global extranet
platform, is targeted at its customers in the adhesive, construction and paper industries.

Acrylic
monomers have commodity-like attributes and can be affected by cyclicality. Other products, particularly dispersions for adhesives, paints and non-wovens;
superabsorbents; and paper process chemicals, are relatively resilient to economic cycles and compete primarily on the basis of product innovation and quality.

BASF's
main competitor in acrylic monomers and polymers is Rohm and Haas Co. of the United States. The Dow Chemical Company and Hercule are BASF's main competitors in paper chemicals. In
the superabsorbents business, BASF's main global competitors are Degussa AG and Nippon Shokubai Co., Ltd.

AGRICULTURAL PRODUCTS & NUTRITION

Segment Overview

This segment consists of the Agricultural Products and Fine Chemicals divisions, which are treated as separate reportable operating segments. The
segment offers opportunities for high returns and is typically resilient to economic cycles. In addition, the segment includes the activities of BASF Plant Science, which seeks to develop crops with
improved properties, such as: greater agricultural efficiency, improved nutrition, and plants that may be used as "green factories." Key information is provided in the following table:

|                                                       | 
|------------------------------------------------------ | 
|
|
|Agricultural Products                                  | 
|Sales to third parties                                 | 
|Percentage of total BASF sales                         | 
|Intersegmental transfers                               | 
|Income from operations                                 | 
|Capital expenditures on tangible and intangible assets | 
|Fine Chemicals                                         | 
|Sales to third parties                                 | 
|Percentage of total BASF sales                         | 
|Intersegmental transfers                               | 
|Income from operations                                 | 
|Capital expenditures on tangible and intangible assets | 
|Pharmaceuticals  discontinued operations              | 
|Sales to third parties                                 | 
|Percentage of total BASF sales                         | 
|Intersegmental transfers                               | 
|Income from operations                                 | 
|Capital expenditures on tangible and intangible assets | 

The
Agricultural Products & Nutrition business segment sells its products primarily to customers in the farming, food processing, animal and human nutrition, personal care and
pharmaceuticals industries. The segment's products include agricultural products such as fungicides, insecticides and herbicides; and fine chemicals such as vitamins, carotenoids, pharmaceutical
active ingredients;

48

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polymers
for pharmaceuticals, cosmetics and human nutrition; aroma chemicals; UV (ultraviolet) filters; amino acids; feed enzymes; and organic acids.

The
business segment contributes to BASF's Verbund approach to integration by sourcing a number of precursors from the company's chemical operations and using them to create higher value
products. The Fine Chemicals division in particular benefits from efficiencies derived from internally purchasing precursors for manufacturing vitamins and other nutrition products.

Segment Strategy

While each of the divisions in the Agricultural Products & Nutrition business segment faces competition and sets goals particular to its
industry, they share the following strategic objectives:



Agricultural
Products division focuses on meeting the customer needs with innovative products to improve the yields and quality of agricultural crops in attractive market segments. BASF
is in a leading position in the significant agricultural markets of Europe, North and South America, and Asia Pacific. With the acquisition of the insecticide Fipronil, and certain fungicides from
Bayer CropScience, we have improved this position further. BASF aims to turn innovations from its strong
research and development rapidly into market success and aligns its product portfolio and organization to customer needs.

The
Fine Chemicals division aims to achieve leading positions in the markets it serves. The division is pursuing this strategy by exploiting economies of scale, developing new production
technologies that reduce costs, expanding its global presence, and attaining preferred supplier status with customers. BASF seeks to realize significant growth potential in tailored contract
manufacturing under cGMP guidelines for the pharmaceuticals industry by capitalizing on its strengths in R&D, production expertise and backward integration. BASF is continuously building up this
business, which is still in its emerging stages.

Plant Biotechnology

Plant Biotechnology is one promising technology for the solution to important questions regarding the future: health, nutrition, and the supply of
raw materials for a steadily growing world population.

All
BASF activities involving plant biotechnology are incorporated in BASF Plant Science. BASF Plant Science coordinates an international research and technology platform with seven
sites in four countries in Europe and North America with a staff of about 400. In addition, BASF Plant Science has established numerous complementary cooperations with research institutes,
universities and biotechnology companies in Europe and North America. BASF Plant Science has the goal of becoming a leading competitor in the plant biotechnology market and a major supplier to the
agricultural and nutritional industry.

The
research activities of BASF Plant Science are concentrated in developing more efficient agriculture, improved nutrition and use of plants as "green factories." These include for
example plants with a higher level of vitamins or with omega-3 fatty acids that can prevent cardiovascular diseases.

49

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Agricultural Products



The Agricultural Products division is a leading supplier and marketer of fungicides, insecticides and herbicides. The division's products are used by farmers to
improve crop yields and crop quality and by customers for uses in public health, structural/urban pest control, turf and ornamental plants.

Resources
are directed at meeting the needs of the high value agricultural markets in Western and Central Europe, North America, Brazil and Japan. The division believes itself to be well
positioned for profitable growth; building on a significant presence in core markets, a strong late stage R&D pipeline, and a high share of patent protected products. Profitability of the division is
driven by:



Products
recently launched from the research pipeline are the fungicides F 500® and Boscalid. On March 21, 2003, BASF has closed the acquisition of the insecticide
Fipronil and certain fungicides for seed treatment from Bayer CropScience.

In
mature and in non-core segments the division focuses on streamlining its product portfolio and its operations. In 2001 the division started further consolidation of its
product portfolio and expects to significantly reduce complexity, costs, and to further focus resources. As part of the streamlining effort, a number of active ingredients, formulations and articles
are being eliminated, phased out or divested. By the end of 2003 the division had eliminated about a third of its active ingredients. Additionally it has divested its global business with the
herbicide Acifluorfen and its soil fumigant portfolio (Basamid, Dichloropropene, Metam-Sodium).

Capital
expenditures in the Agricultural Products division included mainly optimization measures at several sites as well as a new laboratory building in Limburgerhof, Germany.



F 500® (pyraclostrobin), a major new fungicidal active ingredient of the strobilurin class of chemistry, has received registration by 2003 for over 30
countries. F 500® controls major plant pathogens from all classes of fungi, and is applied in many crops including cereals, soybeans, grapes, vegetables and fruits. It is highly effective,
safe for crops and has a favorable toxicological and ecotoxicity profile. F 500® has been approved for over 100 crops in over 50 indications and is marketed under the brands
Comet® and Opera® in most of Europe and South America as well as under the brands of Headline® and Cabrio® in North America since January 2003.
Market introduction was negatively impacted by the drought related market decline in Europe. In North and South America, the introduction developed as planned sales exceed our expectations. Assuming a
more normal weather patter in Europe, peak sales could surpass our target of €300 million in 2004.

Boscalid,
one of the most recent active ingredients from our research, is highly effective for controlling fungal diseases especially in fruits and vegetables. With its broad spectrum of
activity and crop uses, Boscalid will become the backbone of our specialty crop business and will complement our strobilurines and other, more mature active ingredients. In 2003 it has received
registrations in over

50

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11 countries
for over 100 crops in over 80 indications and has been launched in time for the 2003/04 season.

Fipronil,
an active ingredient of the new insecticide chemistry, was acquired from Bayer CropScience effective March 21, 2003. It fills a strategic gap in the insecticides
portfolio and puts the Agricultural Products division in a position to strongly participate in ongoing and future shifts in product usage towards more modern insecticides. Furthermore, it strengthens
BASF's position in other attractive market segments, such as in public health, structural/urban pest control, turf and ornamental plants. BASF expects to create synergies with its current portfolio,
especially in fungicides.

The
CLEARFIELD Production System combines herbicide-resistant seeds developed using enhanced plant breeding methods with custom-designed herbicide solutions. CLEARFIELD crops currently
being marketed include canola, sunflower, corn, rice and wheat. Because the CLEARFIELD technology does not involve the introduction of genetic material from other sources, it is characterized as
non-GMO (genetically modified organisms), offering advantages to the growers for certain markets.

51

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The
following table lists the Agricultural Products division's other major active ingredients, the products containing these actives and the crops and regions they are used in:

|                 
|-----------------
|
|Fungicides       
|                 
|Boscalid         
|                 
|Dimethomorph     
|                 
|Dithianon        
|                 
|Epoxiconazole    
|                 
|Metconazole      
|                 
|Metiram          
|                 
|Kresoxim-methyl  
|                 
|Prochloraz       
|                 
|Pyraclostrobin   
|                 
|Insecticides     
|                 
|Alphacypermethrin
|                 
|Chlorphenapyr    
|                 
|Fipronil         
|                 
|Terbufos         
|                 
|Herbicides       
|                 
|Bentazon         
|                 
|Dicamba          
|                 
|Dimethenamid     
|                 
|Dimethenamid-P   
|                 

52

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|Imidazolinones |  | Pivot®, Pursuit®, Lightning®, Odyssey®, Onduty®, Raptor® |  | Corn Canola, Soybeans                     |  | North America, South America, Asia, Europe
|-------------- |  | -------------------------------------------------------- |  | ----------------------------------------- |  | ------------------------------------------
|              
|Metazachlor    |  | Butisan®, Novall®, Nimbus®                               |  | Canola, Vegetables                        |  | Europe                                    
|              
|Pendimethalin  |  | Stomp®, Prowl®, Herbadox®                                |  | Corn, Cereals, Rice, Soybeans, Vegetables |  | North America, Europe                     
|              
|Picolinafen    |  | Pico®                                                    |  | Cereals                                   |  | Europe, Asia                              
|              
|Quinclorac     |  | Facet®, Accord®                                          |  | Rice, Cereals                             |  | North America, South America, Asia        
|              

Research and Development

BASF's research and development activities in Agricultural Products cover all three areas of crop protection: fungicides, insecticides and herbicides. The
division's research and development is located in Ludwigshafen and Limburgerhof, Germany, and at Research Triangle Park (RTP) in Raleigh, North Carolina. In addition to these global research centers,
BASF has a network of experimental and research stations that are located in key markets around the world.

In
2003, research and development spending in the Agricultural Products division was approximately 8% of the division's sales to third parties.

Including
recent market introductions, BASF's product pipeline has 13 projects. BASF estimates the total peak sales potential of these projects at around
€1.5 billion, based on present exchange rates, making it one of the strongest pipelines in the industry:

|                                                            
|------------------------------------------------------------
|
|Projects in launch                                          
|                                                            
|Pyraclostrobin (F 500®)                                     
|                                                            
|Chlorfenapyr                                                
|                                                            
|Boscalid                                                    
|                                                            
|Tritosulfuron                                               
|                                                            
|Dimethenamid-P                                              
|                                                            
|Piconinafen                                                 
|                                                            
|Projects in development (launch targeted for 2004 and later)
|                                                            
|Dimoxystrobin                                               
|                                                            
|Orysastrobin                                                
|                                                            
|Metrafenone                                                 
|                                                            
|n.n.                                                        
|                                                            
|n.n.                                                        
|                                                            
|n.n.                                                        
|                                                            
|n.n.                                                        
|                                                            
|Total                                                       
|                                                            

53

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The success of a new active ingredient is driven by its economic, biological or ecological advantages. BASF believes that fungicides and
insecticides provide the most attractive targets for its research activities while it sees only few unmet needs in herbicides and has realigned resource allocation accordingly. Development activities
are being directed more strongly to high value segments in key markets and for core active ingredients leading to a significant reduction of development spending by 2005. Cost reduction measures in
2003 included the exit of the experimental station in Nelspruit (South Africa) and the research station in Gosport (United Kingdom).

Markets and Distribution

The Agricultural Products division markets its products globally, focusing on strategic markets. Sales to third parties were
€3,176 million in 2003. The following tables show sales by product group and region:

Product Group

|                                            
|--------------------------------------------
|
|
|Fungicides                                  
|Insecticides and other agrochemical products
|Herbicides                                  

Regions

|                   
|-------------------
|
|
|Europe             
|North America      
|South America      
|Asia/Pacific/Africa

BASF has plants for synthesizing active ingredients at BASF's Verbund site in Ludwigshafen and in Schwarzheide, Germany; Hannibal, Missouri;
Beaumont, Texas; Tarragona, Spain; Thane, India; and at BASF's Brazilian sites in Guaratinguetá and Resende. Products for final sale are formulated in facilities that are usually
located close to the market. The formulating of products is carried out either at BASF plants or together with partners.

The
Agricultural Products division delivers high performance products and competes primarily on innovation, product quality and service. BASF directs marketing and sales efforts through
multi-staged marketing channels, which include wholesalers and commercial distributors.

The
global market for agricultural products is seasonal, since the main markets for these products are in the Northern Hemisphere. Sales are higher in the first and second quarters of
the year, when the growing season in North America and Europe is underway. Sales during the second half of the year, which are driven primarily by the main growing season in South America, are lower.

Over
the last years, the agrochemical industry has been going through a process of consolidation. As a result, the number of basic suppliers of crop protection products has decreased.
BASF considers the main competitors of the Agricultural Products division to be Syngenta AG, Bayer CropScience AG, as well as Monsanto Co., The Dow Chemical Company and E.I. du Pont de Nemours and
Company.

BASF
forecasts the market for agricultural products to grow in the medium to long term. The main driver is a growing world population, a rising demand for food and feed and the resulting
need for more effective agricultural production systems.

54

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Governmental Regulation

In most countries, crop protection products (including genetically modified plants) must obtain government regulatory approval prior to marketing. The regulatory
framework for crop protection and environmental health products is directed to ensure the protection of the consumer, the applicator and the environment. The strictest standards are applied in the
United States, Japan and Western Europe.

It
generally takes five to seven years from discovery of a new active ingredient until the dossier is submitted to the appropriate regulatory agency for product approval. The standard
time frame for registration of an agricultural product is typically 30 to 36 months.

Fine Chemicals

Overview

BASF's Fine Chemicals division develops, manufactures and sells more than 1,000 different high-value specialty products to approximately 8,000
customers. The Fine Chemicals division serves steadily growing markets driven by a growing world population with increasing needs in healthcare and lifestyle by being a leading supplier of vitamins;
carotenoids; pharmaceutical active ingredients and advanced intermediates; polymers for the pharmaceuticals, cosmetics and human nutrition industries; raw materials for aroma chemicals; UV
(ultraviolet light) filters; amino acids; enzymes; non-antibiotic growth promoters; and organic acids for the animal nutrition industry. In all of the division's main product groups BASF
is one of the top three suppliers. In the fourth quarter of 2003 we started of our new Vitamin B2 plant based on proprietary fermentation technology in Gunsan, Korea. With the start of our
feed enzyme production planned for late 2005, we will strengthen our leading position in the animal nutrition business.

The
Fine Chemicals division benefits from BASF's Verbund approach to integration by purchasing approximately 35% of its raw materials from other BASF operations. Virtually all of the
division's products are sold to external customers.

About
60% of the division's raw material purchases are bulk commodities from external and internal sources, such as nutrients for vitamin premixes; sugar and molasses for lysine and
pseudoephedrine production; and urea and acetanhydride for purines. There are currently no restrictions in supply for these commodity products. No single product accounts for more than 4% of our total
external purchases of specialty (non-commodity) raw materials.

The
key elements of the division's success are establishing a global sales presence and achieving preferred supplier status with major customers, as this status promotes lasting
relationships and often generates higher sales volumes. BASF believes that its Fine Chemicals division generally has a good cost position in comparison with its competitors. In the few areas where the
division's production costs do not compare favorably with those of competitors, BASF improves processes in existing plants and transfers production capacities from smaller facilities to world-scale
plants.

The
Fine Chemicals division aims to expand its role as a contract manufacturer for the pharmaceutical industry. We believe the mid- and long-term fundamentals in
the pharmaceutical industry remain positive despite the current environment of overcapacities and lower registrations of new chemical entities. We are investing in our own facilities and are
considering acquisitions to build a leading position until the end of the decade.

Products



BASF is the second largest vitamins producer worldwide, and vitamins account for approximately one third of sales in the Fine Chemicals division. BASF markets all
of the 13 naturally occurring

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vitamins.
In six of these vitamins, which include the five most significant vitamins; C, E, A, B2 and Calpan, BASF has a production position. The Fine Chemicals division sells vitamins
mainly to the human and animal nutrition industries. In 2001, BASF acquired the vitamins business of Takeda Chemical Industries Ltd. thereby strengthening it's position in the water-soluble
products. The company estimates that as a result of the acquisition it holds around one fourth of the world market for vitamins. The first phase of the investment program is almost completed with
important plants (vitamin E, B2, precursors) coming onstream recently or scheduled to do so in 2004. The second phase, including an investment in vitamin C, is expected to be completed in
2007. BASF's vitamins sales are evenly divided among Europe, North America and Asia.



Carotenoids are nature-identical products that provide certain health benefits and are also used to color foods. This product line includes
beta-carotene, canthaxanthine and astaxanthine for the food, feed and nutritional supplement industries for human and animal nutrition. BASF is the world's second largest supplier of
carotenoids. More than half of the division's carotenoid sales are in Europe.



The main products in this category are caffeine, pseudoephedrine, theophylline, ibuprofen and povidone iodine and lately paroxetine and our new isotretinoin.
Beverage manufacturers account for approximately 80% of the caffeine demand, and pharmaceutical applications consume the remaining share. Theophylline and pseudoephedrine are used to treat respiratory
diseases. Ibuprofen is used in a variety of over-the-counter and prescription products to treat mild to moderate pain. Isotretinoin is the standard for systemic acne therapy,
paroxetine represents the lead molecule for the treatment of depression. All of BASF's production sites for these products have cGMP (current good manufacturing practice) certification, the quality
standard necessary for approval by regulatory authorities. BASF sells these products worldwide,
with the United States being the most important market, followed by Western Europe. BASF is a leading producer worldwide of all the products in this category.



BASF offers a range of customized manufacturing and formulation capabilities to the worldwide pharmaceuticals industry. These activities are complemented by
flexible, multi-product cGMP plants, in particular at the Minden site in Germany, and BASF's chemical and biotechnological R&D skill.



The Fine Chemicals division sells highly functional polymers for applications in the cosmetics, pharmaceuticals and food industries. In pharmaceuticals, polymers
are used as binders, disintegrants, coatings and solvents for the manufacture of finished dosage forms. The cosmetics industry uses polymers mainly in hair care products such as hairsprays, styling
mousses, gels and hair conditioners. In the food industry, polymers are applied as filtration aids for beverages such as beer, wine and soft drinks. BASF sells polymers mainly in Europe.



Amino acids are feed additives that serve as an efficient protein source for animal nutrition. An important product is lysine, of which BASF is among the top
three producers. The Fine Chemicals division produces lysine at BASF's site in Gunsan, Korea. BASF has a strong foothold in the Asian market for amino acids, with the region accounting for half of the
sales for this product group.

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Enzymes, which are proteins that function as biochemical catalysts, are used for animal nutrition to improve feed absorption. BASF's enzyme product line includes
Natuphos®, Natustarch®, and Natugrain®. As a consequence of DSM's acquisition of Roche's Vitamins and Fine Chemicals Division, the BASF DSM enzyme alliance was
terminated in October 2003. BASF has become independent in this field, and having acquired all relevant intellectual property from DSM, will construct its own enzyme production facility. Most
of BASF's enzyme sales are divided approximately equally between Europe and North America.



Organic acids are used as preservatives for grains and compound feeds and more recently as growth enhancing agents. BASF offers a wide range of organic acid
products that suppress the growth of molds and bacteria. BASF is the leading supplier of standard and tailor-made organic acids for the feed industry in Europe and Asia. With
Formi® BASF offers the first non-antibiotic growth enhancer, an alternative to antibiotics that are to be banned in animal breeding in Europe as of 2006. Formi® was
acquired from Norsk Hydro AS in 2002.



Cosmetic ingredients are raw materials for personal care products with the major applications being hair, skin, sun and oral care. The Fine Chemicals division is
the world market leader in UV absorbers for cosmetic applications and offers the full range of UVA and UVB absorbers.



Aroma chemicals are raw materials for flavor and fragrance compounds that are used in many consumer products industries such as the food, personal care, and the
fabrics and home care industries. The new lysmeral plant, which has been onstream since 2002, further strengthens BASF's position as the leading manufacturer of petrochemicals-based aroma chemicals.
With the
new Citral plant, BASF will also strengthen its position in aroma chemicals and in the fat-soluble vitamins production, in which Citral also serves as the key intermediate. The plant is
scheduled to come onstream on time in early 2004.

Research and Development

The Fine Chemicals division's research and development activities focus on constantly improving BASF's cost position while generating a flow of new products. In
2003, the Fine Chemicals division spent approximately 4% of its consolidated sales on research and development activities, essentially unchanged from 2002.

One
third of the Fine Chemicals division's research and development expenses in 2003 was spent on products for the animal nutrition industry. For both the human nutrition and
pharmaceuticals business units around 20% was spent. The rest was allocated for applications in the cosmetics ingredients and aroma chemicals sectors.

Variable
production costs of biotechnological production processes are reduced through continuous improvement in the bacteria strains and fermentation processes for the amino acid
lysine, vitamin B2 and precursors of vitamin C.

Markets and Distribution

The Fine Chemicals division's sales to third parties were €1,845 million in 2003. In 2003, Europe accounted for 45% of the Fine Chemicals
division's sales; North America for 25%, the Asia, Pacific

57

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Area,
Africa region for 24%; and South America for 6%. The following table shows the Fine Chemicals division's sales for 2003 by customer industry:

|                                            
|--------------------------------------------
|
|
|Animal nutrition                            
|Human nutrition                             
|Pharmaceuticals                             
|Personal care, cosmetics and aroma chemicals

The
main customers of the Fine Chemicals division are global players in the animal nutrition, human nutrition, pharmaceuticals, personal care and aroma chemical industries. A significant
percentage of the division's products are sold in small, specialty volumes and are often tailor-made to meet specific customer specifications.

BASF
sells the majority of its fine chemical products through its own sales force. Key account managers are assigned to major customers. Through its sales and marketing departments, BASF
works closely with customers to develop systems and solutions as well as new products. BASF also sells its fine chemical products through its global e-commerce platform, WorldAccount.

BASF's
competitive position depends to a large extent on its ability to compete on price, product quality and customer service. BASF expects the trend toward globalization and
consolidation for both the manufacturing and the consumer industries to continue. The trend toward commoditization for certain fine chemicals, such as vitamins, is also continuing.

BASF
considers its main competitors in the animal nutrition area to be DSM, Archer Daniels Midland Co., Novo Nordisk A/S, Adisseo Group, Rhodia S.A., Eisai Co. Ltd. and new
entrants from China. In the human nutrition area, BASF's main competitors are DSM of the Netherlands and several Asian companies. In pharmaceutical active ingredients, BASF considers Albemarle
Corporation, International Specialty Products Inc. and FMC Corporation of the United States to be
its main competitors, as well as a number of Chinese and Indian suppliers. In cosmetics and aroma chemicals, LC United, International Specialty Products, Millennium Specialty Chemicals, National
Starch & Chemical Co., Givaudan, Symrise and Kurarai are BASF's main competitors.

Governmental Regulation

BASF's various Fine Chemicals products are subject to regulation by government agencies throughout the world. The primary emphasis of these requirements is to
assure the safety and effectiveness of BASF's products. Of particular importance in the United States is the Food and Drug Administration (FDA), which regulates many of BASF's Fine Chemicals products.
The FDA oversees the marketing, manufacturing and labeling of cosmetics (e.g., sunscreen agents), pharmaceuticals (e.g., pharmaceutical active ingredients), foods (e.g., dietary supplements, including
vitamins) and feeds (e.g., vitamins, carotenoids). The Federal Trade Commission regulates claims made in the advertising of dietary supplements. Animal health products are also regulated in the United
States by the United States Department of Agriculture and the Environmental Protection Agency.

In
the E.U., similar regulatory systems are established on the national level of different member states as well as on the pan-European government level. Positive lists and
negative lists in Europe regulate the usage of various substances in order to ensure consumer safety. Before the substances are added to these lists, they are subject to a rigorous approval procedure.

In
countries other than the United States and those of the E.U. in which BASF conducts business, BASF is subject to regulatory and legislative environments that are similar to or
sometimes even more restrictive than those described above.

58

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OIL & GAS

Segment Overview

BASF conducts the activities of its Oil & Gas segment through its 100% subsidiary Wintershall AG. Wintershall and its affiliated companies
are active in two sectors:



Wintershall searches for and produces oil and natural gas in 10 countries on four continents. Wintershall markets approximately 75% of its crude oil production
through its wholly owned subsidiary Wintershall Oil AG of Zug, Switzerland.



BASF conducts natural gas distribution and trading activities through two joint ventures  WINGAS GmbH (WINGAS) and Wintershall Erdgas
Handelshaus GmbH (WIEH)  in partnership with Gazprom. WINGAS owns and operates a natural gas distribution pipeline system in Germany that is more than 2,000 kilometers in
length. The company also owns and operates an underground natural gas storage site, with a working gas capacity of 157 billion cubic feet, making it the largest in Western Europe. WIEH acts
exclusively as a trading company, purchasing Russian natural gas and marketing it to WINGAS and Verbundnetz Gas AG (VNG), a transmission and distribution company in eastern Germany in which
Wintershall has a 15.8% ownership interest. WIEH also markets Russian natural gas in Central Europe through its Swiss subsidiary Wintershall Erdgas Handelshaus Zug AG (WIEE), Switzerland.

Against
the background of progressively more liberalized European markets, WINGAS is expanding its activities beyond the borders of its home market of Germany. In 2003 WINGAS established
the distribution company WINGAS Belgium S.p.r.L., and plans to set up a joint venture with Norsk Hydro in the U.K. in 2004. In addition, WINGAS took a 25% stake in HubCo-North West European Hub
Service Company (HubCo). HubCo offers international gas-traders a fully integrated hub service at the trading point in Bunde/Emden (Germany).

The
Oil & Gas segment sells all of the oil and most of the natural gas it produces to third parties, however WINGAS also supplies BASF with natural gas consumed at BASF's Verbund
site in
Ludwigshafen, Germany and at other BASF companies. Key information is provided in the table below:

|                                                      
|------------------------------------------------------
|
|
|Sales to third parties, net of natural gas taxes      
|Natural gas taxes                                     
|Intersegmental transfers                              
|Sales incl. intersegmental transfers                  
|Royalties                                             
|Sales incl. intersegmental transfers, less royalties  
|Income from operations                                
|Capital expenditures on tangible and intangible assets

The
Oil and Gas segment's sales to third parties, net of natural gas taxes, accounted for 13.9% of BASF's total sales in 2001 and 13.0% of BASF's total sales in 2002. In 2003, the
segment accounted for 14.4% of BASF's total sales.

Segment Strategy

The Oil & Gas segment seeks to increase production of oil and gas by 50% within the current decade and thus strengthening its natural hedge
function within the BASF group. This will be

59

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accomplished
by strengthening its exploration activities, developing new fields, optimizing production in existing concessions, and seeking complementary acquisitions. To ensure the company's ongoing
competitiveness, Wintershall focuses on the following core regions:



Wintershall's
goal is to maintain a ratio of proved reserves to production of approximately 10 years and a suitable portfolio of assets operated by Wintershall and by third
parties. Wintershall's strategy for achieving these goals is:



In
the natural gas marketing and distribution business, WINGAS currently is the third largest natural gas transmission and distribution company in Germany. Ongoing liberalization of the
European natural gas market requires natural gas distributors to give third parties access to their pipelines. This creates significant growth opportunities for WINGAS, since the company is eligible
to transport natural gas through its competitors' extensive transmission networks. Additionally, increases in market share will be realized by expanding WINGAS's activities into new regions in Europe.

Exploration and Production of Oil and Natural Gas

The exploration and production of oil and natural gas have been Wintershall's core businesses, with producing assets in Germany, the Netherlands,
Libya, Argentina, Russia, and Dubai.

BASF
believes that Wintershall presently has finding and development costs that are below the industry average. Unlike major oil and gas exploration and production companies, Wintershall
focuses its exploration and production activities on a select number of core regions where a combination of technical expertise, local operating experience and strategic partnerships allow it to
develop petroleum resources at below-average costs.

Wintershall
is the operator of most of the significant exploration and production projects in which it has an interest. In projects where it is not the operator, Wintershall participates
in operating decisions pursuant to agreements with operators.

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The
Oil & Gas segment presently conducts activities in the following countries:

|         
|---------
|
|Argentina
|         
|Brazil   
|         
|Dubai    
|         
|Germany  
|         
|Libya    
|         

Reserves

The Oil & Gas segment's most significant oil reserves are in North Africa and Germany, with the substantial share of these reserves being located in Libya.
The most significant natural gas reserves
are in Argentina, Germany and the Netherlands. The Oil & Gas segment's proved oil and gas reserves and proved developed oil and gas reserves by geographic area were as follows:

|                            
|----------------------------
|
|At December 31, 2003        
|Oil (millions of barrels)   
|Proved reserves             
|Proved developed reserves   
|Gas (billions of cubic feet)
|Proved reserves             
|Proved developed reserves   
|At December 31, 2002        
|Oil (millions of barrels)   
|Proved reserves             
|Proved developed reserves   
|Gas (billions of cubic feet)
|Proved reserves             
|Proved developed reserves   
|At December 31, 2001        
|Oil (millions of barrels)   
|Proved reserves             
|Proved developed reserves   
|Gas (billions of cubic feet)
|Proved reserves             
|Proved developed reserves   

At
2003 levels of production proved oil reserves would last approximately nine years, and proved gas reserves would last approximately 11 years.

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Exploration and Production

The net quantities of oil and gas produced as well as the average sales price and production cost (lifting cost) per unit of oil and gas produced in each of the
last three years were as follows:

|                                                                
|----------------------------------------------------------------
|
|Oil                                                             
|Net quantities produced (millions of barrels)                   
|Average sales price less royalties (per barrel)                 
|Average production cost (lifting cost) (per barrel)             
|Gas                                                             
|Net quantities produced (billions of cubic feet)                
|Average sales price less royalties (per thousand cubic feet)    
|Average production cost (lifting cost) (per thousand cubic feet)

Wintershall's
total gross and net productive wells, total gross and net developed acres and total gross and net undeveloped acres (both leases and concessions) as of December 31,
2003, were as follows:

|                                        
|----------------------------------------
|
|Oil                                     
|Total gross productive wells            
|Total net productive wells              
|Gas                                     
|Total gross productive wells            
|Total net productive wells              
|Oil and Gas Acreages
(thousand of acres)
|Total gross developed acres             
|Total net developed acres               
|Total gross undeveloped acres           
|Total net undeveloped acres             

---

In 2003, Wintershall spent €385 million for exploration, acquisition and investment, compared with €999 million in
2002. Thereof, €151 million were spent in Europe (2002: €749 million), €147 million in North Africa/Middle East (2002:
€124 million), €67 million in South America (2002: €111 million) and €20 million in Russia/Caspian Sea
(2002: €15 million).

Either
directly or through its subsidiaries, Wintershall was involved in the drilling and completion of 12 exploratory wells, which resulted in seven successful wells. As of
December 31, 2003, Wintershall had begun drilling five additional exploratory wells.

In
2003, approximately 70% of the Oil & Gas segment's oil reserves and production activities were in North Africa and the Middle East. The substantial majority of these reserves
and production activities were in Libya, where the segment operates several onshore oilfields and produces associated natural gas for local consumption. Offshore Libya Wintershall holds a 12.5%
interest in the Al Jurf oil field, which started production in September 2003. BASF does not believe the ILSA (Iran-Libya Sanctions) Extension Act adopted by the United States
government will have a material adverse effect on BASF's financial condition or results of operations. Remaining oil production takes place primarily in the

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Mittelplate
offshore oil field in the German North Sea as well as in Dubai, Argentina, the Netherlands and Russia.

With
approximately 200 million barrels of proved initial reserves, the Mittelplate field is the largest known German oil reservoir. Wintershall and its partner,
RWE-Dea AG, with a 50% interest each, have been producing oil from an offshore production platform since 1987. As of 1998, the Mittelplate field has also been developed from an onshore
site by extended-reach wells. In 2003, oil production increased to 15.4 million barrels of which 9.3 million barrels were produced through extended-reach wells. The partners intend to
connect the offshore production platform by pipeline to the onshore facilities, thus further increasing the production of the field. The project realization is subject to the approvals of the
authorities.

In
October 2003 the new core region Russia/Caspian Sea, Wintershall had become the operator for a highly prospective exploration block offshore Dagestan, Russia by acquisition of
70% interest in OOO Megatron NVK.

Wintershall
produces 43% of its natural gas in Argentina. In 2001, Wintershall, with its partners, decided to develop the Carina and Aries gas fields off the coast of Tierra del Fuego.
As a result of the economic development in Argentina, the project schedule has been adjusted in accordance with expected gas demand. In 2003 Wintershall successfully managed to strengthen its
exploration portfolio by acquiring the block La Invernada in the Neuquen basin and an interest in the Geminis prospect offshore Tierra del Fuego, both in the vicinity of our producing assets. In the
Central Patagonian frontier area Cañadon Asfalto basin Wintershall together with Repsol YPF were granted two exploration blocks for which the official governmental approval is still
pending; however field work has already commenced.

Wintershall
more than doubled its reserves and future production in the Netherlands through the acquisition of Clyde Netherlands B.V. in 2002. Wintershall is now the third largest gas
producer in the country. With the production start-up of two new gas fields in October 2003 Wintershall now operates a total of 23 offshore platforms in the North Sea. Clyde also
contributes substantially to Wintershall's exploration portfolio. Highly qualified staff strengthens Wintershall's global Center of Expertise for Offshore Activities. The acquisition of Clyde combined
two companies whose portfolios complement each other. Offshore UK, Wintershall was granted five exploration blocks in July 2003, which are located at the border with the Netherlands.

The
Oil & Gas segment has a 49.95% participation interest in and is the operator of the first natural gas offshore field on the German continental shelf, approximately 300
kilometers off the German North Sea coast. Since production start-up in 2000 the field production capacity has been maintained at 45 billion cubic feet per year. The major partners
in this project include Exxon Mobil Production Deutschland GmbH and RWE-Dea AG. N.V. Nederlandse Gasunie, a Dutch natural gas distributor has contracted to purchase the natural gas
produced from this field.

BASF
has a cooperation agreement with Gazprom that provides a framework for future project-specific agreements. The agreement also contemplates the joint participation of Wintershall and
Gazprom in the exploration and production of oil and gas primarily in Russia. Wintershall and Gazprom are specifically planning to participate in the development of large gas/condensate fields in
Western Siberia. For development of the vast gas and condensate reserves of the Achimov formation in the Urengoy field the joint venture company Achimgaz was established in July 2003. Joint
venture partners are OOO Urengoygazprom, a subsidiary of Gazprom, and Wintershall with 50% interest each.

In
general, oil and gas exploration and production activities require high levels of investment and entail particular economic risks and opportunities. These activities tend to be highly
regulated, and

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companies
engaging in these activities generally may face intervention by governments in matters such as:



Crude
oil prices are subject to international supply and demand and other factors that are beyond an oil company's control. Political and economical developments can affect world supply
of and demand for oil, and therefore oil prices as well. Such factors can also affect the price of natural gas sold under long-term contracts because, under long-term contracts
in Germany and in many other countries, natural gas pricing typically is tied to prices of refined products pursuant to a specified time lag. Crude oil prices are generally set in U.S. dollars, while
costs may be incurred in a variety of currencies. Fluctuations in exchange rates therefore can give rise to foreign exchange exposures.

As
with most international oil and gas companies, substantial portions of the oil and gas reserves of Wintershall are located in countries outside the European Union and North America,
some of which can be considered politically and economically less stable than European Union or North American countries. These reserves and the related operations may be subject to political risks.
To date, political risks have not significantly affected the Oil & Gas segment or had a material adverse effect on BASF's financial condition or results of operations.

Wherever
possible, Wintershall arranges capital investment guarantees by the German government to protect its investments. German government guarantees currently cover a total investment
volume by Wintershall of approximately €523 million, including inventory of raw materials and supplies.

General
uncertainties are inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures. The accuracy of any
reserve estimate is a function of the quality of available data and engineering, and geological interpretation and judgment. Results of drilling, testing and production after the date of the estimate
may require substantial upward or downward revisions. In addition, changes in oil and natural gas prices could have an effect on the economically recoverable reserves. Accordingly, reserve estimates
could be materially different from the quantities of oil and natural gas that are ultimately recovered. However, according to company standards, Wintershall conducts reserves audits of its major oil
and gas fields through independent, internationally recognized auditors.

Natural Gas Distribution and Trading

BASF conducts its natural gas distribution and trading activities pursuant to an extensive agreement with OOO Gazexport, a subsidiary of Gazprom.
To promote the joint marketing of mainly Russian, as well as Western European natural gas predominantly in Germany, Wintershall and OAO Gazprom established two joint ventures:



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WINGAS owns and operates a large pipeline system in Germany for the distribution of natural gas and also owns and operates one underground natural gas storage site. WIEH acts exclusively
as a trading company, purchasing Russian natural gas and marketing it to WINGAS and other natural gas providers in Germany. WIEH also markets Russian natural gas in Central Europe through its wholly
owned Swiss subsidiary, Wintershall Erdgas Handelshaus Zug AG (WIEE), Switzerland.

In
the medium term, the natural gas distribution and trading business generates stable margins and represents a source of noncyclical income for BASF. In addition, this business ensures
a reliable and cost efficient source of natural gas for BASF's Verbund site in Ludwigshafen, Germany, and for other BASF companies.

Since
1991, WINGAS has invested more than €2.7 billion (of which Wintershall's share was €1.8 billion) in its natural gas distribution and
trading activities in Germany. The high-pressure pipeline system currently spans more than 2,000 kilometers (km). The pipeline system presently consists of four primary legs:



In
addition to its natural gas pipeline network, WINGAS also owns and operates a natural gas storage site in Rehden, Germany. It is the largest underground gas storage site in Western
Europe, with a working gas capacity of 157 billion cubic feet.

In
2003, WINGAS purchased 217 billion cubic feet of natural gas from WIEH, which in turn purchases all of its gas from Gazprom's subsidiary Gazexport. In 2003, WINGAS bought
160 billion cubic feet directly from Gazexport so that in total 377 billion cubic feet or 68% were purchased from Russian sources. WINGAS also bought 98 billion cubic feet from
North Sea suppliers, primarily from EDF Trading Ltd. and Conoco, 68 billion cubic feet in the main forward market and 12 billion cubic feet low caloric gas from Wintershall.

In
2003, WINGAS entered into new supply contracts with municipalities, industrial companies and in the forward market. In addition WINGAS started during the reporting year deliveries to
industrial customers in Belgium via third party access through the network of the Belgium pipeline system. In total the sales volume increased from 456 billion cubic feet to 559 billion
cubic feet. This growth was due to the increase in the supply to new customers and to the low temperatures during the last winter. The sales volume of WINGAS, WIEH and WIEE totaled 978 billion
cubic feet compared with 814 billion cubic feet for 2002. The BASF consolidated sales volume in 2003 was 647 billion cubic feet, representing a 24% increase over the previous year's
sales volume of 524 billion cubic feet.

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WINGAS's
biggest customer is BASF's own Verbund site in Ludwigshafen. In 2003, the site purchased approximately 93 billion cubic feet, or approximately 17% of WINGAS's
distribution volume. Approximately 19 billion cubic feet, or approximately 3%, was sold to other BASF companies; 33% to transmission companies; 19% to regional distributors, municipalities and
industrial companies; and 28% was sold in foreign markets of which the main part was sold mainly at trading hubs. In 2003, most of the natural gas WINGAS distributed in Germany was sold to
approximately 60 customers via long-term natural gas supply agreements.

WINGAS
is currently the third largest natural gas transmission and distribution company in Germany. Capital expenditures in 2003 totaled €36 million. The
enlargement of STEGAL's transport capacity with its €21 million initial investment represents the largest project. This targeted expansion measure will secure
additional transport of Russian natural gas to Western Europe, which will help to compensate in the medium term for the declining natural gas offshore production in the North Sea.

ENVIRONMENTAL MATTERS

BASF is subject to extensive, evolving and increasingly stringent international and local environmental laws and regulations concerning: the
production, distribution, the handling and storage of our products, the disposal of materials, the practices and procedures applicable to construction and operation of sites, the exploration and
production of oil and gas, as well as the maintenance of safe conditions in the workplace.

These
Environmental protection and remediation laws and regulations govern primarily:



Although
BASF believes that its production sites and operations currently fully comply with all applicable laws and regulations, these laws and regulations have required and in the
future could require BASF to take action to remediate the effects on the environment of the prior disposal or release of chemicals or petroleum substances or waste. Such laws and regulations have
applied
and in the future could apply to various sites, including BASF's chemical plants, oil fields, waste disposal sites, chemical warehouses and natural gas storage sites. In addition, such laws and
regulations have required and in the future could require BASF to install additional controls for certain emission sources, undertake changes in its operations in future years and remediate soil or
groundwater contamination at current and/or former sites and facilities.

BASF's
operating costs for environmental protection totaled €667 million in 2003. These costs are recurring or one-time costs associated with sites or
measures that are incurred in the avoidance, reduction or elimination of deleterious effects on the environment. They include the costs of disposal sites, such as wastewater treatment plants and
residue incinerators. They also comprise different levies such as effluent levies, water levies, costs for disposal services by third parties, monitoring, analyses and surveillance carried out by
mobile and stationary units as well as research and development costs for reducing the incidence of residues. BASF also spent approximately €159 million in 2003 on capital
expenditures for pollution control devices and equipment.

BASF
also incurs costs to remediate the impact of the past disposal as well as the release of chemicals or petroleum substances or waste, both at its own sites and at third-party sites
to which BASF has sent waste for disposal. Worldwide, BASF had established provisions of €248 million for anticipated

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investigation
and clean-up costs at such sites as of December 31, 2003, and €264 million as of December 31, 2002.

In
the United States, liability for remediation of contamination is imposed generally pursuant to the federal Comprehensive Environmental Response Compensation and Liability Act
(Superfund) and analogous state laws. Although such U.S. laws generally allow the recovery of the total cost of cleanup from any single responsible party, cleanup costs typically are shared among
several responsible parties at third-party sites where multiple parties sent waste to the site for disposal, and sometimes at owned or operated sites where a predecessor or other third-party disposed
of waste on-site. BASF has been notified that it may be a potentially responsible party at such sites. The proceedings related to these sites are in various stages. The cleanup process has
not been completed at most sites; the number, potential liability and financial viability of other parties are typically not fully resolved and the status of the insurance coverage for most of these
proceedings is uncertain. Consequently, BASF cannot accurately determine the ultimate liability for investigation or cleanup costs at these sites. As events progress at each site for which BASF has
been named a potentially responsible party or is otherwise involved in remediation of contamination, BASF accrues, as appropriate, a liability for site cleanup. Such liabilities include all costs that
are probable and can be reasonably estimated. In establishing these liabilities, BASF considers its shipments of waste to a site and its percentage of total waste shipped to the site (in the case of
third-party sites); the types of waste involved; the conclusions of any studies; the magnitude of any remedial actions which may be necessary; and the number and viability of other potentially
responsible parties. Although the ultimate liability may differ from estimates, BASF
routinely reviews liabilities and revised estimates, as appropriate, based on the most current information available.

BASF
has established and continues to establish provisions for environmental remediation liabilities where the amount of such liability can be reasonably estimated. The provisions made
are considered to be in accordance with U.S. GAAP. BASF sets up or adjusts accruals as new remediation commitments arise or additional information becomes available. For further information, see
Note 24 to the Consolidated Financial Statements.

BASF
establishes provisions for currently known potential soil contamination at BASF sites that are still in operation, or in case of the accidental release of chemicals around the
world. In general investigations into potential contamination and subsequent cleanup are only required when a site is closed and the existing production facilities dismantled. Taking into account
BASF's experience to date regarding environmental matters and facts currently known, BASF believes that capital expenditures and remedial actions necessary to comply with existing laws and conditions
governing environmental protection will not have a material effect on BASF's consolidated financial condition or results of operations.

In
connection with the onshore and offshore oil and gas activities conducted by BASF's subsidiary, Wintershall, BASF is subject to an increasing number of international and national
laws, regulations and directives governing the protection of the environment. In connection with the exploration, drilling, production, storage, transportation and distribution of oil and gas, these
regulations may, among other things:



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Wintershall
performs environmental impact studies where new oil and gas activities are planned and complies with environmental protection principles when onshore and offshore sites are
abandoned. Environmental laws and regulations have an increasing impact on the oil and gas industries, and therefore on Wintershall. It is impossible to predict accurately the effect of future
developments in such laws and regulations on Wintershall's future earnings and operations. Some risk of environmental costs and liabilities is inherent in Wintershall's oil and gas activities, as it
is with other companies engaged in similar businesses. BASF can make no assurance that Wintershall will not incur material costs and liabilities relating to environmental matters.

In
recent years the operations of all chemical companies have become subject to increasingly stringent legislation and regulations related to occupational safety and health, product
registration and environmental protection. Such legislation and regulations are complex and constantly changing, and there can be no assurance that future changes in laws or regulations would not
require BASF to install additional controls for certain of its emission sources, to undertake changes in its manufacturing processes or to investigate possible soil or groundwater contamination and
remediate proven contamination at sites where such cleanup is not currently required.

SUPPLIES AND RAW MATERIALS

Raw materials procurement

Through its Verbund strategy, BASF operates in an integrated manufacturing environment that processes basic raw materials to produce thousands of
products for sale as finished goods at various points in these manufacturing processes. Large amounts of raw materials purchased by BASF are therefore used as feedstocks in these value-adding chains
of production.

The
major raw materials that feed BASF's Verbund production sites are hydrocarbon-based raw materials such as naphtha and LPG (liquefied petroleum gas). These materials are used as
feedstocks for the steam crackers that are operated in Ludwigshafen, Germany; Antwerp, Belgium; and Port Arthur, Texas. BASF monitors the market for naphtha, and actively hedges its exposure by using
swaps and options. Other important hydrocarbon-based raw materials are natural gas, benzene and propylene. BASF primarily sources its natural gas from Russia by means of long-term natural
gas supply contracts with Gazprom. These contracts are conducted through BASF's joint ventures with Gazprom, WINGAS and WIEH. Other important materials at BASF include cyclohexane, ammonia, titanium
dioxide and methanol.

BASF
believes the company can purchase raw materials most efficiently through its network of global and regional procurement teams. High-volume raw materials or those of
strategic importance, such as raw materials used at the start of BASF's value-adding chains of chemistry, tend to be purchased by global procurement teams in order to leverage BASF's purchasing power
and secure a stable supply of key raw materials. Regional procurement teams play an essential role in purchasing raw materials for the company's regional production sites.

BASF
has a policy of maintaining, when possible, multiple sources of supply for materials and is not dependent on a limited number of suppliers for essential raw materials.

BASF
has not experienced any difficulty in obtaining sufficient supplies of raw materials in recent years and believes it will generally be able to obtain them at competitive market
prices in the future. BASF however, cannot give any assurance that its ability to obtain sufficient raw materials at any time will not be adversely affected by unforeseen developments. In addition,
the prices of raw materials may vary, perhaps significantly, from year to year.

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Technical goods and services procurement

The technical goods and services that BASF purchases are related primarily to the company's manufacturing activities, which involve significant
capital expenditures to design and build plants and later to maintain them. These expenditures therefore also cover the maintenance of sites and offices around the world.

BASF's
global and regional procurement teams work with engineers and technical staff to identify where and how technical goods and services can be procured most efficiently. To this end,
the standardization of goods and services is a key driver for reducing costs. Standardizing goods and services tends not only to be more cost effective, but reduces the expenses associated with
servicing and maintenance during the total life cycle. Furthermore, the company's procurement teams work closely with suppliers to support them in developing system solutions.

E-commerce

BASF is using e-commerce to increase the efficiency of its procurement processes. For example, increasingly in the chemicals industry,
buyers and sellers are connecting their respective enterprise resource planning (ERP) systems through online marketplaces. BASF's ERP is linked to Elemica Holding Ltd., a neutral electronic
marketplace for the purchase and sale of basic, intermediate, specialty and fine chemicals.

Electronic
marketplaces are also playing a strategic role in BASF's technical goods and services procurement. BASF is a founding partner in cc-chemplorer, a marketplace for
maintenance, repair and operations-related products and services for the chemical industry. BASF believes that its involvement in such e-commerce activities is making a positive
contribution to the speed and quality of its procurement activities.

ORGANIZATIONAL STRUCTURE

BASF Aktiengesellschaft is the ultimate parent company of the BASF Group. The Group operates in five separate business segments, which encompass
BASF's 12 operating divisions. The business segments are reportable segments except for business segment Agricultural Products & Nutrition, which is treated as two reportable segments,
disclosing separately the Agricultural Products and Fine Chemicals divisions. The divested Pharmaceuticals division was formerly included as a third reportable segment in the business segment formerly
known as Health and Nutrition.

Business
operations are run by 57 regional and global business units, organized along business or product lines. As profit centers, they are responsible for all business operations
 from production to marketing and sales  and their processes are customer-oriented.

In
addition, to its operating divisions and business units, BASF has three corporate divisions which support the Board of Executive Directors in directing the company's activities, and
nine competence centers which oversee strategic activities and set global standards. The corporate divisions are Legal, Taxes & Insurance; Planning & Controlling and Finance. The
competence centers are Logistics; Information Services; Human Resources; Environment, Safety & Energy; Purchasing; Corporate Engineering; Chemicals Research & Engineering; Specialty
Chemicals Research and Polymer Research.

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The
following table sets forth significant subsidiaries owned, directly or indirectly, by BASF Aktiengesellschaft:

|                                             
|---------------------------------------------
|
|BASF Coatings AG, Münster-Hiltrup, Germany   
|                                             
|BASF Schwarzheide GmbH, Schwarzheide, Germany
|                                             
|Elastogran GmbH, Lemförde, Germany           
|                                             
|Wintershall AG, Kassel, Germany              
|                                             
|BASF Antwerpen N.V., Antwerp, Belgium        
|                                             
|BASF Española S.A., Tarragona, Spain         
|                                             
|BASF Corporation, Mount Olive, New Jersey    
|                                             
|BASF S.A., São Bernardo do Campo, Brazil     
|                                             
|BASF Company Ltd., Seoul, Korea              
|                                             

DESCRIPTION OF PROPERTY

BASF owns and operates numerous production and manufacturing sites throughout the world. The principal offices of BASF Aktiengesellschaft are
located in Ludwigshafen, Germany. In addition, BASF operates regional headquarters, sales offices, distribution centers and research and development facilities worldwide.

At
the heart of BASF's integration strategy are its Verbund production sites. The following is a description of these sites including the number of production plants:

|                     
|---------------------
|
|
|Ludwigshafen, Germany
|                     
|Antwerp, Belgium     
|                     
|Geismar, Louisiana   
|                     
|Freeport, Texas      
|                     
|Kuantan, Malaysia    
|                     

An
additional Verbund site is currently under construction in Nanjing, China, with the joint venture partner SINOPEC.

See
"Item 4. Information on the Company  Environmental Matters" for information on environmental issues related to BASF's properties. Additional information regarding BASF's
property, plant and equipment is contained in Note 14 to the Consolidated Financial Statements included in Item 18.

For
information on BASF's oil and natural gas exploration and production activities, see "Item 4. Information on the Company  Oil & Gas" and "Supplementary
information concerning oil and gas producing activities (unaudited)" in Item 18.

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Item 5.    Operating and Financial Review and Prospects

OVERVIEW

BASF is a transnational chemical company that aims to increase its corporate value through growth and innovation. The company's product range
includes high-performance products, including chemicals, plastics, coatings systems, dispersions, agricultural products, fine chemicals as well as crude oil and natural gas.

BASF
is comprised of the parent company, BASF Aktiengesellschaft of Ludwigshafen, Germany, and 153 consolidated subsidiaries and affiliated companies. The company has customers in more
than 160 countries and operates production sites in 41 countries.

BASF
conducts its worldwide operations through 12 operating divisions, which have been aggregated into five business segments based on the nature of the products and production
processes, type of customers, channels of distribution and nature of the regulatory environment. The business segments are reportable segments, with the exception of Agricultural Products &
Nutrition, which is treated as two reportable segments, Agricultural Products and Fine Chemicals, respectively. The divested Pharmaceuticals division was until 2001 included as a third reportable
segment in the business segment Health & Nutrition.

The
reportable operating segments are:



BASIS OF PRESENTATION

Overview

The Consolidated Financial Statements of BASF included in Item 18 of this report have been prepared based on BASF's accounting and valuation
principles in accordance with German GAAP as required by the German Commercial Code (Handelsgesetzbuch), the standards of the German Accounting
Standards Committee (GASC) and the German Stock Corporation Act (Aktiengesetz).

There
are certain differences relating to accounting and valuation methods that are required under U.S. GAAP but are not allowed under German GAAP. The effects of BASF's reconciliation
of the remaining differences between German GAAP and U.S. GAAP for the years ended December 31, 2003 and 2002 are described in Note 4 to the Consolidated Financial Statements included in
Item 18.

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Outlook for 2004

After three years of weak global growth, we see more favorable mid-term prospects than in previous years, despite latent risks in the
Middle East. We are planning our activities based on the following premises:



Under
these premises, we anticipate that the global economy will regain momentum. The United States and Asia's growth markets will lead the way in strengthening the global recovery
process. The global chemical industry will recover in pace with increasing demand from industrial customers. The impetus for growth in chemical production will come from the recovery in the United
States and Asia.

In
the following descriptions of results of operations in the segments, we make forecasts for sales and earnings in 2004. These forecasts are based on the assumption of the above
described scenario.

Critical Accounting Policies

Critical accounting policies are those that are most important to the portrayal of the company's financial condition and results of operations.
These policies require management's difficult, subjective and complex judgments in the preparation of the financial statements and accompanying notes. Management makes estimates and assumptions about
the effect of matters that are inherently uncertain, relating to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. The company's most
critical accounting policies are discussed below.

Pension provisions and similar obligations

Obligations arising from company pension plans are based on actuarial computations made by external actuaries according to the projected unit credit method.
Accordingly, assumptions must be made with regard to discount factors, salary and pension trends, and, in the case of externally financed obligations, with regard to the growth and return on the fund
assets used to finance future obligations.

These
assumptions are redefined as of each balance sheet date, taking account of current circumstances. Discount factors are based on returns for securities or bonds with high credit
ratings. The expected return on fund assets is based on long-term developments as observed in the capital markets as well as the respective portfolio structures. If the actual developments
deviate from the assumptions made, the resulting actuarial profits or losses beyond a given limit are distributed over the future years of service of employees.

See
Note 23 to the Consolidated Financial Statements for further details with regard to the change in pension obligations and financing status.

Provisions for legal damages

The evaluation of risks associated with claims for damages and litigation and the determination of the amounts of related provisions are subject to considerable
judgment. In particular, this relates to pending regulatory proceedings and claims for damages associated with antitrust violations in the vitamins business.

It
is currently not possible to estimate the full consequences of litigations. Corresponding provisions are established to the extent that they are considered probable and the amount can
be reasonably estimated. The level of provisions also considers the outcomes of similar cases and legal opinions, taking into account the current circumstances. The actual outcome of legal proceedings
may

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differ
considerable from these estimates. See also Note 27 to the Consolidated Financial Statements for further information with regard to litigation and claims.

Deferred taxes on loss carryforwards

Tax loss carryforwards are primarily related to restructuring measures at subsidiaries in the North American (NAFTA) region. In countries in the NAFTA region,
these carryforwards may be set against future taxable income for up to 20 years.

The
realization of deferred tax assets on these carryforwards is dependent upon the economic development of our subsidiaries in the NAFTA region. An evaluation is affected by
difficulties in predicting long-term economic developments. Significant valuation allowances were not made to deferred tax assets on tax-loss carryforwards in 2003 in view of
the long carryforward period and in expectation of stable economic developments in the NAFTA region.

See
also Note 10 to the Consolidated Financial Statements for further information on deferred taxes.

Goodwill

From 2002 onward, goodwill is no longer to be amortized under U.S. GAAP. Instead, goodwill is written off only if the carrying value of goodwill is impaired. The
value of goodwill has to be reviewed at least once per year at the reporting unit level. An impairment exists if the book value of the goodwill at the reporting unit exceeds the fair value, generally
determined based upon the discounted value of expected future cash flows.

To
review the value of goodwill, however, it is necessary to make assumptions with regard to the long-term profitability of the operating units against the background of
macroeconomic developments. To a significant extent, goodwill is associated with the acquisition of the insecticide fipronil from Bayer CropScience in March 2003 and of the crop protection
business of American Home Products Corporation in 2000. The value of these goodwills is subject to the long-term development of the global market for crop protection products and the
continued profitability of this business.

Write-offs
due to impairment were not necessary in 2003. As a result, the amortization expenses recorded in accordance with German GAAP are reversed in the reconciliation to
U.S. GAAP (see Note 4 to the Consolidated Financial Statements).

Provisions for environmental protection measures and site remediation

The company records liabilities for environmental issues in the accounting period in which its responsibility is established and the cost can be reasonably
estimated. At environmental sites in which more than one potentially responsible party has been identified, the company records a liability for its allocable share of costs related to its involvement
with the site, as well as an allocable share of costs related to insolvent parties or unidentified shares. At environmental sites in which the company is the only potentially responsible party, a
liability is recorded for the total estimated costs of remediation before consideration of recovery from insurers or other third parties. The process of estimating environmental liabilities is complex
and dependent on; physical and scientific data at the site, uncertainties as to remedies and technologies to be used, and the outcome of discussions with regulatory agencies.

See
also Note 24 to the Consolidated Financial Statements for further explanations with regard to the accrual of provisions for environmental protection measures and site
remediation.

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Impairment of long-lived Assets

Impairment tests of long-lived assets are made when conditions indicate a possible loss. Impairment tests are based on a comparison of undiscounted
cash flows to the recorded value of the asset. The estimate of the cash flows is based on information available at that time including factors such as: expected sales, customer trends, operating
efficiencies, material and energy prices, etc. If an impairment is indicated, the asset value is written down to its fair value based upon market prices or, if not available, upon discounted cash
flows. The assumptions used in the cash flow projections reflect the market conditions at the time an impairment becomes known.

New U.S. GAAP accounting standards not yet adopted

FIN 46, "Consolidation of Variable Interest Entities", which was issued in January 2003 and revised in December 2003, requires
consolidation of variable interest entities by the primary beneficiary, even in the absence of a majority of the voting rights, FIN 46 is to be applied for interests in special purpose entities
for periods ending after December 15, 2003 and for interests in all other entities for periods ending after March 15, 2004. The application of FIN 46 within the BASF group was
analyzed, and it was determined that it would not have a significant impact on the assets, profitability, or financial situation of the BASF Group.

Off Balance Sheet Arrangements, Contingent Liabilities and Other Financial Obligation

Our unconsolidated entities are not considered special-purposes entities, and do not constitute other off-balance sheet arrangements.

Contingent
liabilities and other financial obligations are described in Note 26 to the Consolidated Financial Statements in Item 18.

RESULTS OF OPERATIONS

Group

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated
Financial Statements and the Notes to the Consolidated Financial Statements included in Item 18 of this Annual Report.

Income
from operations in 2003 was somewhat higher than in 2002 despite a persistently difficult business environment and despite a higher level of special items. Our measures to
increase efficiency and reduce costs offset higher raw materials costs and insufficient sales prices resulting from global competitive pressures. Net income declined significantly due to a lower
financial result and higher tax expense due, among other things, to legislative changes.

The
following table sets forth sales and income for BASF. Sales are net of petroleum and natural gas taxes.

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Sales and Earnings

|                                                    |                                                           
|--------------------------------------------------- | ----------------------------------------------------------
|
|
|Sales                                               |                                                           
|Gross profit                                        |                                                           
|Gross profit as a percentage of sales (%)           |                                                           
|Income from operations                              |                                                           
|Income from operations as a percentage of sales (%) |                                                           
|Special items                                       |                                                           
|Financial Result                                    |                                                           
|Income before taxes and minority interests          |                                                           
|Net income                                          |                                                           
|Net income as a percentage of sales (%)             |                                                           
|Basic earnings per share                            |                                                           
|Amounts in accordance with U.S. GAAP                |                                                           
|                                                    | Net income                                                
|                                                    | from continuing operations                               
|                                                    | from discontinued operations including gain from disposal
|                                                    | cumulative effect of implementing SFAS 133               
|                                                    | Basic earnings per share                                  
|                                                    | from continuing operations                               
|                                                    | from discontinued operations including gain on disposal  
|                                                    | cumulative effect of implementing SFAS 133               
|                                                    | diluted earnings per share                               

Income from operations in 2003 contains special charges of €335 million. This amount includes
€305 million for restructuring measures taken to increase efficiency as part of the Ludwigshafen Site Project and to reorganize our service divisions in North America (NAFTA).
The proceeds from the sale of the soil improvement products business in December offset most of the costs of integrating the fipronil business acquired by the Agricultural Products division.

Income
from operations in 2002 included special charges of €240 million. This was €836 million less than in the previous year. Charges of
€124 million were incurred as a result of restructuring measures. These were due to the closure of ethylene oxide and glycol plants in the Chemicals segment in Geismar,
Louisiana; various optimization and restructuring measures in the Agricultural Products & Nutrition segment; and measures to improve efficiency associated with the Site Concept at the
Ludwigshafen production site. Further special charges of €116 million resulted primarily from the €100 million provision for claims for damages related to
the vitamins business. The financial result included special income of €301 million related in particular to the sale of marketable securities and of a lease financing company.

In
2001, the high special charges of €1,076 million in income from operations were caused by our comprehensive restructuring program, which resulted in charges of
€747 million. Moreover, an

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additional
provision of approximately €200 million had to be made for the fines imposed by the E.U. Commission for antitrust violations in the vitamins business.

2003 Compared with 2002



Sales in 2003 rose €1,145 million compared with the previous year to €33,361 million. The following factors
contributed to the change in sales:

|                                                     | 
|---------------------------------------------------- | 
|
|
|Volume                                               | 
|Prices                                               | 
|Currency exchange                                    | 
|Acquisitions and additions to scope of consolidation | 
|Divestitures                                         | 
|                                                     | 
|                                                     | 
|                                                     | 

We achieved higher sales volumes primarily in the Chemicals, Plastics and Oil & Gas segments. Some divisions were able to impose price
increases to compensate somewhat for the increase in raw materials costs.

The
weakness of the U.S. dollar caused sales to decline considerably in euro terms in North America (NAFTA), South America and Asia. In local currency terms, however, sales rose by 10%
in North America, by 13% in South America and by 25% in Asia.

Acquisitions
increased sales by €633 million, primarily due to the acquisition of the global fipronil business from Bayer CropScience and the purchase of
Honeywell's engineering plastics. Additions to the scope of consolidation contributed €5 million to sales.

Divestitures
reduced comparable sales by €261 million, primarily due to the sale of our nylon fibers business to Honeywell.



After deducting production costs from sales, we recorded a gross profit of €10,028 million in 2003. The decline of
€372 million or 3.6% resulted mainly from considerably higher raw materials costs. Lower capacity utilization in the second half of the year also had a negative impact. The
ratio of gross profit to sales declined to 30.1% from 32.3% in 2002.



Income from operations was slightly higher than in 2002. Improvements in the Agricultural Products & Nutrition, Oil & Gas and Other segments offset
the decline in Chemicals, Plastics and Performance Products. At €2,658 million, income from operations in 2003 was €17 million higher than in the previous
year and as a ratio of sales was 8.0%, compared with 8.2% in 2002.



Compared with 2002, income before taxes declined €473 million to €2,168 million in 2003. This decline is due to the
almost identical decline in the financial result by €490 million. In 2002, the financial result contained gains from the sale of securities. In 2003, income from financial
assets also declined and certain financial assets had to be written down (see Note 8 to the Consolidated Financial Statements in Item 18).

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Income before taxes and minority interests was €2,168 million and the tax expense was €1,192 million or 55%. After
deducting these taxes and minority interests of €66 million, net income in 2003 was €910 million, or €594 million lower than in
2002. This decline was due to lower income before taxes and minority interests as well as tax expenses that were €150 million higher than in the previous year. In 2003, a tax
refund claim of €124 million that was accounted for as tax receivable in 2002 had to be written off, resulting in an increase in tax expense of
€248 million compared with the previous year. This write-off of the tax refund claim for a reduction in corporate income tax associated with paid dividends was
incurred due to changes in German tax law in 2003 (see Note 10 to the Consolidated Financial Statements in Item 18). In addition, foreign income taxes on oil production rose, primarily
due to the production of higher volumes of oil.

Earnings
per share in 2003 were €1.62, compared with €2.60 in the previous year. In accordance with U.S. GAAP, we posted net income of
€1,338 million or €2.38 per share in 2003 compared with €1,717 million or €2.96 per share in 2002.



Assuming a moderate upturn in the chemical industry, we expect slightly higher sales and an increase in income from operations in 2004, driven primarily by our
restructuring, cost-reduction and portfolio optimization measures.

2002 Compared with 2001



In 2002, sales were slightly lower than the previous year's level and decreased €284 million, or 0.9%, to
€32,216 million. Sales growth in the Chemicals and Plastics & Fibers segments was not quite enough to offset the decline in the Agricultural Products & Nutrition
and Oil & Gas segments.

The
following factors contributed to the change in sales:

|                                                     | 
|---------------------------------------------------- | 
|
|
|Volume                                               | 
|Prices                                               | 
|Currency exchange                                    | 
|Acquisitions and additions to scope of consolidation | 
|Divestitures and deconsolidations                    | 
|                                                     | 
|                                                     | 
|                                                     | 

Sales volumes were up substantially in 2002. We achieved significant growth in the Chemicals and Plastics & Fibers segments. As a result of
new plants, in particular the new steam cracker in Port Arthur, Texas, we were able to increase production significantly in the Petrochemicals division. In addition to covering internal requirements,
we sold larger volumes to external customers.

The
selling prices for our products remained under pressure. Some divisions were able to impose price increases to offset higher raw material costs, but overall prices declined by 5.2%.
The rise in the value of the euro against the U.S. dollar and Japanese yen, as well as a devaluation of South American currencies had a significantly negative impact on sales.

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Portfolio changes, which amounted to €(286) million were 0.8 percent lower than in 2001 and did not have a substantial impact. Acquisitions 
primarily, the Intermediates division's acquisition in mid-2001 of the Italian SISAS Group's activities in Feluy, Belgium  accounted for a €118 million
increase in sales.

Divestitures
reduced comparable sales by €404 million, primarily due to the divestiture of the pharmaceuticals business at the end of February 2001.

Additions
to the scope of consolidation contributed €76 million, or 0.2%, to sales.



After deducting production costs from sales, we achieved a gross profit of €10,400 million in 2002. The increase of
€88 million, or 0.9%, caused the gross margin to rise to 32.3% compared with 31.7% in 2001. This was due to the positive development of production costs, which declined more
sharply than sales (1.7% compared with 0.9%). The decline in production costs was due in particular to the higher utilization rate of production facilities and cost reductions as a result of
restructuring measures.



Following a weak year marked by high restructuring charges, income from operations in 2002 almost returned to the level of previous years. Income from operations
of €2,641 million in 2002 was €1,424 million or 117% higher than in the previous year, and represented 8.2% of sales, compared with 3.7% in 2001.

Excluding
special items of €240 million in 2002 and €1,076 million in 2001, income from operations rose by 25.6% to
€2,881 million. This was primarily due to improved earnings in the Chemicals and Plastics & Fibers segments as well as in Performance Products.



Income from ordinary activities rose from €609 million in 2001 to €2,641 million in 2002. Lower special charges as
well as higher special income accounted for €1,210 million of this increase of €2,032 million. On a comparable basis, income from operations contributed
€588 million and the financial result €234 million to an increase of €822 million.



There was no extraordinary income in 2002. The high extraordinary income in the previous year of €6,121 million, or
€5,976 million net of taxes, resulted from the sale of our pharmaceuticals business to Abbott Laboratories Inc., Abbott Park, Illinois.



Income before taxes and minority interests was €2,641 million and the tax expense was €1,042 million, or 39.5%.
After deducting these taxes and minority interests of €95 million, net income in 2002 was €1,504 million. In comparison with the previous year, in which
there was a loss of €118 million excluding extraordinary income, net income rose by €1,622 million.

Earnings
per share in 2002 were €2.60 compared with ordinary earnings per share of €(0.20) in the previous year. In addition, there was extraordinary
income per share of €9.92 in the previous year. In 2002, net income in accordance with U.S. GAAP was €1,717 million or €2.96 per share compared
with €5,692 million or €9.45 per share in 2001.

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Chemicals

Segment data
(euros in millions)

|                                                       |                   
|------------------------------------------------------ | ------------------
|
|Sales to third parties                                 |                   
|                                                       | Thereof Inorganics
|Petrochemicals                                         |                   
|Intermediates                                          |                   
|Intersegmental transfers                               |                   
|Sales incl. intersegmental transfers                   |                   
|Income from operations                                 |                   
|Special items                                          |                   
|Operating margin (%)                                   |                   
|Assets                                                 |                   
|Return on operational assets (%)                       |                   
|Research and development expenses                      |                   
|Capital expenditures on tangible and intangible assets |                   

The
Chemicals segment is comprised of the Inorganics, Petrochemicals and Intermediates divisions. As of July 1, 2001, the former Specialty Chemicals operating division was
dissolved and the strategic business units of glycols, alkylene oxides as well as ethylene and propylene oxides were transferred to the Petrochemicals operating division. The other activities of the
Specialty Chemicals operating division were allocated to the Performance Products operating division. The previous year's segment data have been restated.

2003 Compared with 2002



In 2003, we increased sales to third parties by €435 million compared with the previous year to €5,752 million
(volumes 12.0%, portfolio 0.7%, prices 5.0%, currency -9.5%). Higher sales volumes made a major contribution to growth in all three divisions, in particular in the Petrochemicals division.

Income
from operations declined by €242 million to €393 million. All three divisions where affected. This was due mainly to the weak U.S.
dollar, continuing
overcapacities for a number of products, and increasing pressure on margins. Modernization measures, scheduled plant maintenance and startup costs for our investment projects in Asia also had a
negative impact on income from operations.

Compared
with 2002, assets declined by €277 million to €4,720 million. We further optimized production structures in Europe and North
America by closing unprofitable plants and investing in new, profitable ones. In the Petrochemicals and Intermediates divisions, the capital expenditure projects at the new Verbund site in Nanjing,
China, and in Caojing, China, continued on schedule. A number of world-scale plants will make a substantial contribution to our production in the growing Asian market from 2005 onward. In the
Petrochemicals division, we constructed a C4 complex in Port Arthur, Texas, with our partners ATOFINA, United States, and Shell, United States. This plant is scheduled to start operations
in 2004 and is linked with our steam cracker.

We
are expecting to achieve higher sales and income from operations in 2004 by raising prices.

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We increased sales to third parties in 2003 by €43 million to €738 million (volumes 3%; acquisition of Callery
Chemical 3%, prices 3%, currency -3%).

Income
from operations decreased in comparison with the previous year. This was due to a decline in margins for basic inorganic chemicals, inorganic specialties and electronic grade
chemicals as a result of negative price and currency effects. These effects could not be fully offset by higher sales volumes of glues, impregnating resins and catalysts. The conversion of part of the
chlorine production facilities to an energy-efficient membrane technology as well as other modernization measures at the Ludwigshafen site had a negative impact on income from operations but will lead
to an improvement in income from 2004 onward.

The
acquisition of Callery Chemical from the Mine Safety Appliances Company (MSA) completed in mid-September 2003, has expanded our profitable and
fast-growing business with inorganic specialties. With this acquisition we have expanded our range of alcoholates and boron compounds and have added potassium specialties to our portfolio.

In
2004, we expect higher sales and a slight improvement in income from operations from factors including the Callery Chemical acquisition. We aim to continue expanding our profitable
business areas in innovative specialties such as heterogeneous catalysts, electronic grade chemicals and powder injection molding technology.



In 2003, we increased sales to third parties by €362 million to €3,264 million (volumes 16%, portfolio 1%, prices
8%, currency -12%). Cracker products in Europe were an important factor in this increase. Sales of alkylene oxides and glycols also rose. We maintained the previous year's level of sales for
plasticizers and solvents.

Income
from operations remained below the previous year's level despite the increase in sales. Prices for raw materials, especially crude oil and naphtha, were very volatile and rose
over the course of the year, as was the case for natural gas and energy. We were unable to increase our sales prices sufficiently and quickly enough, and margins therefore declined. The cost of plant
shutdowns for scheduled maintenance and technical problems at our steam cracker in Port Arthur, Texas, also had a negative impact on income from operations.

Capital
expenditures increased slightly compared with the previous year. In Port Arthur, Texas, together with our partners ATOFINA and Shell, we built a C4 complex for
metathesis, inalkylation and butadiene extraction that is scheduled to start operations in 2004. Together with our partner SINOPEC, Beijing, China, we are investing in our new Verbund site in Nanjing,
China, which is scheduled to begin operations in 2005.

We
are expecting higher sales in 2004 and higher income from operations by improving margins.



In 2003, sales to third parties increased by €30 million to €1,750 million (volumes 9%, prices 1%, currency -8%). We
increased volumes of amines, diols and polyalcohols in particular.

Income
from operations was well below the previous year's level and was negatively impacted by significantly higher raw materials prices, in particular for natural gas and butadiene. The
increasing weakness of the U.S. dollar intensified competitive pressure from the U.S. dollar zone in all regions. European competitors lowered prices because of insufficient capacity utilization. This
resulted in a decline in margins for our products. Income from operations also contains charges for startup costs for investment projects in Asia as well as impairment charges for production plants.

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The
higher level of capital expenditures compared with the previous year related primarily to projects in China: We are building integrated production plants for THF and
PolyTHF® in Caojing and plants for methylamine, dimethylformamide, formic acid and propionic acid in Nanjing, China.

In
2004, we expect higher sales, especially in Asia, and higher income from operations.

2002 Compared with 2001



In the Chemicals segment, sales to third parties increased in 2002 to €5,317 million from €4,494 million in 2001.
Sales in the Intermediates division were slightly above the previous year's level, while sales in the Inorganics division were slightly lower. In the Petrochemicals division, sales increased
substantially. This was due primarily to the startup of new production capacities, in particular the new steam cracker in Port Arthur, Texas. Higher sales volumes contributed 25.7% to the increase in
sales. Price and currency fluctuations had a negative effect of 9.6%.

Intersegmental
transfers increased 6.0% from €2,452 million in 2001 to €2,598 million in 2002.

Income
from operations rose in 2002 by 75.4% to €635 million, compared with €362 million in 2001. The increase in earnings resulted
primarily from higher sales volumes and a corresponding improvement in capacity utilization at our production facilities, significantly lower startup costs for new plants and the restructuring and
cost-cutting measures introduced in 2001, which are beginning to take effect. All divisions reported higher earnings compared with 2001, with Petrochemicals posting the largest increase.

Special
items in the Petrochemicals division related to the closure of two ethylene oxide plants and one glycol plant at the site in Geismar, Louisiana.

Through
the increase in inventories and receivables, assets increased 3.1% from €4,847 million in 2001 to €4,997 million in 2002. We further
optimized our production activities in Europe and North America by closing unprofitable plants and investing in profitable, new production facilities. In the growing Asian market, we will achieve
another milestone in the development and expansion of local production facilities with the forthcoming completion of the butanediol plant at our Verbund site in Kuantan, Malaysia.



In the Inorganics division, sales to third parties in 2002 declined 2.7% to €695 million from €714 million in 2001.
Despite a difficult business environment, we increased sales volumes 6%. In most product lines our selling prices declined on average by 9%. Sales of catalysts, glues, impregnating resins and basic
inorganic chemicals were below the previous year's levels, but sales of inorganic specialties and electronic grade chemicals were higher due to higher sales volumes.

Income
from operations improved compared with the previous year.

In
2002, we again achieved high capacity utilization rates in our plants for large-volume inorganic products, which form an important foundation for most of BASF's value-adding chains.
Through such economies of scale, we were able to supply the Ludwigshafen and Antwerp Verbund sites cost-effectively. To consolidate and extend our cost leadership in the Inorganics
division, we began in 2002 to refit a world-scale chlorine plant to use a state-of-the-art membrane process.

In
addition to large-volume inorganic products, our product range includes innovative specialties such as heterogeneous catalysts, electronic grade chemicals and powder injection molding
technology. We will continue to expand these profitable business areas in the future.

81

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In the Petrochemicals division, sales to third parties in 2002 increased to €2,902 million and were 39.6% higher than in 2001. We were able
to increase sales in all product lines. Sales volumes were stable throughout the year and therefore capacity utilization at our plants was generally high. In addition, the startup of the steam cracker
in Port Arthur, Texas, in December 2001 and the expansion of the cracker in Antwerp, Belgium, led to increased sales volumes. Higher volumes led to a 49% increase in sales, whereas price and
currency fluctuations reduced sales by 11%.

Income
from operations rose significantly. This was due to higher volumes in all product lines and regions. In addition, earnings were no longer burdened by high startup costs for the
steam cracker in Port Arthur, Texas, and the new plants in Kuantan, Malaysia. Special items were also lower. Special charges of €25 million in 2002 related in particular to the
closure of two ethylene oxide plants and one ethylene glycol plant at the site in Geismar, Louisiana.

We
substantially expanded business volumes in cracker products. Rising crude oil prices and naphtha costs could be passed on to the market only in the first half of the year.

Sales
and earnings in plasticizers and solvents exceeded the previous year's levels. However, the markets for both product lines continue to suffer from excess capacity and, as a result,
from strong price and margin pressures. We will address these challenges with significant cost reductions through further rationalization and closure of production plants. In June, we started
production of our new product Hexamoll® DINCH, a plasticizer for use in applications with stringent requirements such as foodwrap, medical devices and toys. This new product was favorably
received by our customers.

Business
in the alkylene oxides and glycols product line picked up considerably in Europe due to the expansion of ethylene oxide capacity in Antwerp, Belgium. Earnings improved as a
result of high capacity utilization. In the United States, we closed underperforming production plants in Geismar, Louisiana, and are exiting gradually from the ethylene glycol business in this
region.

In
2002, capital expenditures were significantly lower compared with the high levels in recent years associated with major projects in Kuantan, Malaysia; Port Arthur, Texas; and
Tarragona, Spain. Important ongoing projects are the metathesis and butadiene extraction plant in Port Arthur, Texas, which is scheduled to start operations in late 2003 or early 2004, as well as
investments at our new Verbund site in Nanjing, China, which we are developing together with our partner SINOPEC.



Business with intermediates recovered in 2002, in particular in Europe and Asia, after a modest second half of 2001. Sales to third parties in 2002 increased by
€19 million to €1,720 million. Increased volumes contributed 6% to the increase in sales. Price and currency fluctuations accounted for an 8% reduction in
sales. Translated to euros, the weak U.S. dollar more than offset price increases.

Income
from operations improved compared with 2001. This improvement could be traced in part to higher sales volumes for our products as well as to the normalization of natural gas
prices in North America, which were high at the beginning of 2001. The availability of many of our products was restricted due to production problems at some of our competitors and plant shutdowns in
Ludwigshafen, Germany, and Feluy, Belgium, related to maintenance or expansion measures.

Capital
expenditures were lower than in the previous year. Numerous projects were completed in 2002. In particular, we started operations at new plants for PolyTHF®
(polytetrahydrofuran), specialty amines and glyoxal in Ludwigshafen. In Freeport, Texas, we expanded our Neol® (neopentylglycol) capacity with a new plant.

82

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Plastics

Segment data
(euros in millions)

|                                                       |                  
|------------------------------------------------------ | -----------------
|
|Sales to third parties                                 |                  
|                                                       | Thereof Styrenics
|Performance Polymers                                   |                  
|Polyurethane                                           |                  
|Intersegmental transfers                               |                  
|Sales incl. intersegmental transfers                   |                  
|Income from operations                                 |                  
|Special items                                          |                  
|Operating margin (%)                                   |                  
|Assets                                                 |                  
|Return on operational assets (%)                       |                  
|Research and development expenses                      |                  
|Capital expenditures on tangible and intangible assets |                  

---

The Plastics segment comprises the Styrenics, Performance Polymers and Polyurethanes divisions. As of July 1, 2001, the former operating
divisions of Engineering Plastics and Fiber Products were merged to create the Performance Polymers operating division. The previous year's segment data have been restated. On May 1, 2003 BASF
took over the worldwide engineering plastics business of Honeywell International, Morris Township, New Jersey, and transferred its worldwide nylon fibers business to Honeywell. At the same time the
segment was renamed Plastics.

2003 Compared with 2002



Sales to third parties rose by €310 million to €8,787 million in 2003 (volumes 9.2%, portfolio -0.9%,
prices 4.6%, currency -9.2%).

Compared
with the previous year, income from operations fell by €286 million to €296 million. The Styrenics and Performance Polymers
divisions posted significantly lower income from operations; the Polyurethanes division increased its income slightly. Income from operations in this segment mainly declined due to higher raw
materials costs and the significant loss incurred in fiber intermediates.

Assets
and capital expenditures were reduced in 2003. We lowered inventories and receivables. In 2004, we will continue to reposition our plastics business. As of December 31,
2003, we acquired the nylon 6,6 business of Ticona LLC, United States. This is part of the expansion of our engineering plastics business. The planned transfer of Styropor® production from
South Brunswick, New Jersey, to our joint venture Polioles S.A. de C.V. in Altamira, Mexico, and the expansion of capacity there will improve our cost position in styrenics.

For
2004, we expect sales at the previous year's level and an improvement in income from operations.

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Sales to third parties in 2003 rose by €239 million to €3,626 million (volumes 7%, prices 10%, currency
-10%). In particular, higher sales volumes of styrene monomers contributed to the increase in sales.

Income
from operations declined significantly compared with the previous year. We significantly increased prices for polymers but were not able to pass on higher raw materials costs to
our customers to a sufficient extent. This was due mainly to excess capacity and the resulting pressure on margins.

In
2003, we continued to improve our production structures: At the end of the year, we started operations at a world-scale Styrolux® plant in Altamira, Mexico. Since the
European market is supplied entirely from the Styrolux® plant in Antwerp, we were able to shut down the Styrolux®plant in Ludwigshafen. We took the first steps toward our exit
from the polystyrene compounds business in Europe. In addition, we have decided to transfer Styropor® production at our site in South Brunswick, New Jersey, to Altamira, Mexico, where we
already operate a Styropor® plant in a joint venture.

In
2004, we expect to maintain our sales level and improve income from operations. We aim to do this by further reducing costs, streamlining our portfolio and by simplifying business
processes.



In 2003, sales to third parties declined slightly by €31 million to €2,239 million (volumes 5%, portfolio
-2%, prices 3%, currency -7%).

Despite
a substantial reduction of fixed costs, income from operations was negative. The drastic rise in raw materials costs in 2003 could not be passed on to our customers to a
sufficient extent because they were affected by the weak economy. Moreover, the decline in the value of the U.S. dollar led to a lower earnings contribution from our exports to Asia out of Europe.
Income from operations was severely affected by completely unsatisfactory margins for nylon fiber intermediates, sales of which are largely to the cyclical carpet and textile industries. On the other
hand, despite weak demand for automobiles, we successfully expanded our nylon engineering plastics business, mainly through the acquisition of the injection molding and extrusion business of
Honeywell, United States, in April 2003.

Together
with our joint venture partner Toray Industries, Japan, we plan to build a production facility for polybutylene terephthalate in Kuantan, Malaysia, to strengthen our business
with engineering plastics, particularly in Asia. Effective December 31, 2003, we acquired nylon 6,6 business of Ticona LLC, United States.

We
expect to increase sales and income from operations in 2004 on the basis of our optimized product portfolio and synergies from the integration of the businesses we acquired.



In 2003, sales to third parties rose by €102 million to €2,922 million (volumes 15%, portfolio -1%,
prices 0%, currency -10%). Sales volumes of our products increased especially in Asia and Europe.

We
increased income from operations compared with 2002 despite very high raw materials costs and persistently unsatisfactory margins. This was due primarily to higher sales volumes of
our products as well as increased productivity.

Capital
expenditures were lower than in 2002 and mainly focused on Asia. At our integrated production site in Yeosu, South Korea, we built a world-scale production plant for TDI that
operates using an improved process and which started operation in the third quarter of 2003. We have begun expanding the existing MDI facility in Yeosu, South Korea. This expanded facility will enable
us to achieve an even greater share of growth in the Asian markets. At the end of 2003, we began the

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construction
of a new production site in Caojing, China. Working with our joint venture partners, we want to complete an additional integrated production facility for MDI and TDI within three years.

We
expect improved sales and income from operations in 2004, as a result of strong growth in the polyurethanes market. We will also continue measures to improve our cost structure.

2002 Compared with 2001



Sales to third parties in 2002 increased 3.6% to €8,477 million from €8,185 million in 2001. Stronger customer
demand led to significantly higher sales volumes, which accounted for an 11.6% increase in sales. Declining prices and negative currency effects reduced sales by 8%. Sales increased in all three
divisions, in particular for polyurethane products and styrenics.

Income
from operations rose to €582 million, compared with a loss of €2 million in 2001. All three divisions contributed significantly to
the increase in earnings, which was due in particular to much stronger demand and correspondingly good capacity utilization, the closure of underperforming plants started in 2001, and a reduction in
fixed costs. Earnings also improved due to a significantly lower level of special items.

Capital
expenditures were lower than in 2001.

At
the beginning of 2003 agreements were signed with Honeywell International Inc., Morris Township, New Jersey, to acquire their engineering plastics business and sell our nylon
fibers business to Honeywell. Through these portfolio swaps, we are further strengthening our position as a leading international supplier of engineering plastics. The two transactions are likely to
be neutral with regard to sales and earnings in 2003.



In the Styrenics division, sales to third parties rose 3.7% in 2002 to €3,387 million compared with €3,267 million
in the previous year. Sales increased due to significantly higher demand compared with 2001 in the face of negative price/currency effects.

Income
from operations increased considerably in 2002. This was due primarily to higher capacity utilization. The second and third quarters in 2002 were affected by rising raw material
costs as well as a worldwide shortage of styrene. The higher raw material costs could not be passed on in full to the market. Asia was the largest growth market for styrene. Overall, we significantly
improved income from operations compared with 2001 in all major regions.

A
Styrodur® plant was closed in Antwerp, Belgium. Production was transferred to a new plant that can be operated with lower production and logistic costs started operations
in Tarragona, Spain. The replacement plants for ethyl benzene/styrene at the Ludwigshafen site started operations at the end of 2002 and will ensure more efficient supplies of styrene.



In the Performance Polymers division, sales to third parties in 2002 rose by 1.3% to €2,270 million from
€2,241 million in 2001. Sales volumes increased by 9%, in particular due to increasing demand for nylon 6 precursors as well as the continuing expansion of our worldwide
engineering plastics business. Prices remained under pressure, largely due to the strength of the euro, which was unfavorable for our export business.

As
a result of the restructuring measures we introduced in 2001 and continued in 2002, we have significantly reduced fixed costs, especially in the NAFTA region. The scheduled shutdown
of

85

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Ultraform®
production in the United States and the sale of our industrial fibers business (Basofil®) will support this trend and allow for a further improvement in earnings.

High
capacity utilization at our production plants also contributed to the improvement in income from operations.

At
the beginning of 2003 agreements were signed with Honeywell International Inc., Morris Township, New Jersey, to acquire their engineering plastics business and sell our nylon
fibers business to Honeywell.



In the Polyurethanes division, sales to third parties in 2002 increased by 5.3% to €2,820 million from
€2,677 million in 2001. Volume growth compared with 2001 contributed 12% to the increase in sales. Demand for polyurethanes rose, in particular in Asia and the United States.
Price and currency fluctuations accounted for a 7% reduction in sales.

Income
from operations increased compared with 2001 despite high raw material costs and persistently unsatisfactory margins. Productivity increases and cost-cutting measures
contributed to earnings in addition to the development in sales volumes. We were able to improve our cost structure through the new TDI (toluene diisocyanate) plant in Geismar, Louisiana, which
started operations in May 2002 and replaced an old plant. We will be able to reduce costs further in 2003, the first full year of plant operation.

In
addition to the TDI plant in the United States, the largest capital expenditures in the Polyurethanes division were the expansion of our MDI (diphenylmethane diisocyanate) plant in
Antwerp, Belgium, which came onstream in late 2002, and the construction of an SM/PO (styrene monomer/propylene oxide) plant in Singapore, by the ELLBA Eastern (Pte.) Ltd. joint venture with
Shell. This plant started operations in the second half of 2002 and is intended to significantly improve supplies of propylene oxide in Asia.

Performance Products

Segment data
(euros in millions)

|                                                       |                              
|------------------------------------------------------ | -----------------------------
|
|Sales to third parties                                 |                              
|                                                       | Thereof Performance Chemicals
|Coatings                                               |                              
|Functional Polymers                                    |                              
|Intersegmental transfers                               |                              
|Sales incl. intersegmental transfers                   |                              
|Income from operations                                 |                              
|Special items                                          |                              
|Operating margin (%)                                   |                              
|Assets                                                 |                              
|Return on operational assets (%)                       |                              
|Research and development expenses                      |                              
|Capital expenditures on tangible and intangible assets |                              

86

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Performance Products segment consists of the Performance Chemicals, Coatings and Functional Polymers divisions. In 2001, the business segment
Colorants & Finishing Products was renamed Performance Products. As of July 1, 2001, the former operating divisions Dispersions, Colorants as well as some parts of Specialty Chemicals
were combined to form the operating division Performance Chemicals.

2003 Compared with 2002



Compared with 2002, sales to third parties declined €381 million to €7,633 million (volumes 1.9%, portfolio 0.3%,
prices -0.1%, currency -6.9%). All divisions were affected by the decline in sales, which was primarily due to negative currency effects and a difficult business environment in
some customer industries. In addition, persistent pressure on prices reduced sales in the Performance Chemicals and Coatings divisions.

Income
from operations fell €168 million to €478 million. This was predominantly caused by the weak U.S. dollar and higher raw materials
costs which could not be offset fully by price increases. Restructuring measures also reduced income from operations. The implementation of cost-reduction measures and our focus on more
profitable products were unable to offset the negative effects on income.

In
2003, the segment's assets fell by €562 million to €4,656 million. Capital expenditures were considerably lower than the level of
depreciation and amortization. We significantly reduced inventories and receivables.

In
2004, we anticipate a slight increase in sales and a significant improvement in income from operations due to cost-reduction measures.



At €3,147 million, sales to third parties were €196 million lower than in 2002 due to currency translation effects
(volumes 0%, portfolio 1%, prices -1%, currency -6%).

Income
from operations fell short of the previous year's strong level, both overall and in all business areas with the exception of printing systems. Demand for our products remained
generally unsatisfactory due to the difficult economic situation. Because of the decline in the value of the U.S. dollar, our exports to North America (NAFTA) and South America resulted in much lower
income in euro terms. Asian currency weakness likewise led to a decline in income from operations, even though we increased sales volumes in the region, especially for textile and leather chemicals.

In
May 2003, we acquired the medium molecular weight polyisobutylenes business  substances employed in chewing gum, adhesives, sealants and films  from
ExxonMobil Chemical, United States. Through this acquisition, we have expanded our product range and increased capacity utilization by being able to supply new customers.

We
reduced inventories and receivables.

In
2004, we expect sales to rise. We also aim to improve income from operations by continuing to lower our fixed costs and by raising margins.



Sales to third parties in 2003 fell by €122 million to €2,015 million (volumes 5%, prices -2%, currency
-9%). The negative currency effect was due to the devaluation of the U.S. dollar, South American currencies and the Japanese yen.

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We increased income from operations compared with the previous year despite the difficult economic situation and the cost of restructuring measures we have initiated, in particular for
our industrial coatings business in Europe. We improved our income from automotive coatings despite a decline in automobile production in Europe, NAFTA and Japan. We achieved this success through
effective service concepts, which enable us to optimize total coating process costs for our customers and to increase our profits. In refinish coatings, we achieved stable, adequate margins in a
stagnating market. In South America, we strengthened our market leadership in decorative paints with our Suvinil® brand.

We
expect increased sales and income from operations in 2004. We are expanding our presence in the growth markets of Eastern Europe and China. In addition, we are restructuring our
industrial coatings business and continuing measures to increase efficiency in all regions and business units.



At €2,471 million, sales to third parties in 2003 were €63 million lower than in 2002 (volumes 0%, prices 3%,
currency -6%). The weak U.S. dollar reduced sales in euro terms, in particular in North America (NAFTA) and in South America. In Europe, on the other hand, we posted higher sales.

Income
from operations declined compared with the previous year due primarily to unsatisfactory earnings in the first half of 2003. It was not possible to pass on higher raw material
costs quickly and to the full extent by increasing prices. Income declined in particular in our superabsorbents and paper chemicals businesses. Our market development and cost reduction efforts could
not offset the decline in income.

In
Nanjing, China, we continued the construction of our second Verbund site in the Asian growth region. Production of acrylic acid and acrylic esters at this site is scheduled to start
in 2005.

We
reduced inventories and receivables.

In
2004, we expect higher sales and an increase in income from operations due to improved margins and lower fixed costs.

2002 Compared with 2001



Sales to third parties in the Performance Products segment declined 1.7% in 2002 to €8,014 million, compared with
€8,154 million in 2001. Higher sales volumes led to a 6.1% increase in sales, in particular in the Performance Chemicals and Functional Polymers divisions. Ongoing price
pressure and negative currency effects in all divisions reduced sales by 7.8%.

Income
from operations rose from €99 million in 2001 to €646 million in 2002. This was due to significantly lower special items, an improved
cost structure due to the restructuring measures introduced in 2001, and portfolio optimization with a focus on more profitable products.

In
2002, assets in the segment declined to €5,218 million from €6,048 million in 2001. Depreciation was in excess of capital expenditures.
Inventories and receivables were reduced.



Despite the difficult global economic climate, sales to third parties of 3,343 million remained just below previous year's level of
€3,345 million. Growth was strong in Asia. In South America, sales declined due to the currency crises in Brazil and Argentina, as well as to the difficult economic environment.
A 7% increase in sales volumes was offset by negative price and currency effects, in particular the strengthening of the euro against the U.S. dollar.

88

---

All
business units contributed to a significant increase in income from operations.

In
performance chemicals for coatings, plastics and specialties, we maintained business at a satisfactory level despite intense competition. Our printing plates business grew against the
market trend. We have widened our product range for the automotive and oil industry and increased production through cost-effective capacity expansions. Our plants for products for the
detergents and cleaning agents industry are operating at a high level of capacity utilization. Despite significant expansion in Asia, sales of textile and leather chemicals declined slightly overall.

We
reduced working capital through our efforts to lower inventory levels and a decline in receivables.



In the Coatings division, sales to third parties in 2002 declined 6.6% to €2,137 million compared with
€2,287 million in 2001. Sales volumes were below the previous year's level, mainly because our decorative paint customers in South America reduced their inventories during the
first half of the year. Overall, we were able to increase prices slightly. The decline in sales was due primarily to currency effects, in particular the devaluation of the Brazilian real as well as
the weakening of the U.S. dollar and the Japanese yen against the euro.

Trends
in our business units were as follows: Automotive (OEM) coatings performed well at a high level despite a decline in automobile production. This success can be ascribed to tried
and tested service concepts through which we expand cooperation with our customers and optimize the total costs of the coating process. Further, our success is based on the market launch of innovative
and eco-efficient products, such as our new cathodic dip coating Cathoguard® 500. Automotive refinish coatings are a strong pillar of our coatings business. Here, we have
stabilized our good position with our new Glasurit® and R-M® global brands. Our newly launched Salcomix® mixing system rounds out our portfolio. In
industrial coatings, restructuring and innovation were the top priorities. This applies to production, marketing and sales as well as customer and portfolio management. Our efforts have improved our
cost structures. In South America, we have solidified the leading position of our Suvinil® brand in the market for decorative paints.

Compared
with the previous year, we were able to improve income from operations substantially in all business units through measures to improve efficiency, cost reductions and
restructuring. An important contribution came from a reduction in fixed costs compared with 2001, in particular in our industrial coatings business in Europe. Devaluation losses in Argentina burdened
earnings.



In the Functional Polymers division, sales to third parties in 2002 increased by 0.5% to €2,534 million from
€2,522 million in 2001. Higher sales volumes contributed to an 11% increase in sales, which was largely offset by negative price and currency effects of a 10%. We were able to
substantially increase sales volumes in all product groups, in particular in acrylic monomers, paper coating binders and dispersions for the construction industry. In Asia, the increase in sales
volumes was larger than in the other regions.

We
were able to improve income from operations considerably compared with the previous year, despite continued strong competitive pressure due to global excess capacity. The
restructuring measures we completed had a particularly positive effect on earnings.

In
Nanjing, China, we laid the foundation stone for BASF's second Verbund site in the Asian growth region. We expect to start producing acrylic acid and acrylic esters at this site in
2005. In Hamina, Finland, we started operations at a new plant for paper coating binders, which will allow us to supply the

89

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important
Scandinavian market from production in the region. We also successfully brought our new superabsorbents plant in Antwerp, Belgium, onstream.

Agricultural Products & Nutrition

The Agricultural Products & Nutrition segment comprises the Agricultural Products division and the Fine Chemicals division. For reporting
purposes each division is considered a reportable segment. The following data relate to the divisions.

Agricultural Products

Segment data
(euros in millions)

|                                                       | 
|------------------------------------------------------ | 
|
|Sales to third parties                                 | 
|Intersegmental transfers                               | 
|Sales incl. intersegmental transfers                   | 
|Income from operations                                 | 
|Special items                                          | 
|Operating margin (%)                                   | 
|Assets                                                 | 
|Return on operational assets (%)                       | 
|Research and development expenses                      | 
|Capital expenditures on tangible and intangible assets | 

2003 Compared with 2002

Sales in 2003 rose €222 million to €3,176 million (volumes 5.7%, portfolio 9.8%, prices 1.0%, currency
-9.0%). This increase was due to the successful market introduction of our new fungicide F 500®, the products acquired in March 2003 from Bayer CropScience
 comprising the insecticide fipronil and selected fungicides  as well as the improved economic environment in South America. These influences offset negative currency effects
from the appreciation of the euro against the U.S. dollar and other currencies.

In
Europe, sales climbed 10% to €1,447 million. Despite higher sales in local currencies  primarily due to the successful launch of new products
, sales in North America declined 6% to €892 million because of the stronger euro. In South America, despite negative currency effects, we increased sales 55% to
€520 million thanks to new products and an improved market environment. In Asia, sales decreased 11% to €317 million.

In
2003, we improved income from operations by €173 million to €234 million. Special items of €60 million from the
integration of the business acquired from Bayer CropScience had a negative effect on income. These special items were primarily related to the use of inventory stepped-up to higher market
values. Other special charges were offset by the sale of our soil improvement products business to Kanesho Soil Treatment BVBA, Belgium, for €65 million.

Assets
rose by €431 million to €5,523 million  primarily due to the acquisition of the insecticide fipronil and selected
fungicides from Bayer CropScience for €1,185 million (including inventories).

Research
and development expenses were reduced by €46 million to €239 million. We achieved this mainly by realizing synergies from the
integration of the crop protection business that we acquired in

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---

2000
from American Home Products, United States, for example by closing research sites. As a percentage of sales, research expenses declined to 7.5% from 9.6% in 2002. We have further strengthened our
active ingredient research for insecticides and fungicides and have reduced our herbicide research activities because there are fewer opportunities in this market.

In
2004, we expect sales and income after currency effects to improve in a market that continues to be intensely competitive. The launch of new products will contribute to this
improvement, as will the acquired products' full contribution to sales and income.

2002 Compared with 2001

Sales in the Agricultural Products segment in 2002 were €2,954 million, compared with €3,478 million in 2001
(volumes -12%, prices/currency -3%). Sales volumes declined in particular in North and South America. The negative price and currency effects were due primarily to the
weakening of the U.S. dollar against the euro and the devaluation of the Brazilian real.

Sales
development differed considerably from region to region. In North America, sales declined 25% to €945 million due to lower sales volumes and negative
currency effects. In South America, we reduced our credit risk by maintaining our restrictive sales policy in Argentina and by repurchasing inventory from the market in Brazil. Sales in South America
declined 38% to €335 million as a result of these measures and negative currency effects. Sales in Europe rose by 4.3% to €1,320 million, while in Asia
they declined 13% to €354 million.

In
2002, we achieved income from operations of €61 million, compared with €18 million in 2001, thereby improving income from operations by
€43 million. Special items reduced earnings by €38 million. Our earnings situation is unsatisfactory and a series of measures have been introduced to
improve it significantly.

In
2002, capital employed was reduced to a total of €5,092 million from €6,377 million in 2001. This was due in particular to a reduction of
inventories and receivables as well as a decline in non-current assets by scheduled amortization and depreciation, which exceeded capital expenditures.

Expenses
for research and development declined 17.4% to €285 million following the closure of the research center in Princeton, New Jersey; as a percentage of
sales, these expenses declined from 9.9% to 9.6%.

Following
the integration of the crop protection business acquired from American Home Products Corp. (AHP) in 2000, we realized annual integration synergies of more than
€250 million for the first time in 2002. In 2003, we will introduce measures to further reduce costs by approximately €100 million.

In
the Agricultural Products division, an agreement was reached on October 28, 2002 to acquire the insecticide fipronil and a series of fungicides from Bayer CropScience AG. The
acquisition is subject to approval by the relevant antitrust authorities.

91

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Fine Chemicals

Segment data
(euros in millions)

|                                                       | 
|------------------------------------------------------ | 
|
|Sales to third parties                                 | 
|Intersegmental transfers                               | 
|Sales incl. intersegmental transfers                   | 
|Income from operations                                 | 
|Special items                                          | 
|Operating margin (%)                                   | 
|Assets                                                 | 
|Return on operational assets (%)                       | 
|Research and development expenses                      | 
|Capital expenditures on tangible and intangible assets | 

---

*  negative

2003 Compared with 2002

Sales to third parties fell €125 million to €1,845 million in 2003 (volumes 2.9%, portfolio 0.2%, prices
-0.3%, currency -9.1%). We increased sales of products for animal nutrition (lysine, carotenoids and organic acids) and of water-soluble vitamins for human nutrition,
especially vitamin C. Sales of fat-soluble vitamins for animal and human nutrition declined. We achieved higher sales of cosmetic raw materials, while North American sales to the
pharmaceuticals industry decreased because of the weak U.S. dollar. In Asia, we were able to increase sales slightly despite negative currency effects.

Income
from operations improved €131 million to €125 million due to a lower level of special charges, which declined from
€124 million in 2002 to €8 million in 2003. Higher sales volumes, higher sales prices for lysine and vitamin C, and cost savings from rationalizations in
vitamin production and the restructuring of our business in North America also had a positive effect on income from operations.

Following
the dissolution of our long-term cooperation with DSM N.V., the Netherlands, we will pursue business with the feed enzyme phytase independently in the future and
plan to build a production plant for this enzyme.

In
2003, the assets of the Fine Chemicals division declined €89 million to €1,303 million. We reduced inventories and receivables.
Amortization of intangible assets continued as planned. Tangible assets grew as a result of capacity expansion for vitamin E and new plants for vitamin B2 and citral.

We
expect sales and income from operations to increase in 2004.

2002 Compared with 2001

In the Fine Chemicals segment, sales to third parties in 2002 declined 0.7% to €1,970 million (volumes 7%, prices/currency
-8%). The animal nutrition business posted higher sales of fat-soluble vitamins as well as enzymes. In human nutrition, sales of carotenoids and caffeine were higher. In both
animal and human nutrition, sales of water-soluble vitamins declined. In our business with the pharmaceutical industry, the new area of contract manufacturing showed particularly strong growth. Sales
in the cosmetic ingredients product line were affected by slow growth in the cosmetics industry.

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In
2002, income from operations was €(6) million compared with €(210) million in 2001. This was due in particular to a lower level of special
charges, which declined from €283 million in 2001 to €124 million in 2002. In both years, these special charges were primarily related to antitrust
violations in the vitamins business prior to 1999. Higher volumes as well as cost savings due to restructuring measures in North American manufacturing and in the premix business contributed
positively to our earnings in 2002.

In
2002, assets in the Fine Chemicals segment were reduced by 6.5% to €1,392 million from €1,488 million in 2001. This was due to scheduled
depreciation of intangible assets as well as reductions in inventory and receivables. Tangible assets were slightly higher than in 2001. Additions to fixed assets included capacity expansion for
vitamin E, carotenoids and Lysmeral®, as well as new plants for vitamin B2 and citral.

Oil & Gas

Segment data
(euros in millions)

|                                                      
|------------------------------------------------------
|
|Sales to third parties                                
|                                                      
|Intersegmental transfers                              
|Sales incl. intersegmental transfers                  
|Royalties                                             
|Sales incl. intersegmental transfers, less royalties  
|Income from operations                                
|                                                      
|Special Items                                         
|Operating margin (%)                                  
|Assets                                                
|Return on operational assets (%)                      
|Research and development expenses                     
|Capital expenditures on tangible and intangible assets

2003 Compared with 2002

Sales to third parties rose €592 million in 2003 to €4,791 million (volumes 13.0%, portfolio 2.2%, prices 0.1%,
currency -1.2%). The significant increase in sales volumes and higher prices for crude oil more than offset the negative effects of the weaker U.S. dollar.

In
2003, sales to third parties in our natural gas trading business rose €454 million compared with the previous year to €2,627 million due
mainly to increased volumes. Gas sales volumes from all gas trading companies increased by 20.1% to 286.5 billion kilowatt-hours. On a consolidated basis, gas sales volumes rose to
189.4 billion kilowatt-hours from 153.4 billion in 2002. WINGAS GmbH (BASF share: 65%) again posted growth in Germany that exceeded the market average. Substantial increases were also
achieved in Belgium and Great Britain.

In
the future, we plan to expand these activities in cooperation with OAO Gazprom, Russian Federation. Over the medium term, the importance of Russian natural gas for Central and Western
Europe will continue to increase because of declining production volumes from the North Sea and

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projected
higher natural gas consumption. We founded subsidiaries in Belgium in 2003 to strengthen our Western European activities, and plan to create a gas marketing company in Great Britain in 2004
together with Norsk Hydro ASA, Norway.

Exploration
and production increased sales to third parties by €138 million compared with 2002 to €2,164 million in 2003. The average price
of crude oil (Brent) rose compared with the previous year by $4/barrel to $29/barrel. As a result of the severe weakening of the U.S. dollar against the euro, the price of oil on a euro basis fell by
about 3%. We expanded our crude oil and natural gas production by 11.6% to 104 million barrels of oil equivalent. This includes 5.4 million barrels from Clyde Netherlands B.V., the
Netherlands, which we acquired in November 2002 and which was included for the full year for the first time in 2003. Without these portfolio measures the increase in exploration would have been
6.6%. We began operating three new fields in the Netherlands and North Africa and expanded production in North Africa following the withdrawal of OPEC production limits. In July 2003, we
founded the Achimgaz joint venture with Gazprom. This company will produce natural gas and condensate from the Achimov horizon of the Urengoy field in western Siberia and plans to spend a total of up
to $700 million on the project. This will expand our long-standing and established partnership with Gazprom for natural gas trading into exploration and production activities. In
October 2003, we acquired a 70% interest in the exploration company OOO Megatron N.V.K., Russian Federation, which owns a block with very promising geological structures in the Caspian region
of Russia.

Income
from operations improved by €155 million to €1,365 million in 2003. At €311 million, natural gas trading again
reached the strong level of the year 2002, which benefited from unusually good margins, in particular in the first few months of the year. In exploration and production, the expansion of oil and gas
production resulted in an increase income of €145 million to €1,054 million in 2003. Income taxes on oil production in North Africa and the Middle East
are not deducted from income from operations, but are reported as income taxes (see Note 10 to the Consolidated Financial Statements).

Assets
in the Oil & Gas segment rose €63 million to €3,711 million compared with 2002 due to the continued expansion of our business.
Additions to tangible assets mainly involved exploration and production for projects in North Africa, the Netherlands, Argentina and Germany. Exploration activities were conducted at the previous
level and were successful at seven of 17 exploratory and expansion holes in 2003.

In
2003, proved reserves of crude oil remained constant at 76 million metric tons. Due to higher production of crude oil, the reserve-to-production ratio
declined to nine years compared with 10 years in 2002. Proved reserves of natural gas increased 2% in 2003 to 65 billion cubic meters. Due to higher production of natural gas, the
reserve-to-production ratio declined from 12 years in 2002 to 11 years in 2003.

In
2004, we expect prices for crude oil to decline in the course of the year and that the U.S. dollar will again weaken somewhat against the euro compared with the average rate in 2003.
Although we will be able to expand our market position through increased production of oil and gas and higher volumes in natural gas trading, we anticipate that we will not be able to maintain the
strong level of income posted in 2003.

2002 Compared with 2001

In the Oil & Gas segment, sales to third parties in 2002 declined 7% to €4,199 million from €4,516 million in
2001 (volumes 5.6%, prices/currency -13.1%). A further increase in sales volumes did not result in higher sales, because the effects were offset by the weakening of the U.S. dollar against
the euro and lower average prices for natural gas in 2002.

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Sales to third parties in our natural gas trading business declined 3.5% in 2002 to €2,173 million, compared with €2,251 million in 2001.
The decline in natural gas prices was a major contributing factor. Natural gas prices are correlated with crude oil prices with a time lag. In 2002, this led to a lower price level than in 2001. We
were able to increase natural gas sales volumes 11% to 239 billion kilowatt-hours despite stagnating overall demand in Germany as a result of mild weather.

In
our exploration and production activities, sales declined by 10.6% to €2,016 million compared with €2,254 million in 2001. At $25 per
barrel, the average price of U.K. Brent quality crude oil in 2002 barely changed in comparison with the previous year. As a result of the substantial weakening of the U.S. dollar against the euro in
the second half of 2002, sales on a euro basis, were negatively influenced by a 3.0% price/currency effect. Our production of 93 million barrels of crude oil and natural gas oil equivalent
achieved the previous year's level despite further limitations on our oil production in North Africa because of OPEC resolutions. This amount includes initial quantities from the Clyde Netherlands
B.V. acquisition since the beginning of November 2002. Through this acquisition, we have more than doubled both our production and our reserves in the Netherlands and in the Dutch North Sea,
and gained a very attractive exploration portfolio.

Compared
with 2001, intersegmental transfers declined from €413 million to €363 million in 2002, primarily as a result of lower natural gas
prices.

Income
from operations decreased €98 million to €1,210 million in 2002, nearly reaching the previous year's high level. Natural gas trading
increased its contribution to earnings. Despite difficult economic conditions, Argentina was again the source of a significant contribution to total earnings.

Income
from operations is shown before income taxes on oil-producing operations in North Africa and the Middle East. These taxes are recorded as income tax expenses (see
Note 10 to the Consolidated Financial Statements).

Assets
in the Oil & Gas segment increased 15.8% to €3,648 million in 2002 from €3,149 million in 2001, primarily due to the
acquisition of Clyde Netherlands B.V. Additions to tangible assets mainly involved development projects for exploration and production activities in North Africa, Argentina and Germany. Exploration
activities were conducted intensively and with very positive results. In 2002, we discovered five new gas fields in the Netherlands, Argentina and Romania and one new oil field in Libya. We have
achieved internationally competitive finding and development costs by using the most advanced technologies and focusing on particularly promising regions.

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LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth the summarized cash flows of BASF in each of the last three fiscal years:

|                                                  | 
|------------------------------------------------- | 
|
|
|Net income*                                       | 
|Depreciation of fixed assets                      | 
|Changes in net current assets                     | 
|Miscellaneous items                               | 
|                                                  | 
|Cash provided by operating activities             | 
|Additions to tangible and intangible fixed assets | 
|Acquisitions and divestitures, net                | 
|Financial investments and other items             | 
|                                                  | 
|Cash provided by investing activities             | 
|Share repurchase/proceeds from capital increases  | 
|Changes in financial indebtedness                 | 
|Dividends paid                                    | 
|                                                  | 
|Cash provided by financing activities             | 
|Changes in cash assets affecting liquidity        | 
|Initial cash assets and other changes             | 
|                                                  | 
|Cash and cash equivalents at year end             | 
|Marketable securities                             | 
|Liquid funds                                      | 

---

*  Excluding
extraordinary income

2003 Compared with 2002



In 2003, cash provided by operating activities was €2,565 million higher than in 2002, despite significantly lower net income. This was due
to cash released from current assets because we significantly reduced inventories and reduced payment terms. In addition, there was an increase in expenses that did not lead to cash outflows, such as
depreciation and amortization and additions to provisions. By contrast, in 2002, provisions were reduced through payments and contributions were made to pension funds in the United States.



We spent €2,071 million on additions to tangible and intangible assets. As planned, we reduced them compared with 2002, bringing them
significantly below the level of amortization and depreciation on tangible and intangible fixed assets.

Expenditures
for acquisitions totaled €1,480 million. Proceeds from divestures amounted to €86 million. In particular, acquisitions involved
the acquisition of the fipronil business from Bayer CropScience and the purchase of Honeywell's engineering plastics business.

We
spent €191 million on financial assets, marketable securities and financial receivables. The sale and disposal of fixed assets and securities of current assets
generated proceeds of €396 million. Cash used in investing activities amounted to €3,260 million.

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On
a regional basis, capital expenditures on tangible and intangible fixed assets were as follows:

|                          
|--------------------------
|
|Europe                    
|North America (NAFTA)     
|South America             
|Asia, Pacific Area, Africa
|                          
|                          
|                          

In theChemicals segment,capital expenditures and acquisitions increased 6.5% compared with the
previous year to €527 million in 2003. Major projects included:



In
thePlastics segment,capital expenditures and acquisitions in 2003 totaled €539 million. This was a decline of
15.3% compared with the previous year. The largest projects were as follows:



In
thePerformance Products segment,capital expenditures and acquisitions in 2003 declined 18.1% to €236 million.
The most important investment projects were as follows:



In
theAgricultural Products & Nutrition segment, we spent €1,273 million on capital expenditures and
acquisitions in 2003 compared with €245 million in 2002. Mayor projects incuded:



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In
theOil & Gas segment,we invested €323 million in 2003. At €920 million,
investments in 2002 were significantly higher due to the acquisition of Clyde Netherlands B.V., the Netherlands. The majority of the investments in 2003 were made in exploration and production. Key
projects were:





Cash used in financing activities in 2003 was €1,359 million. We bought back 13.7 million shares for
€500 million at an average price of €36.55 per share.

We
paid out a total of €857 million in dividends and profit transfers in 2003. Dividend payments to shareholders of BASF Aktiengesellschaft for fiscal year 2002
totaled €789 million or €1.40 per share. €68 million in profits was paid or transferred to shareholders of fully or proportionally
consolidated companies.

Financial
indebtedness decreased to €3,507 million due to currency translation effects. We issued a €1 billion Euro Benchmark Bond maturing
in 2010, taking advantage of the favorable capital market situation to refinance a portion of our short-term debt. Financial indebtedness is discussed in detail in Note 25 to the
Consolidated Financial Statements of Item 18.



Total liquid funds at the end of 2003 amounted to €628 million, or 1.9% in terms of total assets.



In 2004, BASF is planning capital expenditures of €1.9 billion, e.g., below the level of depreciation. Of this amount, 57% is scheduled to
be invested in Europe; 10% in North America (NAFTA); 4% in South America; and 29% in the Asia, Pacific Area, Africa region. Major projects by segment include:



98

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2002 Compared with 2001



In 2002, cash provided by operating activities was €2,313 million. In spite of significantly higher net income, cash provided by operating
activities only remained at the previous year's level. This was caused by cash expenses being charged against provisions for restructuring measures established in 2001. Further funds were required for
the payment of fines for antitrust violations involving the vitamins business and compensation payments to direct purchasers of vitamins in the United States following the conclusion of corresponding
settlements. The antitrust violations relating to the vitamins business occurred several years ago. The contribution of $475 million to the pension fund in the United States also led to a cash
outflow. This contribution constitutes a prepaid pension asset and will be recognized in subsequent years' earnings as net periodic pension cost.



We spent €2,410 million on additions to tangible and intangible assets. We thus substantially reduced capital expenditures compared with
2001 as planned.

Expenditures
for acquisitions totaled €267 million. They involved in particular the purchase of Clyde Netherlands B.V., which has concessions for oil and gas
exploration in the Dutch North Sea.

The
sale of securities held as current assets, as well as of fixed assets generated total proceeds of €900 million. Including the funds thus released, outflows for
capital expenditures and acquisitions were €2,164 million.

On
a regional basis, capital expenditures on tangible and intangible fixed assets were as follows:

|                          
|--------------------------
|
|Europe                    
|North America (NAFTA)     
|South America             
|Asia, Pacific Area, Africa

In theChemicals segment, capital expenditures and acquisitions declined 46.7% to
€495 million in 2002 compared with €929 million in 2001. Major projects included:

Europe



99

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North
and South America



Asia



In
thePlastics segment, capital expenditures and acquisitions in 2002 totaled €636 million. This corresponds to a
decline of 28.6% compared with the previous year. The largest projects were as follows:

Europe



North
and South America



Asia



In
thePerformance Products segment, capital expenditures and acquisitions in 2002 declined by 31.1% to
€288 million. In 2001 they stood at €418 million. Major investment projects initiated or completed were as follows:

Europe



In
theAgricultural Products & Nutrition segment, capital expenditure and acquisitions in 2002 totaled
€245 million. This was €104 million less than in the previous year.

100

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The
Agricultural Products division invested a total of €88 million in 2002. Investment was related to optimization projects at various sites. The previously
announced acquisition of a package of crop protection products from Bayer CropScience AG is expected to be completed in spring 2003.

The
Fine Chemicals division spent €157 million on capital expenditures and acquisitions in 2002. The division's capital expenditures in 2001 totaled
€199 million, which included the acquisition of Takeda's vitamins business. The most important investments in 2002 included expansion of the plant for vitamin E and precursors
in Ludwigshafen, Germany, and construction of a new vitamin B2 plant in Gunsan, Korea.

In
theOil & Gas segment, we invested €920 million compared with €229 million in the
previous year. The majority of this was in exploration and production. In addition, Wintershall Nederland B.V. acquired Clyde Netherlands B.V., which has substantial oil and gas activities in the
Dutch North Sea and further operations on the Dutch mainland, from ConocoPhillips, Houston, Texas.



In 2002,cash used in financing activities was €265 million. We bought back 13.1 million shares for
€500 million at an average price of €38.20 per share.

We
paid out a total of €843 million in dividends and profit transfers in 2002. Dividend payments to the shareholders of BASF Aktiengesellschaft for fiscal year
2001 totaled €758 million, or €1.30 per share. €85 million in profits was paid or transferred to shareholders in fully or proportionally
consolidated companies.

Financial
indebtedness increased due in particular to the issuance of commercial paper by BASF Aktiengesellschaft using the cost-effective CP Markets Internet platform.
Financial indebtedness is discussed in detail in Note 25 to the Consolidated Financial Statements of Item 18.



Cash and cash equivalents decreased by €129 million in 2002. Marketable securities declined to €132 million due to
the sales made in the past year. Total liquid funds at the end of 2002 amounted to €363 million. Liquid funds as a percentage of total assets was 1.0% and was considerably lower
than 2.0% in 2001.

EXCHANGE RATE EXPOSURE AND RISK MANAGEMENT

BASF conducts its business in many currencies other than the euro. About 58% of BASF's 2003 sales, 55% of 2002 and 2001 sales were to customers in
Europe, about 42% of 2003 sales and 45% of 2002 and 2001 sales were to customers outside Europe. Moreover, about 39% of BASF's 2003 sales, 41% of 2002 sales, and about 40% of BASF's 2001 sales were
attributable to BASF operations conducted outside Europe.

As
a result of BASF's foreign currency exposure, exchange rate fluctuations have a significant impact in the form of both translation risk and transaction risk on BASF's Consolidated
Financial Statements. Translation risk is the risk that BASF's Consolidated Financial Statements expressed in euros for a particular period or as of a certain date may be affected by changes in the
prevailing rates of the various currencies of the reporting subsidiaries against the euro. Transaction risk arises when the currency structure of BASF's costs and liabilities deviates to some extent
from the currency structure of BASF's sales proceeds and assets.

The
effect of exchange rate fluctuations on BASF's income from operations for 2003, 2002 and 2001 is shown in BASF's Consolidated Financial Statements under the line items "Other
operating income" and "Other operating expense." See Notes 6 and 7 to the Consolidated Financial Statements

101

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for
further information. The net effect of exchange rate fluctuations on BASF's income from operations amounted to a net loss of €31.5 million in 2003, a net loss of
€132.5 million in 2002 and a net loss of €62.6 million in 2001. The variance between 2003 and 2002 was primarily due to the weakening of the U.S. dollar
and of currencies dependent on the U.S. dollar in Asia, South America and, in particular, in the NAFTA region. The variance between 2002 and 2001 was primarily due to the weakening of the U.S. dollar
and the devaluation of the Brazilian real and the Argentine peso.

In
2003, foreign currency translation adjustments had a negative effect of €642.2 million on stockholders' equity primarily due to the weakening of the U.S. dollar
and of currencies dependent on the U.S. dollar in Asia, South America and, in particular, in the NAFTA region. In 2002, foreign currency translation adjustments had a negative effect of
€862.0 million on stockholders' equity due to the weakening of the U.S. dollar and the devaluation of the Brazilian real. In 2001, the negative effect of
€129.5 million on stockholders' equity was primarily due to the devaluation of the Argentine peso and the deconsolidation of the pharmaceuticals business.

Exchange
rate risk management is centralized at BASF Aktiengesellschaft. BASF bases its foreign exchange risk management generally on exposures derived from receivables and payables on
the balance sheet. Future sales revenues or expenses are only considered if such transactions are based on fixed contracts. Receivables and payables in a particular currency are netted. Normally at
BASF, receivables generated from export sales exceed payables from raw material purchases resulting in substantial net exposures in U.S. dollar and relatively small exposures in the British pound and
the Japanese yen.

To
mitigate the impact of currency exchange rate fluctuations, the exposure to currency risk is assessed on a daily basis. BASF applies a selective hedging strategy  a
varying portion of the exposure in each currency is hedged, based on forecasts of the exchange rate development versus the euro.

In
2003, BASF's hedging transactions have been aimed primarily at minimizing exchange rate risks against the U.S. dollar, the Canadian dollar, the Australian dollar, the British pound,
the Mexican peso, the Japanese yen, the Singapore dollar and the Brazilian real. See "Item 11. Quantitative and Qualitative Disclosure About Market Risk" and Note 29 to the Consolidated
Financial Statements for further information.

RESEARCH AND DEVELOPMENT

BASF's research and development activities aim to develop new and improved products, find new applications for existing products and develop more
cost-efficient and environmentally sound manufacturing processes.

BASF
spent €1.10 billion on research and development activities in 2003 compared with €1.14 billion in 2002 and
€1.17 billion in 2001, not including the expenses of the discontinued pharmaceuticals business. Of the total R&D expenditures the Chemical segment spent 10%, Plastics 13%,
Performance Products 22%, Agricultural Products 22%, Fine Chemicals 6%, Oil & Gas 11%, and Others 17%. Excluding the expenditures for Oil and Gas exploration the company spent 58% of the
research budget on developing new products and improving existing products. Developing new and improved processes accounted for about 31% of spending, while 11% was spent on discovering new research
methods and technologies. Excluding Oil and Gas, BASF spent 88% of its annual research budget in Germany, 5% in other European countries and 7% in North America.

BASF
employs about 7,500 people worldwide in various research and development activities. About 5,500 employees are involved in research and development work in Ludwigshafen, making the
facility one of the world's largest research centers in the chemical industry.

The
center in Ludwigshafen and a number of decentralized research sites worldwide, form an efficient network that makes an important contribution to BASF's Verbund approach to
integration.

102

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BASF
has three main research and development platforms in Ludwigshafen that support the company's global activities. In addition, BASF conducts research activities through about 1,100 cooperative
agreements with universities, research institutes and industrial partners in many countries worldwide and through various research joint ventures. Product and market-related development worldwide is
conducted in close cooperation with customers and joint-venture partners.

The
biggest share of BASF's research spending is devoted to the area of agriculture and nutrition. The Limburgerhof Agricultural Center in Germany and the research center in Research
Triangle Park (RTP) in Raleigh, North Carolina, develop agricultural products, using our network of experimental and research stations around the world. BASF conducts its own plant biotechnology
research and is also involved in various biotechnology research joint ventures. The activities are concentrated in BASF Plant Science GmbH, which currently employs about 400 people worldwide.

In
April 2001 BASF Future Business GmbH, a 100% subsidiary of BASF Aktiengesellschaft, was founded with the goal of more quickly developing specific new business areas together
with partners both inside and outside the BASF Group. Additionally BASF Venture Capital GmbH, a wholly-owned subsidiary of BASF Future Business GmbH, was established in April 2001. By the year
2005 BASF Venture Capital GmbH intends to invest a total of €100 million in innovative businesses worldwide. Both companies will focus on high-growth markets and
future challenges especially in the field of material sciences.

BASF
puts great emphasis on obtaining patents, trademarks, copyrights and designs to protect its investment in research and development and the developed intellectual property. The
company seeks the optimum protection for significant product and process developments.

103

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Item 6.    Directors, Senior Management and Employees

In
accordance with the German Stock Corporation Act (Aktiengesetz), BASF Aktiengesellschaft has a Board of Executive Directors
(Vorstand) and a Supervisory Board (Aufsichtsrat). The two Boards are separate, and no individual is
simultaneously a member of both Boards.

The
Board of Executive Directors is responsible for managing the business of BASF Aktiengesellschaft in accordance with the German Stock Corporation Act and BASF Aktiengesellschaft's
Articles of Association. The Board of Executive Directors also represents the company in its dealings with third parties and in court.

The
principal function of the Supervisory Board is to appoint and supervise the Board of Executive Directors. The Supervisory Board may not make management decisions, but BASF's Articles
of Association or the Supervisory Board itself may require the prior consent of the Supervisory Board for certain types of transactions.

Members
of both the Board of Executive Directors and the Supervisory Board owe a duty of loyalty and care to BASF Aktiengesellschaft. In exercising these duties, the applicable standard
of care is that of a diligent and prudent business person. Members of both Boards must take into account a broad range of considerations when making decisions, foremost the interests of BASF
Aktiengesellschaft, including its shareholders, employees and creditors and, to a certain extent, the interests of society. The members of the Board of Executive Directors and the Supervisory Board
are personally liable to BASF Aktiengesellschaft for breaches of their duties of loyalty and care.

BOARD OF EXECUTIVE DIRECTORS

The number of members of the Board of Executive Directors is determined by the Supervisory Board, subject to a minimum of two members. As of
December 31, 2003, BASF Aktiengesellschaft's Board of Executive Directors had eight members. On May 6, 2003 Dr. Jürgen F. Strube and Max Dietrich Kley retired as
members of the Board of Executive Directors.

Pursuant
to the Memorandum and Articles of Association of BASF Aktiengesellschaft, any two members of the Board of Executive Directors or one member and the holder of a special power of
attorney (Prokura) may bind the company.

The
Board of Executive Directors must report regularly to the Supervisory Board on the current business of BASF Aktiengesellschaft, on the company's business policies and other
fundamental matters regarding the future conduct of the company's business, on the company's profitability, particularly on its return on equity, on the risk exposure of the company and the risk
management, as well as on any exceptional matters that may arise from time to time. The Supervisory Board is also entitled to request special reports at any time.

The
Supervisory Board appoints members to the Board of Executive Directors for a maximum term of five years. Members of the Board of Executive Directors may be re-appointed
or have their terms extended for one or more terms of no more than five years.

Under
certain circumstances, such as a serious breach of duty or a bona fide vote of no confidence by a majority of votes at a shareholders' meeting, a member of the Board of Executive
Directors may be removed by the Supervisory Board prior to the expiration of her or his term. A member of the Board of Executive Directors may not deal with or vote on matters relating to proposals,
arrangements or contracts between that member and the company.

The
Articles of Association of BASF Aktiengesellschaft require decisions of the Board of Executive Directors to be made by a simple majority unless the law requires a larger majority. In
case of a tie, the vote of the chairman of the Board is decisive.

105

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The
following table lists the current members of the Board of Executive Directors, their ages as of December 31, 2003, the years in which they were first appointed to the Board
and in which their running term ends and their outside directorships:

Dr. Jürgen Hambrecht

|Age: 57 |  | First year appointed: 1997 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1976
|    
|1985
|    
|1990
|    
|1995
|    
|1997
|    
|2002
|    

Position & Main Areas of Responsibility

Chairman of the Board of Executive Directors  Legal, Taxes & Insurance, Planning & Controlling, Communications, Investor Relations,
Global HR-Executive Management and Development.

Memberships on Supervisory Boards

Bilfinger + Berger Bauaktiengesellschaft, Frankfurt, Germany

Eggert Voscherau

|Age: 60 |  | First year appointed: 1996 |  | Year term expires: 2006
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1969
|    
|1981
|    
|1984
|    
|1987
|    
|1991
|    
|1996
|    
|1997
|    
|2002
|    

106

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Position & Main Areas of Responsibility

Vice Chairman and Industrial Relations Director, Human Resources, Environment, Safety & Energy, Occupational Medicine & Health Protection,
Ludwigshafen Verbund Site, Antwerp Verbund Site, Europe region, BASF Schwarzheide GmbH.

Memberships on Supervisory Boards

Dresdner Bank Lateinamerika AG, Hamburg, Germany

Haftpflichtverband
der Deutschen Industrie V.a.G., Hanover, Germany (German Industry Liability Association)

Basell
N.V., Hoofddorp, the Netherlands

Dr. Kurt Bock

|Age: 45 |  | First year appointed: 2003 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1985
|    
|1987
|    
|1991
|    
|1992
|    
|1994
|    
|1996
|    
|1998
|    
|2000
|    
|2002
|    

Position & Main Areas of Responsibility

Executive Director and Chief Financial Officer  Finance, Logistics, Purchasing, Information Services, Internal Audit, South America region.

Memberships on Supervisory Boards

Basell N.V., Hoofddorp, the Netherlands

107

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Dr. John Feldmann

|Age: 54 |  | First year appointed: 2000 |  | Year term expires: 2004
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1988
|    
|1990
|    
|1993
|    
|1996
|    
|1999
|    
|2000
|    

Position & Main Areas of Responsibility

Executive Director  Styrenics, Performance Polymers, Polyurethanes, Oil & Gas, Polymer Research.

Memberships on Supervisory Boards

Basell N.V., Hoofddorp, the Netherlands

Dr. Andreas Kreimeyer

|Age: 48 |  | First year appointed: 2003 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1986
|    
|1989
|    
|1991
|    
|1993
|    
|1995
|    
|1998
|    
|2000
|    
|2003
|    

Position & Main Areas of Responsibility

Executive Director  Performance Chemicals, Functional Polymers, Asia.

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Klaus Peter Löbbe

|Age: 57 |  | First year appointed: 2002 |  | Year term expires: 2006
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1966
|    
|1975
|    
|1987
|    
|1990
|    
|1993
|    
|1996
|    
|2002
|    

Position & Main Areas of Responsibility

Executive Director  Coatings, NAFTA.

Dr. Stefan Marcinowski

|Age: 50 |  | First year appointed: 1997 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1979
|    
|1986
|    
|1988
|    
|1992
|    
|1995
|    
|1997
|    

Position & Main Areas of Responsibility

Executive Director and Research Executive Director  Inorganics, Petrochemicals, Intermediates, Chemical Research & Engineering, Corporate
Engineering, University Relations & Research Planning.

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Peter Oakley

|Age: 50 |  | First year appointed: 1998 |  | Year term expires: 2008
|------- |  | -------------------------- |  | -----------------------

|    
|----
|
|1977
|    
|1980
|    
|1984
|    
|1991
|    
|1995
|    
|1998
|    

Position & Main Areas of Responsibility

Executive Director  Agricultural Products, Fine Chemicals, Specialty Chemicals Research, Plant Biotechnology.

SUPERVISORY BOARD

The Supervisory Board consists of 20 members, 10 of whom are elected by shareholders at BASF Aktiengesellschaft's Annual Meeting and 10 of whom
are elected by employees as required by the German Codetermination Act (Mitbestimmungsgesetz). Any Supervisory Board member elected by the shareholders
at BASF Aktiengesellschaft's Annual Meeting may be removed by a majority of the votes cast at a subsequent meeting of shareholders. Any Board member elected by the employees may be removed by
three-quarters of the votes cast by the class of employees that the member represents.

All
current shareholder representatives on the Supervisory Board were elected at the Annual Shareholders Meeting on May 6, 2003. The members of the Supervisory Board representing
the Company's employees were elected on February 25, 2003 except for Ralf Sikorski who was appointed by the district court of Ludwigshafen on August 7, 2003 as a replacement for Gerhard
Zibell.

The
Supervisory Board appoints a chairman and a deputy chairman from among its members. The chairman of the Supervisory Board must be elected by a majority of two-thirds of
the Board members. If a majority is not reached in the first vote, the members of the Supervisory Board, who were elected by the shareholders, elect the chairman.

At
least half of the total required number of members of the Supervisory Board must be present or participate in decision-making to constitute a quorum. Unless otherwise provided for by
law or BASF Aktiengesellschaft's Articles of Association, resolutions are passed by a simple majority of the votes cast. In the event of a tie, a second vote is held, and the chairman may cast a
deciding vote.

Supervisory
Board members are elected to terms of approximately five years. The terms expire at the end of the Annual Meeting after the fourth fiscal year following the year in which the
members were elected. The current terms of all Supervisory Board members expires at the end of the Annual Meeting in 2008. Compensation for Board members is determined by BASF Aktiengesellschaft's
Articles of Association.

To
our great sadness, Helmut Werner died on February 6, 2004. On March 2, 2004, the district court of Ludwigshafen appointed Hans Dieter Pörsch, member of
the board of directors of Volkswagen AG, to replace Helmut Werner on the Supervisory Board.

110

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The
following table lists the current members of BASF Aktiengesellschaft's Supervisory Board, their respective ages as of December 31, 2003, their principal occupation and the
year in which they were first elected or appointed to the Supervisory Board:

|                                
|--------------------------------
|
|DR. JÜRGEN F. STRUBE Chairman   
|                                
|ROBERT OSWALD(1) Deputy Chairman
|                                
|RALF-GERD BASTIAN(1)            
|                                
|WOLFGANG DANIEL(1)              
|                                
|DR. FRANCOIS DIEDERICH          
|                                
|MICHAEL DIEKMANN                
|                                
|DR. TESSEN VON HEYDEBRECK       
|                                
|ARTHUR L. KELLY                 
|                                
|ROLF KLEFFMANN(1)               
|                                
|MAX DIETRICH KLEY               
|                                
|DR. RENATE KÖCHER               
|                                
|EVA KRAUT(1)                    
|                                
|ULRICH KÜPPERS(1)               
|                                
|KONRAD MANTEUFFEL(1)            
|                                
|DR. KARLHEINZ MESSMER(1)        
|                                
|DR. HERMANN SCHOLL              
|                                

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|RALF SIKORSKI(1)                                |  | 42 |  | Manager of the Ludwigshafen branch of the Mining, Chemical and Energy Industries Union (Industriegewerkschaft Bergbau, Chemie, Energie)                 |  | 2003
|----------------------------------------------- |  | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                               
|ROBERT STUDER                                   |  | 65 |  | Retired Chairman of Union Bank of Switzerland                                                                                                           |  | 1993
|                                               
|DR. JÜRGEN WALTER(1)                            |  | 58 |  | Member of the Central Board of Executive Directors of the Mining, Chemical and Energy Industries Union (Industriegewerkschaft Bergbau, Chemie, Energie) |  | 1988
|                                               
|HELMUT WERNER (Passed away on February 6, 2004) |  | 67 |  | Retired Chairman of the Board of Executive Directors of Mercedes-Benz AG                                                                                |  | 1993
|                                               

The Supervisory Board has established three committees: the committee for the personal affairs of the members of the Board of Directors
(Personalausschuss), the Audit Committee (Prüfungsausschuss) and the Mediation Committee.

The
"Personalausschuss" performs the tasks of a nominating and compensation committee. The committee determines the terms and conditions of employment of the members of the Board of
Executive Directors including the level and structure of their remuneration. In addition, the committee makes proposals regarding the appointment of members of the Board of Executive Directors. As of
December 31, 2003 the members of this committee are Dr. Jürgen F. Strube, Robert Oswald, Dr. Tessen von Heydebreck and Dr. Jürgen Walter.

The
Audit Committee was established by a resolution of the Supervisory Board in July 2003. The Audit Committee oversees the Company's accounting processes. Based on the
independent auditor's report it reviews the Company's annual financial statements and reports to the Supervisory Board for an informed decision of the Supervisory Board whether or not to approve the
annual financial statements. The Audit Committee is responsible for dealing with the independent auditors of the Company. In particular, it awards the audit contract to the independent auditor elected
at the Annual Shareholders' Meeting, determines the focal points of the audit, as well as the auditors compensation, and approves non-audit services rendered by the independent auditor. As
of December 31, 2003 the members of the Audit Committee were Max Dietrich Kley, Dr. Karlheinz Messmer, Dr. Jürgen Walter and Helmut Werner, who passed away on
February 6, 2004. All members of the Audit Committee fulfill the independence requirements of the Sarbanes-Oxley Act of 2002 as implemented by the SEC's regulations.

The
Mediation Committee, comprising two members of the Supervisory Board elected by the Shareholders' Meeting and two members of the Supervisory Board elected by the employees. In
the event the Supervisory Board cannot reach the two-third majority required to appoint a member of the Board of Executive Directors, the Mediation Committee submits a proposal for
the appointment to the Supervisory Board.

Compensation of Directors and Officers

The aggregate amount of compensation BASF Aktiengesellschaft and its subsidiaries paid during the year ended December 31, 2003, to all
members of the Board of Executive Directors and the Supervisory Board, as a group, was €14.1 million. Of this amount, members of the Board of Executive Directors received
€11.9 million and members of the Supervisory Board received €2.2 million. The

112

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amount
of compensation of the Board of Executive Directors includes accrued performance-related bonuses for 2003 of €7.3 million. Additionally, the pro rata value of stock
options granted to the members of the Board of Executive Directors in 2003 amounted to €3.9 million.

The
total compensation BASF Aktiengesellschaft and its subsidiaries paid during the year ended December 31, 2003, to former members of the Board of Executive Directors and their
beneficiaries was €6.7 million. As of December 31, provision of pensions and similar benefits to former members of the Board of Executive Directors and their
beneficiaries totaled €58.1 million. No loans were extended to the members of the Supervisory Board or the Board of Executive Directors.

Pursuant
to its Articles of Association, BASF Aktiengesellschaft grants each Supervisory Board member a fixed annual payment of €25,000 and additional compensation based
on dividends paid to BASF Aktiengesellschaft shareholders. This latter amount is €3,500 for each €0.05 by which the dividend paid to the shareholders by BASF
Aktiengesellschaft exceeds €0.30. For the year ended December 31, 2003 the additional compensation based on the dividends amount is €77,000 The chairman of the
Supervisory Board receives a payment of twice and a deputy chairman receives a payment of 1.5 times these amounts. BASF Aktiengesellschaft further grants the members of the Supervisory Board a fee of
€500 for attending a meeting of the Supervisory Board or one of its committees to which they belong and reimburses each Supervisory Board member for applicable
out-of-pocket expenses and value added tax. Each member of the Audit Committee further receives a fixed annual payment of €25,000 for such membership. The
chairman of the Audit Committee receives twice and a deputy chairman receives 1.5 times this further amount.

Pursuant
to BASF's stock option program, each member of the Board of Executive Directors is entitled to receive options on BASF Shares corresponding to 10 to 30% of the Board member's
individual performance-related bonus. See "Item 6. Directors, Senior Management and Employees  BASF Stock Option Program (BOP)" for further details on the number of options granted and on
the terms and conditions of the options' rights.

Directors'
service contracts with BASF or with any of its subsidiaries do not include benefits which are provided upon termination of employment.

Share Ownership by Members of the Board of Executive Directors and the Supervisory Board

No member of the Board of Executive Directors or the Supervisory Board beneficially owns 1% or more of the outstanding BASF Shares.

EMPLOYEES

As of December 31, 2003, BASF employed a workforce of 87,159 worldwide, which represents a decline of approximately 2.5% from the end of
2002, largely related to the implementation of our restructuring program. About 56.2% of the workforce is based in Germany. Expenditures for salaries and wages totaled
€4,654 million in 2003, down from €4,751 million in 2002. For further information, see Note 12 to the Consolidated Financial Statements included in
Item 18.

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The following table details BASF's workforce on a regional basis as of December 31, 2003, 2002 and 2001.

|                          
|--------------------------
|
|Europe                    
|                          
|North America             
|South America             
|Asia, Pacific Area, Africa
|                          
|Total                     
|                          

As of December 31, 2003, BASF Aktiengesellschaft employed 37,054 people mainly at its headquarters in Ludwigshafen, Germany, compared with
38,361 people as of December 31, 2002.

Many
of BASF's employees who are not considered management in Germany are members of labor unions. The main part of these union members belong to the Mining, Chemical and Energy
Industries Union (Industriegewerkschaft Bergbau, Chemie, Energie). None of BASF's sites in Germany is operated on a "closed shop" basis, meaning that
employees are not required to join a union. In Germany, collective bargaining agreements for employees below management level are generally negotiated between the association of employers within a
particular industry and the respective unions.

In
addition, under German law, employees elect a works council (Betriebsrat) that participates in determining company site policy,
especially with regard to certain voluntary compensation matters and benefits.

The
most recent collective bargaining agreement for employees in Germany represented by labor unions, which covers most of BASF's employees in Germany, was signed in May 2003 with
a term of 13 months.

BASF
considers its labor relations to be positive and anticipates reaching future agreements with its labor unions on terms satisfactory to all parties. There can be no assurances,
however, that new agreements will be reached without a work stoppage or strike or on terms satisfactory to BASF. A prolonged work stoppage or strike at any of BASF's major manufacturing sites could
have a material adverse effect on the company's results of operations. BASF has not experienced any material strikes during the last 10 years.

Agreements at the Ludwigshafen site and restructuring at BASF Corporation

In September 2003, BASF management and employee representatives of BASF's Ludwigshafen site reached an agreement calling for
continued workforce reductions that will be achieved through socially responsible measures. Similar agreements have been in place since 1997. A number of measures  voluntary severance
offers to employees whose jobs have become redundant, voluntary retirement incentives such as part-time contracts for those approaching retirement (2,020 contracts signed within the year
2003), increased internal job-market flexibility  will help reduce the workforce without enforced redundancies while at the same time allowing younger employees to be hired.
In 2003, provisions of €146 million were made to cover severance payments.

We
are applying a two-phase restructuring program to our North American business with the aim of reducing annual costs by at least $250 million by 2006. Phase one of
the program focuses on improving the efficiency and effectiveness of our service and functional units. Functions such as Information Technology, Communications, Human Resources, Finance, Legal and
Taxes have already been restructured; the optimization of the remaining service units is proceeding according to plan and is scheduled for completion in 2004. The first phase of restructuring involves
a workforce reduction of

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approximately
1,000 positions. In phase two of the program, we will focus on further optimizing our business and site portfolio.

BASF Stock Option Program (BOP)

The BASF Stock Option Program (BOP) is offered to the Board of Executive Directors and currently approximately 1,000 of BASF's senior executives.
Approximately 80% of the eligible senior executives opted to participate in the program. The program became effective on April 30, 1999, after BASF's shareholders approved a conditional capital
increase for the program at the Annual Meeting on April 29, 1999. At the Annual Meeting on April 26, 2001 the shareholders approved a new conditional capital increase to incorporate
certain changes to the BOP effective as of 2001.

An
executive participating in the BOP receives four option rights for each BASF Share held by such executive for the purpose of taking part in the BOP (the "BOP Shares"). The number of
BOP Shares eligible for the BOP is determined by an amount representing 10 to 30% of the executive's annual variable compensation and by the relevant "market price" of BASF Shares, which is the volume
weighted average of the prices quoted in the Xetra® electronic trading system of Deutsche Börse AG on the day after the Annual Meeting (the "BOP Share Price"). In 2003, the
BOP Share Price was €38.94 (2002: €46.70, 2001: €47.87). Annual variable compensation for a member of the Board of Executive Directors is determined by
the Supervisory Board pursuant to the terms of the executive director's employment agreement with BASF. Annual variable compensation for any other senior executive is determined by such senior
executive's superiors pursuant to rules established by the Board of Executive Directors, and is based on BASF's performance and individual's target agreement.

Option
rights granted in 1999 and 2000 may not be exercised prior to three years after the grant date. They expire 15 days after the sixth Annual Meeting of BASF
Aktiengesellschaft following the grant date. Option rights granted since 2001 may not be exercised prior to July 1 two years after the granting. Option rights granted in 2001 expire
15 days after the eighth Annual Meeting of BASF Aktiengesellschaft following the grant date. Option rights granted in 2003 (2002) expire on June 30, 2011 (2010).

Each
option right entitles the holder to two subscription rights. The first subscription right permits participants to a cash settlement, based on the difference between the BASF Share
price on the exercise date and the BOP Share price, provided that the market price of BASF Shares on the exercise date is more than 30% higher than the BOP Share Price. The second subscription right
permits participants to a cash settlement, provided that the BASF Share outperforms the benchmark index. For options granted in 1999 and 2000 the benchmark index is the DOW Jones EURO
STOXXSM Total Return Index  and for options granted since 2001 the benchmark index is the Dow Jones Global Chemicals Total Return Index. The cash settlement amount is equal
to the relevant BOP Share Price multiplied by twice the percentage by which BASF Shares have outperformed the benchmark index since the date of issue of the relevant right.

An
option right may be exercised if the exercise criteria for one or both of the underlying subscription rights have been satisfied. If an option right is exercised based on the
exercisability of only one subscription right, then the other unexercisable subscription right terminates. The monetary benefit resulting from the exercise of option rights being granted for one BOP
Share may not exceed 10 times the BOP Share Price.

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For
details about the number of stock options granted see the table below:

|                                           
|-------------------------------------------
|
|Stock options outstanding as of January 1  
|Stock options granted                      
|                                           
|Option rights lapsed(1)                    
|Option rights exercised                    
|                                           
|Stock options outstanding as of December 31
|                                           

---

Employee Stock Purchase Program

In 1999, BASF Aktiengesellschaft and several other German subsidiaries of BASF launched a stock purchase program for their employees not being
entitled to participate in BOP. At present, various European and Mexican subsidiaries participate in the program. The program allows an employee to purchase BASF Shares at market prices by using all
or part of the annual variable salary that the employee receives from the employing company. For every block of 10 BASF Shares so purchased, the employee will be granted one additional BASF Share
after one, three, five, seven and 10 years without further payment, provided that the BASF Shares purchased under the program are still held by the employee.

In
2002 most companies improved the employee share purchase program. The first block of 10 shares purchased in any year now attracts one free incentive share in each of the following
10 years. In addition, all employees with permanent contracts were offered five free shares (which must be held for ten years). As a result, 82% of the eligible employees currently hold shares
in the company.

|                                                              
|--------------------------------------------------------------
|
|Number of BASF Shares held under the program as of January 1  
|Number of BASF Shares purchased under the program             
|Maximum amount of free shares granted                         
|Shares expired                                                
|Number of BASF Shares held under the program as of December 31

In mid-2000, BASF Corporation implemented an Employee Stock Purchase Program (ESPP) for employees that are not eligible to participate
in the BASF Stock Option Program. The program allows an employee to purchase units in a common fund, which is invested primarily in BASF American Depository Receipts that are traded on the New York
Stock Exchange. Units in the ESPP fund are purchased each pay day through voluntary payroll deductions. For every block of 10 BASF Share equivalents so purchased the employee is granted a
proportionate number of Company Discount units, which vest on December 1 of the second calendar year following the purchase year. In addition, BASF grants Company Bonus units on
December 1 of the second, fifth, and eighth years following the purchase year, provided that the ESPP units purchased under the program are still held by the employee.

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Item 7.    Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

The capital stock of BASF Aktiengesellschaft consists of ordinary shares with no par value
(Stückaktien) that are issued only in bearer form ("BASF Shares"). As of December 31, 2003, BASF Aktiengesellschaft had an
aggregate of 558,861,410 ordinary shares outstanding. Thereof 2,218,000 are repurchased shares intended to be cancelled. The outstanding number of shares as disclosed in the financial statements is
556,643,410. Because the holders of BASF Shares are not registered with BASF Aktiengesellschaft or any other organization, BASF Aktiengesellschaft generally cannot determine who its shareholders are
or how many shares a particular shareholder owns. Notwithstanding the foregoing, based on its most recent survey, BASF Aktiengesellschaft believes that, as of January 09, 2004, approximately 13.8% of
the BASF Shares were held by shareholders in the United States.

Allianz
Aktiengesellschaft has notified BASF that on August 12, 2003 the share of the BASF Shares directly or indirectly held by Allianz Aktiengesellschaft has fallen below the
limit of 5% and at December 31, 2003 amounted to 2.7% of the BASF Shares.

To
its knowledge, BASF Aktiengesellschaft is not owned or controlled directly or indirectly by any corporation, foreign government or any person, jointly or severally.

RELATED PARTY TRANSACTIONS

The existing loans between BASF and affiliated and associated companies and participating interests as of December 31, 2003 are shown in
Note 15 to the Consolidated Financial Statements included in Item 18. There are no loans outstanding to members of the Supervisory Board or the Board of Executive Directors.

Certain
members of the Supervisory Board and the Board of Executive Directors are members of supervisory or executive boards of financial institutions with which BASF engages in certain
transactions in the ordinary course of business. These transactions are executed at prevailing market rates and terms at the time of the transaction.

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Item 8.    Financial Information

CONSOLIDATED FINANCIAL STATEMENTS

See "Item 18. Financial Statements."

EXPORT SALES

BASF manufactures products mainly in Europe (primarily Germany), North America, and to an increasing extent in Asia. BASF's products are then sold
in markets worldwide. Therefore, a large share of BASF's products are manufactured in Germany and exported for sale in Asia and to a lesser extent in South America. The following table sets forth
BASF's primary exports:

|                           |                
|-------------------------- | ---------------
|
|
|Europe                     |                
|                           | Thereof Germany
|North America              |                
|South America              |                
|Asia, Pacific Area, Africa |                
|                           |                
|Total                      |                
|                           |                

LEGAL PROCEEDINGS

Antitrust Claims Relating to Vitamins

In 1999 and in 2000, BASF Aktiengesellschaft as well as BASF Australia Ltd. entered into agreements with the United States Department of
Justice, the Canadian Competition Bureau and the Australian Department of Justice by which BASF Aktiengesellschaft and BASF Australia Ltd. agreed to plead guilty to certain violations of
antitrust laws relating to the sale of vitamin products in respective countries. The relevant courts accepted the guilty pleas. On November 21, 2001, the European Commission imposed a fine of
€296.2 million against BASF Aktiengesellschaft. BASF has appealed this decision. Further proceedings are still pending in Brazil, Korea and Australia.

All
lawsuits in the U.S. in connection with said antitrust law violations filed by direct customers that purchased vitamins in the U.S. have been settled.

State
court class actions on behalf of indirect purchasers have been filed separately in approximately 28 states. In October 2000, class actions in 24 of these states, as well as
related claims by various state government entities, were settled with terms calling for the vitamin manufacturers to pay, after a reduction to reflect nonparticipation of certain claimants of
approximately $340 million. BASF Aktiengesellschaft will be obligated to pay approximately $83 million of the total amount. The settlements have been finally approved by the respective
state courts and partially fulfilled. Certain of indirect purchasers plaintiffs who did not wish to participate in these settlement or were not eligible to do so have filed suits. Certain of those
suits have been settled. Certain other suits by indirect purchasers are still pending. Further claims for damages have been filed in Canada, Germany, France and Australia.

For
these antitrust proceedings the company has established provisions for the costs that it can currently anticipate in excess of the amounts agreed upon and paid. BASF does not
believe, that additional charges relating to these proceedings will have a substantial impact on the profitability of the company.

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BASF
Aktiengesellschaft has been named as a defendant in Empagran S.A. v. F. Hoffman-LaRoche, Ltd., et al., a federal class action filed in the U.S. District Court for the
District of Columbia purportedly on behalf of all persons who purchased vitamins from the defendants outside the United States between January 1, 1988 and February 1999. The Empagran
complaint alleges that the plaintiffs were overcharged on their vitamins purchases as the result of a worldwide conspiracy among the defendants to fix vitamin prices. By decision dated June 7,
2001, the District Court for the District of Columbia dismissed the Empagran complaint for lack of subject matter jurisdiction. On January 17, 2003, a divided panel of the United States Court
of Appeals for the District of
Columbia Circuit reversed the District Court's ruling. The Court of Appeals held that the United States antitrust laws permit the assertion of federal subject matter jurisdiction over claims by
foreign purchasers based on purchases made and purported damages felt outside the United States. The defendants named in Empagran, including BASF Aktiengesellschaft, filed a timely petition for
rehearing by the full Court of Appeals, but that Court (by a 4-3 vote, with two judges abstaining) declined on September 11, 2003, to rehear the panel's decision. As a result, the
named defendants (including BASF Aktiengesellschaft) filed a petition for certiorari seeking review of the Court of Appeals' decision, which the United States Supreme Court granted on
December 15, 2003. The Supreme Court will likely argue the case in spring 2004. A decision is anticipated by June 30, 2004.

If
the Supreme Court reverses the Court of Appeals' decision and remands the case for dismissal on subject matter jurisdiction grounds, the proceedings would be terminated and the case
dismissed. If, on the other hand, the Supreme Court upholds the Court of Appeals' decision, then BASF Aktiengesellschaft will vigorously defend the case at each stage of the proceedings, including
personal jurisdiction, venue, attempted certification of a world wide class, number of liability issues and purported damages in various countries. An ultimate finding against BASF Aktiengesellschaft
could cause considerable financial charges.

Synthroid®-Related Claims

This proceeding concerned class action lawsuits against Knoll Pharmaceutical Company (KPC) of BASF's Pharmaceutical business, discontinued in
2001. The lawsuits challenged Knoll's delaying the publication of a study comparing Synthroid® to certain branded and generic products. Final approval of a proposed settlement of 1997 was
not granted. KPC subsequently negotiated a new proposed settlement with consumers and third-party payors providing for a payment of $25.5 million in addition to the $98 million paid into
escrow in late 1997 (plus the accrued interest thereon). The United States District Court of Chicago granted final approval of the new proposed settlement on August 4, 2000. A number of appeals
have been filed. On August 31, 2001, the United States Court of Appeals granted final confirmation of the settlement. The only issue outstanding before payment can be made is the possible
appeal of consumer class counsels' litigation costs and expenses.

Meridia Class Actions against BASF Corporation and BASF Aktiengesellschaft

In various class actions in the U.S., KPC and BASF Corporation (and partly BASF Aktiengesellschaft) as well as Abbott Laboratories, Inc.
and Glaxo Wellcome are being sued for an unknown amount of damages as well as for the reimbursement of costs for preventive medical check-ups. The claims are based on the possible
hazardousness, alleged insufficient trials, and failures during the admission procedure of Meridia® (trade name of the obesity drug sibutramine). The legal proceedings are still at a very
early stage. Both actions against BASF Aktiengesellschaft have been dropped or dismissed. BASF Corporation processed and still processes the drug for KPC by way of toll manufacture. Beyond this BASF
Corporation has no relationship with the product. The mere fact, that BASF Corporation held the interest in KPC, does not provide a sufficient basis for compensation claims. The overall material risk
for BASF can be considered as rather low.

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Additional Proceedings

The Supreme Court of Minnesota in its decision dated February 19, 2004 upheld the verdict of the appelate court against BASF Corporation
regarding payment of damages in an amount of $52 million. The court held that the sale of the plant protection products Poast® and Poast Plus® at different sales prices
violated consumer protection laws. BASF believes that different sales prices are justified because the products are based on different patents and product registrations. BASF examines a petition
seaking review of the decision by the U.S. Supreme Court.

In
2001, class action lawsuits against BASF Aktiengesellschaft and some of its affiliates were filed at United States courts. It was alleged that sales of automotive refinish coatings
had violated antitrust laws. BASF considers these allegations to be unfounded and consequently filed for dismissal of the lawsuits.

DIVIDEND POLICY

The Board of Executive Directors and the Supervisory Board of BASF Aktiengesellschaft propose dividends based on BASF Aktiengesellschaft's
year-end unconsolidated financial
statements. The proposal is then voted on at BASF's Annual Meeting. The Annual Meeting is usually convened during the second quarter of each year.

Since
all BASF Shares are in bearer form, dividends are either remitted to the custodian bank on behalf of the stockholder, generally within two days following the Annual Meeting, or, in
the case of stockholders personally possessing certificates, available immediately following the Annual Meeting upon submission of the dividend coupon therefor at the offices of BASF
Aktiengesellschaft in Ludwigshafen, Germany, or the offices of BASF Aktiengesellschaft's appointed paying agents. Record holders of BASF's American Depositary Receipts (ADRs) on the dividend record
date will be entitled to receive payment of the dividend less withholding tax of 15% in respect of the year for which it is declared. See "Item 10. Additional Information" for further information.
Cash dividends payable to ADR holders will be paid to the Bank of New York, as depositary, in euros and, subject to certain exceptions, will be converted by the depositary into U.S. dollars. The
amount of dividends received by holders of ADRs may be affected by fluctuations in exchange rates. See "Item 3  Exchange Rate Information" for further information.

BASF
Aktiengesellschaft expects to continue to pay dividends, although there can be no assurance as to the particular amounts that would be paid from year to year. The payment of future
dividends will depend on BASF's financial condition. See "Item 5. Operating and Financial Review and Prospects."

SIGNIFICANT CHANGES

Except as otherwise disclosed in this Annual Report, there has been no material change in the financial position of BASF Aktiengesellschaft since
December 31, 2003.

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Item 9.    The Offer and Listing

LISTING DETAILS

Principal Market for BASF Shares

The principal trading market for BASF Shares is the Frankfurt Stock Exchange. BASF Shares are also traded on the other German stock exchanges,
namely Berlin, Bremen, Düsseldorf, Hamburg, Hanover, Munich and Stuttgart. In addition, BASF Shares are traded on the London, Paris and Swiss stock exchanges.

Since
June 7, 2000, American Depositary Receipts (ADRs), each representing one BASF Share, have been traded on the New York Stock Exchange (NYSE) under the trade symbol "BF."

Options
on BASF Shares are traded on Eurex, the German-Swiss derivatives market jointly owned and operated by Deutsche Börse AG and the Swiss Stock Exchange.

Share Price History

The table below shows for the periods indicated the high and low official daily quotation for BASF Shares on the Frankfurt Stock Exchange as
reported by Deutsche Börse AG and also the high and low of the DAX. See "Item 3. Key Information" for information on exchange rates between the U.S. dollar and the euro during the
periods in this table.

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|                        
|------------------------
|
|
|Quarterly highs and lows
|1999                    
|First Quarter           
|Second Quarter          
|Third Quarter           
|Fourth Quarter          
|2000                    
|First Quarter           
|Second Quarter          
|Third Quarter           
|Fourth Quarter          
|2001                    
|First Quarter           
|Second Quarter          
|Third Quarter           
|Fourth Quarter          
|2002                    
|First Quarter           
|Second Quarter          
|Third Quarter           
|Fourth Quarter          
|2003                    
|First Quarter           
|Second Quarter          
|Third Quarter           
|Fourth Quarter          

|                                                
|------------------------------------------------
|
|Monthly highs and lows of the last six months(1)
|2003                                            
|September                                       
|October                                         
|November                                        
|December                                        
|2004                                            
|January                                         
|February                                        

---

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Trading on the New York Stock Exchange

The following table sets forth, for the period indicated, the high and low sales price per BASF ADR, as reported on the New York Stock Exchange
Composite Tape:

|         
|---------
|
|2003     
|September
|October  
|November 
|December 
|2004     
|January  
|February 

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Item 10.    Additional Information

ARTICLES OF ASSOCIATION

BASF incorporates herein all information regarding its Articles of Association by reference to its Registration Statement on
Form 20-F (File No. 1-15909), as filed with the Securities and Exchange Commission on May 25, 2000.

Acquisition of BASF Shares by BASF Aktiengesellschaft

Under the German Stock Corporation Act, a stock corporation may acquire its own shares in a limited number of exceptional cases, including if so
authorized by a shareholder resolution adopted at a General Shareholders' Meeting. At the Annual Meetings of BASF Aktiengesellschaft held on April 30, 2002 and May 6, 2003 the
shareholders authorized the Board of Executive Directors to buy back BASF Shares representing up to 10% of BASF Aktiengesellschaft's outstanding share capital. The Board of Executive Directors may
either cancel the repurchased shares, reducing the company's outstanding share capital, reissue the shares subject to a further resolution adopted at an Annual Meeting, use the shares to service
option rights granted to participants of the BASF Stock Option Program, or with the approval of the Supervisory Board, use the shares for the acquisition of companies, parts of companies or holdings
in companies in return for the transfer of BASF shares. In 2003, BASF Aktiengesellschaft had bought 13,673,000 BASF Shares, or approximately 2.4% of the then outstanding BASF Shares. The Board of
Executive Directors has cancelled 11,455,000 of these repurchased BASF Shares, reducing the company's outstanding share capital. On December 16, 2003, the Board of Executive Directors also
decided to cancel the remaining 2,218,000 repurchased BASF Shares.

EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

There are, except in limited embargo circumstances pursuant to resolutions adopted by the United Nations or the European Union, no legal
restrictions in Germany on international capital movements and foreign exchange transactions.

For
statistical purposes only, every individual or corporation residing in Germany (a "Resident") must report to the German Central Bank (Deutsche
Bundesbank), subject only to certain immaterial exceptions, any payment received from or made to or on account of an individual or corporation residing outside Germany (a
"Nonresident") if such payment exceeds €12,500 or the equivalent in a foreign currency. In addition, Residents must report any claims against or any liabilities payable to Nonresidents
if such claims or liabilities in the aggregate exceed €5,000,000 or the equivalent in a foreign currency during any one month.

Neither
German Law nor the Articles of Association (Satzung) of BASF Aktiengesellschaft impose any limitations on the rights of
Nonresident or foreign owners to hold or vote BASF Shares, including those represented by American Depositary Receipts (ADRs).

TAXATION

The following is a summary of material U.S. federal income and German tax considerations relating to the ownership of American Depositary Shares
(ADSs) or BASF Shares by an Eligible U.S. Holder (as defined below).

The
discussion is based on tax laws of the United States and Germany as in effect on the date of this Annual Report, including the Convention between the United States of America and the
Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to Certain Other Taxes (the "Income Tax Treaty"),
and the

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Convention
between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation with respect to Taxes on Estates, Inheritances, and Gifts (the "Estate Tax
Treaty"). All such laws are subject to change, possibly with retroactive effect, and are subject to different interpretations. The discussion is also based in part upon the representations of the
Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

The
discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to the ownership of ADSs or BASF Shares. In particular, it does not
address any aspect of U.S. federal tax law other than income taxation, or any aspect of German tax law other than income, gift, inheritance and wealth taxation, and it does not cover the tax laws of
any state or municipality, or any jurisdiction outside the United States and Germany. Moreover, the discussion does not consider any specific facts or circumstances that may apply to a particular
Eligible U.S. Holder, and does not take into account any special tax rules to which certain holders (including, without limitation, tax-exempt organizations, persons subject to the
alternative minimum tax, securities broker-dealers, financial institutions, persons holding ADSs or BASF Shares in a hedging transaction or as part of a straddle or conversion transaction, persons
having a functional currency other than the U.S. dollar, persons that own, or that are treated as owning, 10% or more of the voting power of our stock and persons that received ADSs or BASF Shares
pursuant to the exercise of employee stock options or otherwise as compensation) may be subject.

Owners
of ADSs or BASF Shares are urged to consult their tax advisers regarding the U.S. federal, state, local, German and other tax consequences of owning and disposing of ADSs or BASF
Shares. In particular, owners of ADSs or BASF Shares are urged to consult their tax advisers to confirm their status as Eligible U.S. Holders and the consequence to them if they do not so qualify.

For
purposes of the discussion that follows, an "Eligible U.S. Holder" is any beneficial owner of ADSs or BASF Shares who or which (i) is a resident of the United States for the
purposes of the Income Tax Treaty, such as a U.S. citizen or U.S. corporation, (ii) is not also a resident of the Federal Republic of Germany for the purposes of the Income Tax Treaty,
(iii) owns the ADSs or BASF Shares as capital assets, (iv) does not hold ADSs or BASF Shares as part of the business property of a permanent establishment located in Germany or as part
of a fixed base of an individual located in Germany and used for the performance of independent personal services, (v) is entitled to benefits under the Income Tax Treaty with respect to income
and gain derived in connection with the ADSs or BASF Shares, and (vi) if not an individual, is not subject to the limitation on benefits restrictions in the Income Tax Treaty.

In
general, for U.S. federal income tax purposes, holders of ADRs (as defined below) evidencing ADSs will be treated as the owners of the BASF Shares represented by those ADSs.

Taxation of Dividends

Under U.S. federal income tax law, Eligible U.S. Holders are generally required to include in their gross income, as dividend income from a
qualified foreign corporation, the gross amount of any distribution paid from the current or accumulated earnings and profits of BASF (as determined under U.S. federal income tax principles). The
amount of dividend income for U.S. federal income tax purposes is not reduced by German taxes withheld from a dividend distribution in respect of the ADSs or BASF Shares. Beginning in 2003, Eligible
U.S. holders are entitled to treat the income from such distributions as "qualified dividend income" that would increase their net capital gain. Eligible U.S. Holders that are corporations will not be
entitled to the dividends-received deduction with respect to such distributions.

As
a German corporation, BASF is required to withhold taxes on dividends paid to German resident and nonresident stockholders. The required withholding rate applicable to BASF dividends
is 20% plus

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a
solidarity surcharge of 5.5% thereon, equal to 1.1% of the gross dividend (i.e., 5.5% of the 20% tax). Accordingly, a total German withholding tax of 21.1% of the gross dividend is required.

An
Eligible U.S. Holder is entitled to a refund of a portion of the withholding tax, reducing the net German tax rate to that permitted under the Income Tax Treaty, i.e., 15% of the
gross dividend.

The
portion of the German income tax withheld that cannot be refunded under the Income Tax Treaty may be claimed either as a foreign tax credit against the U.S. federal income tax
liability of an Eligible U.S. Holder or as a deduction in computing taxable income. For U.S. foreign tax credit purposes, dividends received in respect of the ADSs or BASF Shares generally will be
treated as passive income (or, in some circumstances, financial services income) derived from sources outside the United States. The rules and limitations relating to foreign tax credits are complex,
and Eligible U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits and the application of the foreign tax credit limitations to their particular
situations. Beginning in 2003, adjustments to these calculations may be required in the case of dividend income treated as "qualified dividend income."

To
illustrate the foregoing, for each $100 gross amount of dividend paid by BASF in 2003 to an Eligible U.S. Holder, $21.10 of German tax would be withheld, of which $6.10 would be
refundable. For U.S. federal income tax purposes, the U.S. Holder would report dividend income of $100 (to the extent paid out of current and accumulated earnings and profits) and foreign taxes paid
of $15, for purposes of calculating the Foreign Tax Credit or the deduction for taxes paid.

For
U.S. federal income tax purposes, dividends paid by BASF in euros are included in the gross income of an Eligible U.S. Holder in a U.S. dollar amount calculated by reference to the
exchange rate in effect on the date the dividends (including the deemed refund of German corporate tax) are received by such Eligible U.S. Holder or, in the case of ADSs, by the Depositary. If a
dividend paid in euros is converted into U.S. dollars on the date received, Eligible U.S. Holders generally should not be required to recognize foreign currency gain or loss in respect of the
dividend.

General Refund Procedures Regarding German Withholding Tax

Pursuant to administrative procedures, claims for refunds under the Income Tax Treaty generally must be submitted to the German Federal Tax
Authority (Bundesamt für Finanzen) either individually by an Eligible U.S. Holder, or collectively (introduced on a trial basis) by the
Depositary (or a custodian as its designated agent) on behalf of all Eligible U.S. Holders owning ADSs. Claims must be filed within four years of the end of the calendar year in which the dividend was
received.

The
collective refund procedure may not be available for Eligible U.S. Holders entitled to refunds in excess of €150 for the calendar year. In such event, those holders
must file separate claims or may qualify for the simplified refund procedure described below. Details of the collective refund procedure will be available from the Depositary.

Individual
claims for refund have to be made on a special German claim form that must be filed with the German Federal Tax Authority at Bundesamt für Finanzen,
Friedhofstrasse 1, 53221 Bonn, Germany. The German claim-for-refund form may be obtained from the German Federal Tax Authority at the same address where applications are filed,
or from the Embassy of the Federal Republic of Germany at 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998. Forms can also be obtained from the Office of the Assistant Commissioner
(International), Internal Revenue Service, 950 L'Enfant Plaza South, SW, Washington, D.C. 20024, Attention: Taxpayer Service Division.

As
part of the individual refund claim, an Eligible U.S. Holder must submit to the German Federal Tax Authority the original bank voucher (or certified copy thereof) issued by the paying
entity documenting the tax withheld, and an official certification on IRS Form 6166 of such Eligible U.S. Holder's last filed U.S. federal income tax return. IRS Form 6166 may be
obtained by sending a request

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to
the Internal Revenue Service Center, Foreign Certification Request, P.O. Box 16347, Philadelphia, P.A. 19114-0447. Requests for certification are to be made in writing and must
include the Eligible U.S. Holder's name, mailing address and social security or employer identification number, the form number for the relevant U.S. federal income tax return and the tax period for
which the certification is requested.

The
Internal Revenue Service will send the certification directly to the German Federal Tax Authority if requested by the Eligible U.S. Holder. If no such request is made, the Internal
Revenue Service will send a certificate on IRS Form 6166 to the Eligible U.S. Holder, which then must submit the certification with the Eligible U.S. Holder's claim for refund. The Internal
Revenue Service certification is valid for three years and need only be resubmitted in a fourth year in the event of a subsequent application for refund.

Simplified Refund Procedure regarding German Withholding Tax in respect of ADSs or BASF Shares Deposited with The Depository Trust Company in New York

As of May 7, 1999, Eligible U.S. Holders may make applications for refunds payable under the Income Tax Treaty by using a simplified refund
procedure instead of the general refund procedures described above. Eligible U.S. Holders may use the simplified refund procedure only with respect to taxes withheld on dividends in respect of ADSs or
BASF Shares deposited with The Depository Trust Company in New York. Under the simplified refund procedure, refund applications will be filed in a special (simplified) collective procedure with the
aid of the "Elective Dividend Service" (the "EDS") installed at The Depository Trust Company.

In
the EDS system, the participants maintaining accounts at The Depository Trust Company report the positions held by them at the relevant cutoff date that qualify for share dividends
subject to withholding tax at the appropriate rates under the Income Tax Treaty. The reports of the individual participants will be compiled by The Depository Trust Company into a collective
application and submitted to the German Federal Tax Authority for conditional refund. After initially checking only arithmetical correctness, the German Federal Tax Authority will make a refund as
required to The Depository Trust Company. The refund will be made at the earliest on the due date of the withholding tax pursuant to German tax law.

The
Depository Trust Company will distribute the refund amounts in accordance with EDS data to the participants to be passed on to the beneficial owners.

Taxation of Capital Gains

Upon a sale or other taxable disposition of ADSs or BASF Shares, an Eligible U.S. Holder will recognize a gain or loss for U.S. federal income tax
purposes in an amount equal to the difference between the amount realized from the sale or other disposition, and the Eligible U.S. Holder's tax basis in the ADSs or BASF Shares. Such gain or loss
generally will be treated as a capital gain or loss derived from U.S. sources, and will be a long-term capital gain or loss if the Eligible U.S. Holder's holding period for the ADSs or
BASF Shares exceeds one year. In the case of certain Eligible U.S. Holders (including individuals), long-term capital gains are taxable at preferential U.S. federal income tax rates. The
deduction of capital losses is subject to certain limitations under U.S. federal income tax law.

Deposits
and withdrawals of BASF Shares in exchange for ADSs generally will not be considered a taxable event for U.S. federal income tax purposes.

Under
the Income Tax Treaty, an Eligible U.S. Holder will not be liable for German tax on capital gains realized or accrued on the sale or other disposition of ADSs or BASF Shares.

128

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Gift and Inheritance Taxes  German Taxation

An Eligible U.S. Holder who is an individual and whose domicile is determined to be in the United States for purposes of the Estate Tax Treaty
will not be subject to German inheritance and gift tax (the equivalent of the U.S. federal estate and gift tax) upon the individual's death or upon the making of a gift unless the ADSs or BASF Shares
(i) are part of the business property of a permanent establishment located in Germany or (ii) are part of the assets of a fixed base of an individual located in Germany and used for the
performance of independent personal services. An individual's domicile in the United States, however, does not prevent imposition of German inheritance and gift tax with respect to an heir, donee, or
other beneficiary who is domiciled in Germany at the time the individual died or the gift was made.

The
Estate Tax Treaty also provides a credit against U.S. federal estate and gift tax liability for the amount of inheritance and gift tax paid to Germany, subject to certain
limitations, in a case where the ADSs or BASF Shares are subject to German inheritance or gift tax and U.S. federal estate or gift tax.

Other German Taxes

There are no German transfer, stamp or other similar taxes that would apply to Eligible U.S. Holders that purchase or sell ADSs or BASF Shares.
The wealth tax is no longer levied in respect of any taxation periods that start on or after January 1, 1997. For collection periods from 1998 on, the trade capital tax has been abrogated.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Dividends on ADSs or BASF Shares, and payments of the proceeds of a sale of ADSs or BASF Shares, paid within the United States or through certain
U.S.-related intermediaries are subject to Internal Revenue Service information reporting, and may be subject to backup withholding at a 31% rate unless the holder (i) is a corporation or other
exempt recipient or (ii) provides a correct taxpayer identification number, certifies that no loss of exemption from backup withholding has occurred and otherwise complies with the backup
withholding requirements.

DOCUMENTS ON DISPLAY

BASF is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, BASF
files reports and other information with the Securities and Exchange Commission. These materials, including this Annual Report and the exhibits thereto, may be inspected and copied at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 233 Broad Street,
New York, N.Y. 10279. Copies of the materials may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may
obtain information on the operation of the Commission's Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. The Commission also
maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission. BASF's Annual Report and some of
the other information submitted by BASF to the Commission may be accessed through this web site. In addition, material filed by BASF can be inspected at the offices of the New York Stock Exchange at
20 Broad Street, New York, N.Y. 10005.

129

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Item 11.    Quantitative and Qualitative Disclosures About Market Risk

BASF
is exposed to foreign currency, interest rate and price risks in the normal course of business. In cases where BASF intends to hedge against these risks, derivatives are used,
including forward exchange contracts, currency options, interest rate/currency swaps, combined instruments or commodity derivatives. In addition, financial derivative instruments are used to replace
transactions in original financial instruments, such as shares or fixed-income securities.

Exclusive
use is made of commonly used instruments with sufficient market liquidity. Derivative instruments are only used if they have corresponding underlying positions arising from the
operating business, cash investments and financing. The leverage effect that can be achieved with derivatives is deliberately not used. The derivative instruments held by BASF are solely held for
purposes other than trading.

Where
derivatives have a positive market value, BASF is exposed to credit risks in the event of non-performance by their counterparties. The credit risk is minimized by
exclusively trading contracts with major credit worthy counterparties.

To
ensure efficient risk management, market risks are centralized at BASF Aktiengesellschaft and BASF Group companies designated for this purpose. BASF has developed and implemented
internal guidelines based on the principles of separation of the placement function from the settlement function for derivative instruments.

The
risks arising from changes in exchange rates, interest rates and prices as a result of the underlying transactions and the derivative transactions concluded to hedge them are
monitored constantly. For this purpose, market quotations or computer or mathematical models are used to determine the current market values not only of the underlying transactions but also of the
derivative transactions and these are compared with each other. Where derivative instruments were
entered into as replacement for original financial instruments, market trends are also monitored constantly.

INTEREST RATE RISK MANAGEMENT

BASF employs interest rate sensitive financial instruments to manage the liquidity and cash needs of its operations. Financial liabilities consist
of bank loans (26% of financial liabilities), which BASF group companies worldwide took from numerous local banks in their various home currencies. Additionally, BASF has two fixed rate euro bonds
outstanding (64% of financial liabilities), as well as a number of variable and fixed-rate U.S. dollar-bonds denominated infrastructure and environmental bonds with a preferred tax status
in the United States (8% of financial liabilities). The remaining debt consists of a number of other bonds or commercial paper (2% of financial liabilities).

In
addition to the interest rate risk exposure resulting from financial liabilities described above, BASF entered into a number of interest derivatives, combined interest/currency
derivatives or combined interest/equity derivatives with banks. In most cases BASF is obliged to pay a fixed rate in a foreign currency and receives a variable rate in euros. Such swaps were concluded
to optimize the internal financing of group companies worldwide and to offer the internal parties the desired credit terms and cash flows. BASF also entered into swap contracts for which BASF pays a
quarterly variable rate and receives a positive equity index performance. That instrument is described in greater detail under "Other Derivatives" and "Marketable Securities" below.

The
following information on debt is presented in euro equivalents, which is BASF's reporting currency:

130

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Principal (Notional) Amount Interest Rate  December 31, 2002

|                                   
|-----------------------------------
|
|
|
|Debt, including current portion    
|U.S. dollar (USD)                  
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Euro (EUR)                         
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Chinese renminbi (CNY)             
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Other currencies                   
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|                                   
|Total                              
|                                   

131

---

Principal (Notional) Amount Interest Rate  December 31, 2003

|                                   
|-----------------------------------
|
|
|
|Debt, including current portion    
|U.S. dollar (USD)                  
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Euro (EUR)                         
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Chinese renminbi (CNY)             
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|Other currencies                   
|Fixed rate                         
|Weighted avg. interest rate (fixed)
|Variable rate                      
|Interest rate (variable)           
|                                   
|Subtotal                           
|                                   
|Total                              
|                                   

132

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The following information on derivatives is presented in euro equivalents, which is BASF's reporting currency. The instruments' actual cash flows are denominated in the currencies noted
parenthetically.

Interest Rate Swaps  December 31, 2002

|                                         | 
|---------------------------------------- | 
|
|
|
|Euro (EUR)                               | 
|Payer swap                               | 
|Weighted to average pay rate (fixed)     | 
|Weighted average receive rate (variable) | 

Interest Rate Swaps  December 31, 2003

|                                         | 
|---------------------------------------- | 
|
|
|
|Euro (EUR)                               | 
|Payer swap                               | 
|Weighted to average pay rate (fixed)     | 
|Weighted average receive rate (variable) | 
|U.S. dollar (USD)                        | 
|Payer swap                               | 
|Weighted to average pay rate (fixed)     | 
|Weighted average receive rate (variable) | 

The total volume of interest rate swaps increased from €90 million in 2002 to €105 million in 2003
due to an additional transaction. The total fair value of the interest rate swaps increased from €(8.99) million to €(8.20) million.

133

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Combined Interest Rate and Cross Currency Swaps  December 31, 2002

|                                              | 
|--------------------------------------------- | 
|
|
|
|U.S. dollar (USD)/euro (EUR)                  | 
|Amount payable on maturity (USD)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (variable, USD)     | 
|Weighted average receive rate (variable, EUR) | 
|Amount payable on maturity (USD)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, USD)        | 
|Weighted average receive rate (variable, EUR) | 
|Amount payable on maturity (USD)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, USD)        | 
|Weighted average receive rate (fixed, EUR)    | 
|Japanese yen (JPY)/euro (EUR)                 | 
|Amount payable on maturity (JPY)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, JPY)        | 
|Weighted average receive rate (variable, EUR) | 
|U.S. dollar (USD)/Korean won (KRW)            | 
|Amount payable on maturity (KRW)              | 
|Amount receivable on maturity (USD)           | 
|Weighted average pay rate (fixed, KRW)        | 
|Weighted average receive rate (variable USD)  | 
|U.S. dollar (USD)/Korean won (KRW)            | 
|Amount payable on maturity (KRW)              | 
|Amount receivable on maturity (USD)           | 
|Weighted average pay rate (fixed, KRW)        | 
|Weighted average receive rate (fixed USD)     | 

---

134

---

Combined Interest Rate and Cross Currency Swaps  December 31, 2003

|                                              | 
|--------------------------------------------- | 
|
|
|
|U.S. dollar (USD)/euro (EUR)                  | 
|Amount payable on maturity (USD)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (variable, USD)     | 
|Weighted average receive rate (variable, EUR) | 
|Amount payable on maturity (USD)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, USD)        | 
|Weighted average receive rate (variable, EUR) | 
|Japanese yen (JPY)/euro (EUR)                 | 
|Amount payable on maturity (JPY)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, JPY)        | 
|Weighted average receive rate (variable, EUR) | 
|Amount payable on maturity (JPY)              | 
|Amount receivable on maturity (EUR)           | 
|Weighted average pay rate (fixed, JPY)        | 
|Weighted average receive rate (fixed EUR)     | 
|U.S. dollar (USD)/Korean won (KRW)            | 
|Amount payable on maturity (KRW)              | 
|Amount receivable on maturity (USD)           | 
|Weighted average pay rate (fixed, KRW)        | 
|Weighted average receive rate (variable USD)  | 
|Amount payable on maturity (KRW)              | 
|Amount receivable on maturity (USD)           | 
|Weighted average pay rate (fixed, KRW)        | 
|Weighted average receive rate (fixed USD)     | 

---

135

---

The total volume of the combined interest rate and cross currency swaps decreased from €3,058 million in 2002 to
€2,596 million as of December 31, 2003 due to expiring transactions. The total fair value of the swaps changed from €(116) million in 2002 to
€292 million as of December 31, 2003 mainly due to the decline in the exchange rate of the USD dollar and the expiration of transactions with negative market values.

Other Derivatives  December 31, 2002

|                                         | 
|---------------------------------------- | 
|
|
|
|Equity index swaps(1)                    | 
|Weighted average pay rate (variable)     | 
|Weighted average receive rate (variable) | 

---

Other Derivatives  December 31, 2003

|                                         | 
|---------------------------------------- | 
|
|
|
|Equity index swaps(1)                    | 
|Weighted average pay rate (variable)     | 
|Weighted average receive rate (variable) | 

---

Foreign Exchange Risk Management

The principal derivative financial instruments used by BASF to hedge foreign currency exposures resulting from trade receivables, trade payables
and commercial paper denominated in foreign currency are forward foreign exchange contracts and currency options. In 2003, transactions in these hedging instruments were primarily aimed at hedging the
exchange rate risk arising from the U.S. dollar, the Canadian dollar, the Australian dollar, the British pound, the Mexican peso, the Japanese yen, the Singapore dollar and the Brazilian real.

Intercompany
loans within the BASF Group must frequently be denominated in a currency which is foreign to the intercompany borrower or the intercompany lender or both. The foreign
currency risks inherent in such loans are hedged by forward foreign exchange contracts or foreign currency borrowings from third parties in such cases where the loan has a short term or a variable
maturity. Longer term intercompany loans with fixed maturity schedules are hedged primarily with forward foreign exchange contracts and cross currency swaps.

The
tables below provide information about significant derivative financial instruments which are sensitive to changes in foreign currency exchange rates.

136

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Foreign Currency Forward Contracts  December 31, 2002(1)

|                                 | 
|-------------------------------- | 
|
|Euro (EUR)                       | 
|Sale Australian dollar (AUD)     | 
|Sale Danish krone (DKK)          | 
|Sale British pound (GBP)         | 
|Sale Japanese yen (JPY)          | 
|Sale New Zealand dollar (NZD)    | 
|Sale Swedish krona (SEK)         | 
|Sale Polish zlotys (PLN)         | 
|Sale Singapore dollar (SGD)      | 
|Sale Malaysian ringgit (MYR)     | 
|Sale Thai baht (THB)             | 
|Sale U.S. dollar (USD)           | 
|Sale South African rand (ZAR)    | 
|Sale Indian rupee (INR)          | 
|Sale Slovak koruna (SKK)         | 
|Sale Hungarian Forint (HUF)      | 
|Sale Czech koruna (CZK)          | 
|Purchase U.S. dollar (USD)       | 
|Purchase Swiss francs (CHF)      | 
|Purchase Canadian dollar (CAD)   | 
|Purchase Turkish lira (TRL)      | 
|Purchase Norwegian krone (NOK)   | 
|Purchase Japanese yen (JPY)      | 
|Purchase Hungarian Forint (HUF)  | 
|U.S. dollar (USD)                | 
|Sale Mexican peso (MXP)          | 
|Sale South African rand (ZAR)    | 
|Sale Brazilian real (BRL)        | 
|Sale Taiwan dollar (TWD)         | 
|Sale Thai baht (THB)             | 
|Sale Indian rupee (INR)          | 
|Sale Nuevo Sol (PEN)             | 
|Purchase Malaysian ringgit (MYR) | 
|Purchase Philippine peso (PhP)   | 
|Singapore dollar (SGD)           | 
|Sale Malaysian ringgit (MYR)     | 
|Malaysian ringgit (MYR)          | 
|Sale Japanese yen (JPY)          | 

---

137

---

Foreign Currency Forward Contracts  December 31, 2003(1)

|                                  | 
|--------------------------------- | 
|
|Euro (EUR)                        | 
|Sale Australian dollar (AUD)      | 
|Sale Danish krone (DKK)           | 
|Sale British pound (GBP)          | 
|Sale Japanese yen (JPY)           | 
|Sale New Zealand dollar (NZD)     | 
|Sale Swedish krona (SEK)          | 
|Sale Polish zlotys (PLN)          | 
|Sale Singapore dollar (SGD)       | 
|Sale Malaysian ringgit (MYR)      | 
|Sale Thai baht (THB)              | 
|Sale U.S. dollar (USD)            | 
|Sale South African rand (ZAR)     | 
|Sale Hong Kong dollar (HKD)       | 
|Sale Slovak koruna (SKK)          | 
|Sale Hungarian Forint (HUF)       | 
|Sale Czech koruna (CZK)           | 
|Sale Kroatien kuna (HRK)          | 
|Sale Pakistan rupee (PKR)         | 
|Purchase Australian dollar (AUD)  | 
|Purchase U.S. dollar (USD)        | 
|Purchase Swiss francs (CHF)       | 
|Purchase South African rand (ZAR) | 
|Purchase Canadian dollar (CAD)    | 
|Purchase Hong Kong dollar (HKD)   | 
|Purchase Norwegian krone (NOK)    | 
|Purchase Polish zlotys (PLN)      | 
|Purchase Hungarian Forint (HUF)   | 
|U.S. dollar (USD)                 | 
|Sale Malaysian ringgit (MYR)      | 
|Sale Mexican peso (MXP)           | 
|Sale South African rand (ZAR)     | 
|Sale Brazilian real (BRL)         | 
|Sale Taiwan dollar (TWD)          | 
|Sale Thai baht (THB)              | 
|Sale Indian rupee (INR)           | 
|Sale Pakistan rupee (PKR)         | 
|Sale Japanese yen (JPY)           | 
|Sale Philippine peso (PhP)        | 
|Purchase Singapore dollar (SGD)   | 
|Purchase South African rand (ZAR) | 
|Purchase Malaysian ringgit (MYR)  | 
|Malaysian ringgit (MYR)           | 
|Sale Japanese yen (JPY)           | 
|Sale Australian dollar (AUD)      | 
|Purchase Australian dollar (AUD)  | 
|Purchase Singapore dollar (SGD)   | 

---

138

---



The total volume of forward currency contracts decreased from €5,927 million in 2002 to €5,069 million as of December 31, 2003 due
mainly to the expiration of hedges of commercial paper denominated in USD and of accounts denominated in foreign currencies. The total fair value of the outstanding forward contracts improved from
€180 million at December 31, 2002 to €367 million as of December 31, 2003 mainly due to the decline in the exchange rate for the US dollar.

Foreign Currency Options  December 31, 2002

Not applicable

Foreign Currency Options  December 31, 2003 (All maturing in 2004)

|                              | 
|----------------------------- | 
|
|U.S. dollar (USD) put (short) | 
|U.S. dollar (USD) call (long) | 

---

The total volume of foreign currency options increased from zero on December 31, 2002 to €410 million on
December 31, 2003 due to new hedges of accounts denominated in USD. The total fair value of foreign currency options was €2 million.

Cross Currency Swaps  December 31, 2002

|                                                       | 
|------------------------------------------------------ | 
|
|
|
|Payment of U.S. dollar (USD)                           | 
|Notional amount                                        | 
|Average contract rate U.S. dollar (USD) per euro (EUR) | 
|Payment of Japanese yen (JPY)                          | 
|Notional amount                                        | 
|Average contract rate Japanese yen per euro (EUR)      | 
|Payment of Korean won (KRW)                            | 
|Notional amount                                        | 
|Average contract rate Korean won per U.S. dollar (USD) | 

139

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Cross Currency Swaps  December 31, 2003

|                                                       | 
|------------------------------------------------------ | 
|
|
|
|Payment of U.S. dollar (USD)                           | 
|Notional amount                                        | 
|Average contract rate U.S. dollar (USD) per euro (EUR) | 
|Payment of Japanese yen (JPY)                          | 
|Notional amount                                        | 
|Average contract rate Japanese yen per euro (EUR)      | 
|Payment of Korean won (KRW)                            | 
|Notional amount                                        | 
|Average contract rate Korean won per U.S. dollar (USD) | 

---

The total volume of cross currency swaps decreased from €3,058 million in 2002 to €2,596 million as
of December 31, 2003 due to expiring transactions. The total fair value of the swaps changed from €(116) million in 2002 to €292 million as of
December 31, 2003 mainly due to the decline in the exchange rate of the USD dollar and the expiration of transactions with negative market values.

MARKETABLE SECURITIES

As of December 31, 2003, BASF owned debt and equity securities which are exposed to price changes. These financial instruments are used as
profitable investments of BASF's cash surplus and are not held for trading purposes. All securities are quoted on stock exchanges, and the funds have readily determinable market prices. The securities
are reflected in the U.S. GAAP reconciliation at their fair value of €161.9 million, which includes unrealized gains of €15.0 million. See
Note 18 to the Consolidated Financial Statements in Item 18 for further information. BASF carefully monitors developments in the financial markets.

In
addition, BASF entered into swap contracts for which BASF pays a quarterly variable rate and receives a positive equity index performance (for details see the "Other Derivatives"
table above in "Interest Rate Risk Management"). Such swaps were concluded to synthetically create an equity investment using the variable interest payments from liquid funds. While BASF is obliged to
pay on a quarterly basis a variable interest rate, the payments by the counterparties are dependent on the change in the DAX-Index during the stipulated term. However, a special provision
insures that negative DAX-Index performance is not required to be reimbursed. Therefore the maximum equity exposure is a

140

---

zero
payment from the counterparties. The fair value of the DAX-Libor-Swaps was €(2) million as of December 31, 2003.

A
10% change in overall equity prices would not materially impact BASF's operations, financial position or cash flows.

COMMODITY PRICE RISKS

Certain BASF divisions are exposed to fluctuations in prices for raw materials and commodities. BASF operates in markets where the prices of raw
materials and products are commonly affected by cyclical movements of the economy.

In
order to secure the supply of raw materials, BASF has signed long-term supply contracts and is buying additional quantities on spot markets. Some of the most important raw
materials involved are naphtha, propylene, benzene, titanium dioxide, cyclohexane, methanol and ammonia.

The
following measures are taken to avoid and manage risks in the purchase of raw materials:



The
following information related to all material contracts as of December 31, 2003:

|                     | 
|-------------------- | 
|
|
|Oil and Oil products | 
|Call Options (Buy)   | 
|Call Options (Sell)  | 
|Put Options (Sell)   | 
|Swaps                | 
|Natural Gas          | 
|Call Options (Buy)   | 
|Swaps                | 

141

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Item 12.    Description of Securities Other than Equity Securities

Not
applicable.

142

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PART II

Item
13.    Defaults, Dividend Arrearages and Delinquencies

None.

Item
14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

143

---

Item 15.    Controls and Procedures

Within 90 days prior to the date of this report, BASF performed an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that the material financial and non-financial information required to be disclosed in
Form 20-F and filed with the Securities and Exchange Commission is recorded, processed, summarized and reported timely. The evaluation was performed under the supervision of BASF's
Chairman of the Board of Executive Directors, Dr. Jürgen Hambrecht, and BASF's Chief Financial Officer, Dr. Kurt Bock. In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute assurance of achieving the desired
control objectives. Managerial judgement was necessary to evaluate the cost-benefit relationship of possible controls and procedures. Based on the foregoing, the Chairman of the Board of
Executive Directors and the Chief Financial Officer concluded that BASF's disclosure controls and procedures as of December 31, 2003 were effective. In 2003 there have been no significant
changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation. Therefore, no corrective actions were taken.

144

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Item 16A.    Audit Committee Financial Expert

Our Supervisory Board has determined that the Company's Audit Committee currently includes one Audit Committee financial expert: Max Dietrich
Kley.

Item
16B.    Code of Ethics

The Company has adopted a code of ethics for financial matters that applies to the Board of Executive Directors, including the Chief Executive
Officer, the Chief Financial Officer, and the senior management of financial reporting and controlling, as well as to all of the Company's employees performing similar functions in and outside
Germany and to all other senior financial personnel. The code of ethics for financial matters is available on the Company's website at
www.basf.de/corporate_governance.

Fees
billed to the Company for professional services by its principal accountant, Deloitte & Touche, during the fiscal years 2002 and 2003 were as follows:

Item
16C.    Principal Accountant Fees and Services

|                  
|------------------
|
|
|
|Audit Fees        
|Audit Related Fees
|Tax Fees          
|Other Fees        
|                  
|Total             
|                  

In the above table, "audit fees" are the aggregate fees billed by Deloitte & Touche for professional services in connection with the audit
of the Company's consolidated annual financial statements as well as audits of statutory financial statements of BASF AG and its affiliates. Also included in "audit fees" are amounts billed for
attestation services in relation to regulatory filings and other compliance requirements. "Audit-related fees" are fees billed by Deloitte & Touche for due diligence engagements related to
acquisitions or divestments as well as audit-related attestation regarding compliance with certain agreements and regulatory requirements. "Tax fees" include primarily fees for tax advice on actual or
contemplated transactions, expatriate employee tax services and transfer pricing studies. "Other fees" include a variety of other services, for example insurance compliance services.

In
accordance with German law, BASF's independent auditors are appointed by the Annual Shareholders' Meeting based on a recommendation of our Supervisory Board. The Audit
Committee of the Supervisory Board prepares the board's recommendation on the selection of the independent auditors. Subsequent to the auditors' appointment, the Audit Committee awards the contract
and in its sole authority approves the terms and scope of the audit and all audit engagement fees as well as monitors the auditors' independence. On May 6, 2003, the Annual Shareholders'
Meeting appointed Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, to serve as the Company's independent auditors for the 2003 fiscal year.

In
order to assure the integrity of independent audits, in March 2003, BASF's Supervisory Board adopted pre-approval policies and procedures pursuant to which certain
types of services to be performed by BASF's independent auditors in 2003. Under the policies, the Company's independent auditors are not allowed to perform any non-audit services which may
impair the auditors' independence under the rules of the U.S. Securities and Exchange Commission. Furthermore, the

145

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Supervisory
Board has limited the aggregate amount of non-audit fees payable to Deloitte & Touche during 2003 to a maximum of €0.5 million for services
rendered for BASF Aktiengesellschaft and €4 million for services for all other companies of the BASF Group.

Services
not included in one of the types of pre-approved services covered by the pre-approval policies and procedures require specific authorization of the Audit
Committee. An approval may not be granted if the service falls into a category of services not permitted by current law or if it is inconsistent with maintaining auditor independence.

146

---



PART III

Item
17.    Financial Statements

Not applicable.

Item
18.    Financial Statements

The
following Consolidated Financial Statements, together with the report of Deloitte & Touche GmbH thereon, are filed as part of this Annual Report.

|                                  |                                                                                                      | Page
|--------------------------------- | ---------------------------------------------------------------------------------------------------- | ----
|Report of Independent Accountants |                                                                                                      | F-2 
|Consolidated Financial Statements |                                                                                                      |     
|                                  | Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001               |     
|                                  | Consolidated Balance Sheets at December 31, 2003 and 2002                                            |     
|                                  | Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001           |     
|                                  | Consolidated Statements of Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001 |     
|                                  | Notes to the Consolidated Financial Statements                                                       |     

F-1

---



REPORT OF INDEPENDENT ACCOUNTANTS

We have audited the accompanying consolidated balance sheets of BASF Aktiengesellschaft and subsidiaries as of December 31, 2003
and 2002, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in Germany and in the United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial position of BASF Aktiengesellschaft and its subsidiaries as of
December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in Germany.

As
discussed in Note 2 to the Consolidated Financial Statements, the Company changed its method of accounting for tax loss carryforwards in 2001.

Application
of accounting principles generally accepted in the United States of America would have affected stockholders' equity as of December 31, 2003 and 2002 and net
income for each of the three years in the period ended December 31, 2003 to the extent summarized by the company in Note 4 to the Consolidated Financial Statements.

Frankfurt
am Main,

March 2,
2004

Deloitte &
Touche GmbH
Wirtschaftsprüfungsgesellschaft

|                                |  |                            
|------------------------------- |  | ---------------------------
|Dr. Künnemann
Wirtschaftsprüfer |  | Dr. Beine
Wirtschaftsprüfer

F-2

---



BASF GROUP    CONSOLIDATED STATEMENTS OF INCOME  (euros and dollars in millions except per share amounts)

|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|
|Sales                                                                                                        | 
|Natural gas taxes                                                                                            | 
|                                                                                                             | 
|Sales, net of natural gas taxes                                                                              | 
|Cost of sales                                                                                                | 
|                                                                                                             | 
|Gross profit on sales                                                                                        | 
|Selling expenses                                                                                             | 
|General and administrative expenses                                                                          | 
|Research and development expenses                                                                            | 
|Other operating income                                                                                       | 
|Other operating expenses                                                                                     | 
|                                                                                                             | 
|Income from operations                                                                                       | 
|                                                                                                             | 
|Expense/income from financial assets                                                                         | 
|Write-downs of, and losses from, retirement of financial assets as well as securities held as current assets | 
|Interest result                                                                                              | 
|                                                                                                             | 
|Financial result                                                                                             | 
|                                                                                                             | 
|Income from ordinary activities                                                                              | 
|Extraordinary income                                                                                         | 
|Income before taxes and minority interests                                                                   | 
|Effect of the change in accounting principles for deferred taxes                                             | 
|Income taxes                                                                                                 | 
|                                                                                                             | 
|Income before minority interests                                                                             | 
|Minority interests                                                                                           | 
|                                                                                                             | 
|Net income                                                                                                   | 
|                                                                                                             | 
|Earnings per share                                                                                           | 

---

Solely for the convenience of the reader, the 2003 financial information has been translated into U.S. dollars
using the December 31, 2003 noon buying rate of the Federal Reserve Bank of New York of $1.2597 = €1.00.

The
accompanying Notes are an integral part of these Consolidated Financial Statements.

F-3

---

BASF GROUP    CONSOLIDATED BALANCE SHEETS  (euros and dollars in millions)

|                                                | 
|----------------------------------------------- | 
|
|Assets                                          | 
|Intangible assets                               | 
|Property, plant and equipment                   | 
|Financial assets                                | 
|                                                | 
|Fixed assets                                    | 
|                                                | 
|Inventories                                     | 
|Accounts receivable, trade                      | 
|Receivables from affiliated companies           | 
|Miscellaneous receivables and other assets      | 
|                                                | 
|Receivables and other assets                    | 
|                                                | 
|Marketable securities                           | 
|Cash and cash equivalents                       | 
|                                                | 
|Liquid funds                                    | 
|                                                | 
|Current assets                                  | 
|                                                | 
|Deferred taxes                                  | 
|Prepaid expenses                                | 
|                                                | 
|Total assets                                    | 
|                                                | 
|Stockholders' equity and liabilities            | 
|Subscribed capital                              | 
|Capital surplus                                 | 
|Retained earnings                               | 
|Currency translation adjustment                 | 
|Minority interests                              | 
|                                                | 
|Stockholders' equity                            | 
|                                                | 
|Provisions for pensions and similar obligations | 
|Provisions for taxes                            | 
|Other provisions                                | 
|                                                | 
|Provisions                                      | 
|                                                | 
|Bonds and other liabilities to capital market   | 
|Liabilities to credit institutions              | 
|Accounts payable, trade                         | 
|Liabilities to affiliated companies             | 
|Miscellaneous liabilities                       | 
|                                                | 
|Liabilities                                     | 
|                                                | 
|Deferred income                                 | 
|                                                | 
|Total stockholders' equity and liabilities      | 
|                                                | 

---

Solely for the convenience of the reader, the 2003 financial information has been translated into U.S. dollars
using the December 31, 2003 noon buying rate of the Federal Reserve Bank of New York of $1.2597 = €1.00.

The
accompanying Notes are an integral part of these Consolidated Financial Statements.

F-4

---



BASF GROUP    CONSOLIDATED STATEMENTS OF CASH FLOWS*  (euros and dollars in millions)

|                                                                     |                                           
|-------------------------------------------------------------------- | ------------------------------------------
|
|Net income (excluding extraordinary income)                          |                                           
|Depreciation and amortization of fixed assets                        |                                           
|Changes in inventories                                               |                                           
|Changes in receivables                                               |                                           
|Changes in other operating liabilities and provisions                |                                           
|Changes in pension provisions/prepaid pension assets and other items |                                           
|Net gains from disposal of fixed assets and marketable securities    |                                           
|                                                                     |                                           
|Cash provided by operating activities                                |                                           
|                                                                     |                                           
|Payments related to tangible and intangible fixed assets             |                                           
|Payments related to financial assets and securities                  |                                           
|Payments related to acquisitions                                     |                                           
|Proceeds from divestitures                                           |                                           
|Proceeds from the disposal of fixed assets and securities            |                                           
|                                                                     |                                           
|Cash used in investing activities                                    |                                           
|                                                                     |                                           
|Proceeds from capital increases                                      |                                           
|Share repurchase                                                     |                                           
|Proceeds from the addition of financial indebtedness                 |                                           
|Repayment of financial indebtedness                                  |                                           
|Dividends paid                                                       |                                           
|                                                                     | to shareholders of BASF Aktiengesellschaft
|                                                                     | to minority shareholders                  
|                                                                     |                                           
|Cash used in financing activities                                    |                                           
|                                                                     |                                           
|Net change in cash and cash equivalents                              |                                           
|                                                                     |                                           
|Effects on cash and cash equivalents                                 |                                           
|                                                                     | from foreign exchange rates               
|                                                                     | from changes in scope of consolidation    
|Cash and cash equivalents as of beginning of year                    |                                           
|                                                                     |                                           
|Cash and cash equivalents as of end of year                          |                                           
|                                                                     |                                           
|Marketable securities                                                |                                           
|                                                                     |                                           
|Liquid funds as shown on the balance sheet                           |                                           
|                                                                     |                                           

---

Solely for the convenience of the reader, the 2003 financial information has been translated into U.S. dollars using the
December 31, 2003 noon buying rate of the Federal Reserve Bank of New York of $1.2597 = €1.00.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-5

---

BASF GROUP    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (euros in millions)

|                                                                                            | 
|------------------------------------------------------------------------------------------- | 
|
|January 1, 2003                                                                             | 
|Share buy-back and cancellation of own shares including own shares intended to be cancelled | 
|Dividends paid                                                                              | 
|Net income                                                                                  | 
|(Decrease)/increase of foreign currency translation adjustments                             | 
|Changes in scope of consolidation and other changes                                         | 
|                                                                                            | 
|December 31, 2003                                                                           | 
|                                                                                            | 

|                                                                                            | 
|------------------------------------------------------------------------------------------- | 
|
|January 1, 2002                                                                             | 
|Share buy-back and cancellation of own shares including own shares intended to be cancelled | 
|Dividends paid                                                                              | 
|Net income                                                                                  | 
|(Decrease)/increase of foreign currency translation adjustments                             | 
|Capital injection by minority interests                                                     | 
|Changes in scope of consolidation and other changes                                         | 
|                                                                                            | 
|December 31, 2002                                                                           | 
|                                                                                            | 

---

F-6

---

|                                                                                                                                                                  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|January 1, 2001                                                                                                                                                   | 
|Issuance of new shares from conditional capital through the exercise of warrants attached to the 1986/2001 3% U.S. Dollar Option Bond of BASF Finance Europe N.V. | 
|Share buy-back and cancellation of own shares including own shares intended to be cancelled                                                                       | 
|Dividends paid                                                                                                                                                    | 
|Net income                                                                                                                                                        | 
|(Decrease)/increase of foreign currency translation adjustments                                                                                                   | 
|Capital injection by minority interests                                                                                                                           | 
|Changes in scope of consolidation and other changes                                                                                                               | 
|                                                                                                                                                                  | 
|December 31, 2001                                                                                                                                                 | 
|                                                                                                                                                                  | 

---

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-7

---



BASF GROUP  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of accounting policies

(a)  Basis of presentation

The Consolidated Financial Statements of BASF Aktiengesellschaft ("BASF" or "BASF Aktiengesellschaft") are based on the accounting and valuation
principles of the German Commercial Code (Handelsgesetzbuch) and the German Stock Corporation Act
(Aktiengesetz) as well as the accounting standards of the German Accounting Standards Committee (Deutscher
Standardisierungsrat), collectively German GAAP. The accounting principles conform to generally accepted accounting principles in the United States (U.S. GAAP) to the extent
permissible under the German Commercial Code. The reconciliation of remaining significant deviations to U.S. GAAP is described in Note 4 to these Consolidated Financial Statements.

The
translation of euros into U.S. dollars ($) has been made solely for the convenience of the reader at the noon buying rate of the Federal Reserve Bank of New York on
December 31, 2003, which was $1.2597 = €1.00. No representation is made that such euro amounts could have been or could be converted into dollars at that or any other
exchange rate on such date or any other dates.

(b)  Scope of consolidation

The Consolidated Financial Statements include BASF Aktiengesellschaft, the parent company, and all material subsidiaries in which BASF
Aktiengesellschaft directly or indirectly exercises a majority of the voting rights (collectively, the "Company"). Furthermore, material jointly operated companies are included on a proportional
consolidation basis, with the exception of the joint venture Basell group, which is accounted for using the equity method. Basell group largely operates independently and is not included in the
planning and approval processes of BASF.

Consolidated
companies and changes to the scope of consolidation:

|                                      
|--------------------------------------
|
|Consolidated companies as of January 1
|                                      
|First-time consolidations             
|                                      
|Deconsolidations                      
|                                      
|                                      
|Consolidated as of December 31        
|                                      

Subsidiaries and joint ventures whose impact on the net worth, financial position and results of the Company is individually and in the aggregate
immaterial, are excluded from the scope of consolidation.

Generally,
affiliated companies not consolidated due to immateriality, non-proportionally consolidated jointly owned companies and associated companies are accounted for
using the equity method. Associated companies represent those entities where the Company has a participation of at

F-8

---

least
20% and exercises a significant influence over the operating and financial policies. Overall, this applies to:

|                          
|--------------------------
|
|Affiliated companies      
|Joint ventures            
|Other associated companies
|                          
|                          
|                          

Major changes to the scope of consolidation, other than those relating to corporate structure, are as follows:

2003:

First-time consolidations comprise:



Deconsolidations
comprise:



2002:

First-time consolidations comprise:



Deconsolidations
comprise:



2001:

First-time consolidations comprise:



F-9

---



Deconsolidations
comprise:



Changes
in the scope of consolidation, acquisitions and divestitures had the following effects on the changes in the Consolidated Financial Statements:

|                                     |                                      
|------------------------------------ | -------------------------------------
|
|
|Sales                                |                                      
|                                     | Thereof:                             
|                                     | Acquisitions                         
|                                     | Divestitures                         
|                                     | Changes in scope of consolidation    
|Fixed assets                         |                                      
|                                     | Thereof property, plant and equipment
|Inventories and receivables          |                                      
|Liquid funds                         |                                      
|                                     |                                      
|Assets                               |                                      
|                                     |                                      
|Stockholders' equity                 |                                      
|Financial liabilities                |                                      
|Other liabilities                    |                                      
|                                     |                                      
|Stockholders' equity and liabilities |                                      
|                                     |                                      

Significant acquisitions

In 2003, BASF purchased a package of crop protection products, including the insecticide fipronil and certain seed treatment fungicides, from
Bayer CropScience, Germany for the consideration of approximately €1.2 billion. In addition, acquisitions in 2003 included the acquisition of the engineering plastics business
from Honeywell, United States for $250 million, and the purchase of the Callery Chemical Division from the Mine Safety Appliance Company, United States for approximately $65 million.
Significant divestitures in 2003 involved, in particular the sale of BASF's nylon fibers business to Honeywell for $160 million.

Announced acquisitions

In January 2004, BASF and Sunoco, United States, agreed on the sales price of $91 million for the purchase of the plasticizer
business including inventories of $29 million. In addition, Sunoco's Neville

F-10

---

Island,
Pennsylvania, site will manufacture plasticizers for BASF under a tolling agreement. The transaction also includes production plants for phthalic anhydride and oxo alcohols in Pasadena, Texas,
as well as registrations, trademarks, patents, customer lists and tolling rights. Sunoco's annual sales in this business amounted to approximately $150 million.

Proportional consolidation

The Company accounts for its investments in 12 jointly operated companies (2002: 11, 2001: 11) using the proportional consolidation method,
as permitted under German GAAP. Under U.S. GAAP, all investments in jointly operated companies must be accounted for using the equity method. The differences in accounting treatment between
proportional consolidation and the equity method of accounting have no impact on reported stockholders' equity or net income. Rather, they relate solely to matters of classification and display. The
United States Securities and Exchange Commission (SEC) permits the omission of such differences in classification and display in the reconciliation to U.S. GAAP appearing in Note 4.

Condensed
financial information relating to the Company's pro rata interest in jointly operated companies accounted for using the proportional consolidation method is as follows:

Income statement information

|                                          
|------------------------------------------
|
|
|
|Sales                                     
|Gross profit                              
|Income from operations                    
|Income before taxes and minority interests
|Net income                                

Balance sheet information

|                                          
|------------------------------------------
|
|
|
|Fixed assets                              
|                                          
|Inventories and receivables               
|Liquid funds                              
|                                          
|Total assets                              
|                                          
|Stockholders' equity                      
|Provisions                                
|Financial liabilities                     
|Other liabilities                         
|                                          
|Total liabilities and stockholders' equity
|                                          

F-11

---

Cash flow information

|                                                | 
|----------------------------------------------- | 
|
|
|
|Cash provided by operating activities           | 
|Cash used in investing activities               | 
|Cash used in (provided by) financing activities | 
|                                                | 
|Net change in cash and cash equivalents         | 
|                                                | 

Summarized financial information for significant associated companies accounted for using the equity method

Condensed financial information of the significant companies accounted for using the equity method, including the Basell Group (BASF's share:
50%), from 2002, the Solvin Group (BASF's share: 25%), Svalöf Weibull Group (BASF's share: 40%) and, until September 2003, DyStar Group (BASF's share: 30%), is as follows:

Income Statement

|                                           | 
|------------------------------------------ | 
|
|
|
|Sales                                      | 
|Gross profit                               | 
|Income from operations                     | 
|Income before taxes and minority interests | 
|Net income                                 | 
|                                           | 
|BASF's share of net income                 | 
|                                           | 

Balance sheet information

|                                          
|------------------------------------------
|
|
|
|Fixed assets                              
|                                          
|Inventories and receivables               
|Liquid funds                              
|                                          
|Total assets                              
|                                          
|Stockholders' equity                      
|Provisions                                
|Financial liabilities                     
|Other liabilities                         
|                                          
|Total liabilities and stockholders' equity
|BASF's investment                         
|                                          

List of shares held:A list of companies included in the Consolidated Financial
Statements as well as a list of all companies in which BASF has a participation, has been deposited in the Commercial Register HRB 3000 in Ludwigshafen (Rhein), Germany, as required by the German
Commercial Code,

F-12

---

Section 313
(2). The List of Shares Held can be obtained as a separate report from BASF Aktiengesellschaft.

(c)   Summary of significant accounting policies

Balance sheet date:The Consolidated Financial Statements are generally prepared using the individual
financial statements of the companies forming part of the group (hereinafter referred to as "consolidated companies"). Such financial statements are generally prepared as of the balance sheet date of
the Consolidated Financial Statements. In certain cases, interim financial statements
or adjusted statements as of the balance sheet date of the Consolidated Financial Statements are prepared and used.

Uniform valuation:Assets and liabilities of consolidated companies are accounted for and valued
uniformly in accordance with the principles described herein. Where the accounting and valuation methods applied in the financial statements of the consolidated companies differ from these principles,
appropriate adjustments are made to the relevant items. For companies accounted for under the equity method, significant deviations in the valuation methods are adjusted.

Eliminations:Transactions between consolidated companies as well as inter-company profits resulting
from sales between consolidated companies are eliminated in full, and those for jointly operated companies on a pro rata basis. Inter-company profits resulting from sales to companies accounted for
under the equity method, on customary market conditions are eliminated if they are material.

Capital consolidation:Capital consolidation is based on a method equivalent to the purchase method
required under U.S. GAAP. At the time of acquisition, the acquisition cost of participations is offset against the proportionate share of equity acquired. Differences arising are allocated to the
assets or liabilities of the acquired company up to their fair values or capitalized as intangible fixed assets, if they can be reliably identified and measured. Differences not allocated to
individual assets are capitalized as goodwill and amortized within the expected useful life, within a period of five to 20 years.

Revenue recognition:Revenues from product sales and the performance of services are recognized upon
shipment to customers or performance of services if ownership and risks are transferred to the buyer. Provisions for discounts, sales returns, rebates to customers, estimated future warranty
obligations and other claims are provided for in the same period the related sales are recorded.

Intangible assets:Intangible assets are valued at acquisition cost less scheduled
straight-line amortization. The weighted average amortization period for the intangible assets is 11 years for 2003 and 12 years for 2002 based on the following expected
useful lives:

|                                                   
|---------------------------------------------------
|
|
|Goodwill                                           
|Trademarks, product rights, and licenses           
|Marketing, supply and similar rights               
|Know-how and patents                               
|Concessions, explorations rights and similar rights
|Software                                           
|Other rights and values                            

Goodwill
is assigned to reporting units and tested annually for impairment in accordance with U.S. GAAP. There are two steps to the goodwill impairment test. The first step, used to
identify potential impairment, compares the fair value of a reporting unit with its carrying value, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second
step is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit

F-13

---

goodwill
with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount
equal to that excess. In computing fair value, the Company utilizes discounted future cash flows, based on long-term earnings forecasts for the reporting units taking into account
macroeconomic and business conditions (see also Note 4h).

The
Company evaluates the other intangible assets whenever significant events or changes in circumstances occur which might impair recovery of recorded asset costs.

Property, plant and equipment:Property, plant and equipment are stated at acquisition or production
cost less scheduled depreciation over their estimated useful lives. Low-value assets are fully depreciated in the year of acquisition and are shown as retirements.

The
cost of self-constructed plants includes direct costs and an appropriate proportion of the overhead cost of units involved in the construction, but excludes financing
costs, pension funds, or voluntary social benefits for the period of construction. Fixed assets, including long-distance natural gas pipelines, are depreciated using the
straight-line method. Movable fixed assets put into operation before the end of 2000 are mostly depreciated by the declining balance method, with a change to straight-line
depreciation when this results in higher depreciation amounts.

The
weighted average periods of depreciation are as follows for 2003 and 2002:

|                                                 
|-------------------------------------------------
|
|
|Buildings and structural installations           
|Industrial plant and machinery                   
|Long-distance natural gas pipelines              
|Working and office equipment and other facilities

Property,
plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Measurement of
an impairment loss for long-lived assets that the Company expects to hold and use is based on the fair value of the asset, which is usually based on the discounted expected future cash
flows from the use of the asset and its eventual disposition.

The
Company follows the successful efforts method of accounting for its oil and gas operations. Under this method, costs of successful and uncompleted oil and gas drilling operations are
capitalized as tangible assets. Successful drillings are depreciated under the unit-of-production basis. Successful drillings of German operations that were completed before
the end of 2000 are depreciated under the declining balance method over the estimated useful lives of eight years (for drilling in old fields) and 15 years. Geophysical expenditures, including
exploratory and dry-hole costs, are charged against income.

Financial assets:Shares in more significant non-consolidated affiliated or associated
companies are accounted for by the equity method. Other shares, participations and securities held as fixed assets are shown at acquisition cost or, where an
other-than-temporary impairment of value occurs, at the appropriate lower values. Investments in affiliated and associated companies accounted for using the equity method are
carried at cost of acquisition, plus the Company's equity in undistributed earnings. Goodwill associated with such investments is amortized over a period of between four and 10 years.

Interest-bearing
loans are stated at cost; non-interest-bearing loans or loans at below market interest rates are stated at their present value. Loans are considered impaired
when, based on current information and events, it is probable that the Company will be unable to collect all amounts due. In such circumstances, the Company recognizes an impairment loss based on the
estimated fair value of the loan.

F-14

---

Inventories:Inventories are carried at acquisition costs or production costs. They are valued at
market values if lower than cost. These lower values are the replacement costs for raw materials and factory supplies and merchandise and, in the case of work in process and finished products, the
expected sales proceeds less costs to be incurred prior to sale or lower reproduction cost.

Production
costs include, in addition to direct costs, an appropriate allocation of overhead cost of production using normal utilization rates of the production plants. Financing costs,
pensions, or voluntary social benefits are not included in production costs.

Construction-in-progress
relates mainly to chemical plants under construction for third parties. Profits are recognized at finalization and billing of a project
or part of a project. Expected losses are recognized by write-downs to the lower attributable values.

Receivables and other assets:Receivables are generally carried at their nominal value. Notes
receivable and loans generating no or a low-interest income are discounted to their present values. Lower attributable values due to risks of collectibility and transferability are covered
by appropriate valuation allowances.

Marketable Securities:Securities are valued at cost. They are valued at quoted or market values if
lower than cost.

Cash and cash equivalents:Cash and cash equivalents comprise mainly cash at banks, cash on hand and
checks in transit.

Deferred tax assets:Deferred tax assets are recorded for taxable temporary differences between the
valuation of assets and liabilities in the financial statements of the consolidated companies and the carrying amounts for tax purposes. In addition, deferred taxes are recorded for tax loss
carryforwards. For companies located in Germany a 38% tax rate is applied; for other companies the tax rates applicable in the individual countries are used. Appropriate valuation allowances are made
if expected future earnings of a company make it seem more likely than not that the tax benefits will not be realized.

Provisions:Provisions for pensions are based on actuarial computations made predominantly according
to the projected unit credit method. Similar obligations, especially those arising from commitments made by North American Group companies to pay the healthcare costs and life insurance premiums of
retired staff and their dependents, are included in pension provisions.

Tax
provisions are recognized for German trade income tax and German corporate income tax and similar income taxes in the amount necessary to meet the expected payment obligations, less
any prepayments that have been made.

Provisions
for deferred taxes are recognized for a net liability from taxable temporary differences between the valuation of assets and liabilities in the financial statements of the
consolidated
companies and the carrying amounts for tax purposes, using the tax rates applicable in the individual countries.

Other
provisions are recorded for the expected amounts of contingent liabilities and probable losses from pending transactions. Certain conditions may exist as of the date the financial
statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements.

Maintenance
provisions are established to cover omitted maintenance procedures as of the end of the year, and are expected to be incurred within the first three months of the following
year. The amount provided is based on reasonable commercial judgment.

F-15

---

Provisions
are established for environmental protection measures and risks if the measures are necessary to comply with legal or regulatory obligations and do not result in items to be
capitalized as production costs. Liabilities for these expenditures are recorded on an undiscounted basis when environmental assessments or clean-ups are probable, the costs can be
reasonably estimated and no future economic benefit is expected. Provisions for required re-cultivation associated with oil and gas operations, especially the filling of wells and
clearance of oilfields, or the operation of landfill sites are built up over their expected service lives.

In
addition, provisions are accrued for regular shutdowns within prescribed intervals of certain large-scale plants as required by technical surveillance authorities. Provisions are
accrued in installments until the next scheduled shutdown based upon the expected costs to carry out these measures. Provisions are not recorded for the costs to temporarily shut down the facilities
or for forgone earnings.

Provisions
for restructuring measures are recorded when a commitment from management exists and a detailed plan has been established. Such provisions include severance payments and other
personnel-related costs, as well as specific site restructuring costs such as the costs for demolition and closure.

Provisions
for long-service and anniversary bonuses are actuarially calculated, predominantly using an interest rate of 5.5%. For pre-retirement
part-time programs, the present value of supplemental (top-up) payments are provided when the employee accepts the offer and the wage and salary payments
due during the passive phase of agreements are accrued through installments and discounted at an interest rate of 5.5%. Provisions are recorded for the expected costs of pre-retirement
part-time programs that are anticipated to be contracted during the term of the collective bargaining agreements, taking into consideration the ceilings provided in the collective
agreements.

The
formation of provisions for the BASF stock option program (BOP) and BASF's incentive share program "plus" is described in detail in Note 28.

Conversion of foreign currency items:The cost of assets acquired in foreign currencies and revenues
from sales in foreign currencies are recorded at current rates on transaction dates. Short-term foreign currency receivables and liabilities are valued at the rate on the balance sheet
date. Long-term foreign currency receivables are recorded at the rate prevailing on the acquisition date or at the lower rate on the balance sheet date. Long-term foreign
currency liabilities are recorded at the rate prevailing on the acquisition date or at the higher rate on the balance sheet date. Foreign-currency receivables or liabilities that are hedged
individually are carried at hedge rates.

Derivative financial instruments:Derivative financial instruments are treated as pending
transactions and are not recorded as assets or liabilities. Underlying transactions and hedging measures are combined and valued together, when applicable. Profits from hedging transactions that
cannot be allocated to a particular underlying transaction are recorded in income upon maturity. Unrealized losses from hedging transactions, which cannot be allocated to a particular underlying
transaction are recognized currently in earnings and included in provisions.

The
use of derivative financial instruments to hedge against foreign currency, interest rate, and price risks is described in detail in Note 29.

Translation of foreign currency financial statements:The translation of foreign currency financial
statements conforms with Statement of Financial Accounting Standard (SFAS) 52. The local currency or the U.S. dollar, is the functional currency of BASF subsidiaries and jointly operated companies in
North America, Japan, Korea, China, Brazil, and Singapore. Translation therefore takes place using the current rate method. Balance sheet items are translated to euros at year-end rates
except equity accounts at historical rates. Expenses and income are translated at monthly average rates

F-16

---

and
accumulated for the year. The effects of rate changes are shown under "currency translation adjustment" as a separate component of equity and are treated as income or expense only when a company
is disposed of.

The
euro is the functional currency for the remaining companies. Remeasurement therefore takes place using the temporal method: fixed assets except loans, and paid in capital are
translated using historical rates. The other assets, liabilities, and provisions are translated using the year-end rates. Expenses and income are converted at quarterly average rates
cumulated to year-end figures, except for those items derived from balance sheet items converted at historical rates, which are also translated at historical rates. Foreign exchange gains
or losses resulting from the remeasurement process are included in other operating expenses or income.

Earnings per share:The calculation of earnings per share is based on the average number of common
shares outstanding during the applicable period and the net income of the period.

Use of estimates in financial statement preparation:The preparation of financial statements requires
the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. In the preparation of these Consolidated Financial Statements, estimates and assumptions have been made by management concerning
the selection of useful lives of property, plant and equipment and intangible assets, the measurement of provisions, the carrying value of investments, and other similar evaluations of assets and
obligations. Given the uncertainty regarding the determination of these factors, actual results could differ from these estimates.

2.    Changes in accounting principles

The company changed the method of estimating the provision for obligations to remove equipment and fill in wells. Such provisions were accrued by
German oil and gas companies on straight-line basis. From 2003 onward such provisions are accrued uniformly based upon the units already produced in comparison to the estimate of available
remaining reserves. The change in the method of estimation resulted in an increase in 2003 in net income of €24.7 million, and an increase in earnings per share of
€0.04.

Additions
of movable assets to property, plant and equipment after January 1, 2001 are depreciated using the straight-line method, which is considered to better
reflect the development of values of the Company's plants. Movable assets of property, plant and equipment already in use before the end of 2000 continue to be depreciated by the declining balance
method with a change to straight-line depreciation when this results in higher depreciation amounts. Successful drillings in the oil and gas operations added in 2001 are depreciated under
the unit-of-production method. Successful drillings of German operations that began production prior to 2001 continue to be depreciated under the declining balance method.

In
2001, the effect of the change in depreciation methods in 2001 was to reduce depreciation expense by €171.9 million and to increase net income by
€110.2 million, or €0.18 per share.

Beginning
in 2001, deferred tax assets for tax loss carryforwards are recorded if the expected future earnings of a company make it seem more likely than not that the tax benefit will be
realized. This accounting treatment, mandatory under U.S. GAAP, is allowed in Germany based on the recently issued Standard No. 10 of the German Accounting Standards Board.

Deferred
tax assets for tax loss carryforwards arising in 2001 reduced income tax expenses and correspondingly increased net income by €219.7 million, or
€0.37 per share.

F-17

---

Deferred
tax assets recorded retroactively for tax loss carryforwards prior to 2001 resulted in an increase in net income of €50.6 million, or
€0.08 per share, which is disclosed separately in the Consolidated Statements of Income as "Effect of the change in accounting principles for deferred taxes."

The
changes in accounting principles in 2001 increased earnings per share in 2001 by €0.63.

3.    Discontinued operations

On March 2, 2001, BASF's pharmaceuticals business was sold on the basis of an agreement dated December 14, 2000 to Abbott
Laboratories Inc., Abbott Park, Illinois. Net sales and income of the pharmaceuticals business are shown separately and included in the financial statements of the BASF Group as well as in the
data of the former business segment Health & Nutrition (now called Agricultural Products & Nutrition) for 2000 and for the period ended March 1, 2001.

The
pharmaceuticals business is considered a discontinued operation under U.S. GAAP and would therefore not be included in the results from continuing operations for the years 2000 and
2001. The effect on the Consolidated Financial Statements would be as follows:

Income statement:

|                                              
|----------------------------------------------
|
|
|Sales                                         
|Income from operations                        
|Income before taxes                           
|Net income/income from discontinued operations

Net income from discontinued operations has been determined using a 40% income tax rate.

The
gain on the disposal of the pharmaceuticals business was separately disclosed as extraordinary income in 2001 (Note 9). In accordance with U.S. GAAP, this gain would be
adjusted for U.S. GAAP valuation differences and reported as part of income from discontinued operations.

F-18

---

4.    Reconciliation to U.S. GAAP

The Consolidated Financial Statements comply with U.S. GAAP as far as permissible under German GAAP. The remaining differences between German and
U.S. GAAP relate to valuation methods that are required under U.S. GAAP but which are not permissible under German GAAP.

The
following is a summary of the significant adjustments to net income and stockholders' equity that would be required if U.S. GAAP had been fully applied rather than German GAAP.

|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|
|
|
|Reconciliation of net income to U.S. GAAP                                                                    | 
|Net income as reported in the Consolidated Financial Statements of income under German GAAP                  | 
|Adjustments required to conform with U.S. GAAP                                                               | 
|Capitalization of interest                                                                                   | 
|Capitalization of software developed for internal use                                                        | 
|Accounting for pensions                                                                                      | 
|Accounting for provisions                                                                                    | 
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates | 
|Valuation of securities at market values                                                                     | 
|Valuation adjustments relating to companies accounted for under the equity method                            | 
|Reversal of goodwill amortization and write-offs due to permanent impairment                                 | 
|Other adjustments                                                                                            | 
|Deferred taxes and recognition of tax credit for dividend payments                                           | 
|Minority interests                                                                                           | 
|                                                                                                             | 
|Net income in accordance with U.S. GAAP                                                                      | 
|                                                                                                             | 

|                                                                 |         
|---------------------------------------------------------------- | --------
|
|
|
|Net income in accordance with U.S. GAAP                          |         
|                                                                 |         
|                                                                 | Thereof:
|                                                                 |         
|                                                                 |         
|Cumulative effect of implementing SFAS 133 as of January 1, 2001 |         

Earnings per share

The calculation of earnings per common share is based on the weighted-average number of common shares outstanding during the applicable period.
The calculation of diluted earnings per common share reflects the effect of all dilutive potential common shares that were outstanding during the respective period. The BASF employee participation
program "plus" has been included in the

F-19

---

computation
of diluted earnings per share. Due to a resolution by the Board of Executive Directors in 2002, settlements of stock options from the BASF stock option program (BOP) for senior management
will be made in cash, therefore such stock options have no dilutive effect.

The
earnings per share from continuing operations based on income from ordinary activities after taxes were not impacted by any dilutive effect in 2003, 2002 and 2001, because the impact
of potential common shares was anti-dilutive in each year.

|                                                                                   |                                                                 
|---------------------------------------------------------------------------------- | ----------------------------------------------------------------
|
|
|
|Net income in accordance with U.S. GAAP                                            |                                                                 
|                                                                                   |                                                                 
|Number of shares (1,000)                                                           |                                                                 
|Weighted average undiluted number of shares                                        |                                                                 
|Dilution effect                                                                    |                                                                 
|Weighted average diluted number of shares                                          |                                                                 
|                                                                                   |                                                                 
|Basic earnings per share in accordance with U.S. GAAP                              |                                                                 
|Dilution effect                                                                    |                                                                 
|Diluted earnings per share in accordance with U.S. GAAP                            |                                                                 
|                                                                                   | Earnings per share in accordance with U.S. GAAP                 
|                                                                                   | From continuing operations                                      
|                                                                                   | From discontinued operations                                    
|                                                                                   | Cumulative effect of implementing SFAS 133 as of January 1, 2001
|                                                                                   |                                                                 
|Diluted earnings per share from continuing operations in accordance with U.S. GAAP |                                                                 
|                                                                                   |                                                                 

|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|
|
|
|Reconciliation of stockholders' equity to U.S. GAAP                                                          | 
|Stockholders' equity as reported in the Consolidated Balance Sheets under German GAAP                        | 
|Minority interests                                                                                           | 
|                                                                                                             | 
|Stockholders' equity excluding minority interests                                                            | 
|Adjustments required to conform with U.S. GAAP                                                               | 
|Capitalization of interest                                                                                   | 
|Capitalization of software developed for internal use                                                        | 
|Accounting for pensions                                                                                      | 
|Accounting for provisions                                                                                    | 
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates | 
|Valuation of securities at market values                                                                     | 
|Valuation adjustments relating to companies accounted for under the equity method                            | 
|Reversal of goodwill amortization and write-offs due to permanent impairment                                 | 
|Other adjustments                                                                                            | 
|Deferred taxes and recognition of tax credit for dividend payments                                           | 
|Minority interests                                                                                           | 
|                                                                                                             | 
|Stockholders' equity in accordance with U.S. GAAP                                                            | 
|                                                                                                             | 

F-20

---

(a)  Capitalization of interest

For U.S. GAAP purposes, the Company capitalizes interest on borrowings during the active construction period of major capital projects.
Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. The capitalization of interest relating to capital projects is not permissible
under German GAAP. In calculating capitalized interest, the Company has made assumptions with respect to the capitalization rate and the average amount of accumulated expenditures. The Company's
subsidiaries generally use the entity-specific weighted-average borrowing rate as the capitalization rate.

(b)  Capitalization of software developed for internal use

Certain costs incurred for computer software developed or obtained for the Company's internal use are to be capitalized and amortized over the
expected useful life of the software. Such costs have been expensed in these financial statements because the capitalization of self-developed intangible assets is not permissible under
German GAAP.

(c)   Accounting for pensions

Pension benefits under Company pension schemes are partly funded in a legally independent fund "BASF Pensionskasse VVaG" ("BASF Pensionskasse").
Pension liabilities and plan assets of BASF Pensionskasse are not included in BASF Group's balance sheet. However, contributions to the BASF Pensionskasse are included in expenses for pensions and
assistance.

BASF
guarantees the commitments of the BASF Pensionskasse. For U.S. GAAP purposes, BASF Pensionskasse would be classified as a defined benefit plan and therefore included in the
calculation of net periodic benefit cost as well as the projected benefit obligation and plan assets. The valuation of the pension obligations under the projected unit credit method and of the fund
assets of BASF Pensionskasse at market values would result in a prepaid pension asset in
accordance with U.S. GAAP that is not recorded in the Consolidated Financial Statements under German GAAP.

Net
periodic benefit cost in accordance with U.S. GAAP would be lower than showing the Company's contribution to the BASF Pensionskasse as expense.

Information
about the funded status of the BASF Pensionskasse is provided in the following table:

|                                              
|----------------------------------------------
|
|
|Plan assets as of December 31                 
|Projected benefit obligation as of December 31
|                                              
|Funded status                                 
|Unrecognized actuarial losses                 
|                                              
|Prepaid pension asset                         
|                                              

The accumulated pension benefit obligation (ABO) in 2003 is €3,429.8 million and in 2002 is
€3,285.4 million.

The
valuation of certain pension plans of foreign subsidiaries, in accordance with SFAS 87 also resulted in prepaid pension assets (Note 23), included in the reconciliation to
U.S. GAAP. After consideration of unrecognized actuarial gains and losses, €195.6 million in 2003, and €205.9 million in 2002 were included in the
reconciliation to U.S. GAAP.

F-21

---

(d)  Accounting for provisions

The reconciliation item contains the following deviations:



Under German GAAP, the company records a provision for the present value of all agreed upon supplemental (top-up) payments, when the employee nearing
retirement age accepts the offer of the pre-retirement part-time program. A provision is also recorded for the expected costs for agreements that are anticipated to be
concluded during the term of the collective bargaining agreements, taking into consideration the ceilings on the number of employee participants provided in such collective bargaining agreements. In
accordance with U.S. GAAP, provisions may only be recorded for employees who have accepted an offer, and the supplemental payments are accrued over the employee's remaining service period. This
results in an increase in income under U.S. GAAP of €124.4 million in 2003, €6.0 million in 2002, and €9.6 million in 2001.
Stockholders' equity increases by €140.0 million in 2003 and €15.6 million in 2002.



German GAAP requires companies to accrue provisions as of the end of the year for expected costs of omitted maintenance procedures expected to take place in the
first three months of the following year. Such costs would be expensed as incurred under U.S. GAAP. The amounts included in the reconciliation of net income related to maintenance provisions were
€(1.7) million in 2003, €6.4 million in 2002, and €(5.6) million in 2001.
The amounts in the reconciliation of stockholders' equity were €32.0 million in 2003, and €33.7 million in 2002.



SFAS 146, "Accounting for Costs Associated with Exit and Disposal Activities" was applied for U.S. GAAP purposes in 2003. Under this standard,
expected costs associated with the exit or disposal of business activities can only be accrued when a liability exists. This includes severance payments for employees, the cancellation of contracts,
the shutdown of production facilities, and the relocation of employees.

Since
the accruals for restructuring measures under German GAAP are recorded based upon management decisions, the adoption of SFAS 146 for the first time in 2003, increased net
income in accordance with U.S. GAAP by €23.5 million, and stockholders' equity by €23.3 million.



SFAS 143, "Accounting for Asset Retirement Obligations" addresses financial accounting and reporting for obligations and costs associated with the
retirement of tangible long-lived assets and was adopted in the fiscal year 2003. The expected obligations and costs associated with the demolition of plants and removal of potential
damage to the environment have to be accrued as of the start of the production as additional cost for the related plants and are depreciated over the useful life. This also includes the change of
these potential liabilities due to adjustments to the conditions as of the balance sheet date.

According
to German GAAP, provisions required for re-cultivation associated with oil and gas operations, especially the filling of wells and clearance of oilfields, or the
operation of landfill sites are accrued over their expected service lives. The initial application of SFAS 143 did not have a material effect on net income or stockholders' equity in 2003.

F-22

---

(e)  Accounting for derivatives at fair value and valuation of long-term foreign currency items

As required by SFAS 133, as amended by SFAS 138, derivative contracts are to be accounted for at fair values. Where hedge accounting
is not applicable, changes in the fair values of derivative contracts are to be included in net income, together with foreign exchange gains and losses of the underlying transactions.

Under
German GAAP, unrealized gains on swaps and other forward contracts are deferred until settlement or termination while unrealized expected losses from firm commitments are
recognized as of each period end. Under U.S. GAAP, these contracts are marked to market.

Furthermore,
hedge accounting by a combined valuation of underlying transaction and derivatives is allowed by SFAS 133 to a lesser extent than applied in these financial
statements.

Under
German GAAP, long-term receivables and liabilities denominated in a foreign currency are converted into euros at the exchange rates of the date when the transactions
took place or the lower exchange rates at the end of the year for receivables and the higher exchange rates for liabilities. U.S. GAAP requires conversion at the exchange rate at the end of the
year.

(f)   Valuation of securities

Under U.S. GAAP, available-for-sale securities are recorded at market values on the balance sheet date. If the effect
comes from unrealized profits or temporary impairments, the change in valuation is immediately recognized in a separate component of stockholders' equity. Realized profits and losses are credited or
charged to income, as are other than temporary impairments of value. The major part of securities and other investments are considered to be available-for-sale. Under German
GAAP, such securities and other investments are valued at the lower of acquisition cost or market value at the balance sheet date.

(g)  Valuation adjustments relating to companies accounted for under the equity method

For purposes of the reconciliation to U.S. GAAP, the earnings of companies accounted for using the equity method have been determined using
valuation principles prescribed by U.S. GAAP.

(h)  Reversal of goodwill amortization and write-offs due to permanent impairment

Goodwill is amortized over its useful life in accordance with German GAAP. The U.S. GAAP standard SFAS 142 "Goodwill and other Intangible
Assets," which had to be applied for the first time in 2002, requires write-offs only based on annual impairment tests. The recoverability of goodwill is reviewed at the
reporting-unit level by comparing the fair value of the reporting unit determined using discounted future cash flows, to the carrying value. There were no impairment write-downs required
in 2003 or 2002. The goodwill amortization included in these financial statements is reversed and added back to net income.

In
2001, the retroactive application of SFAS 142 would have resulted in an increase of earnings in accordance with U.S. GAAP of €243.3 million after
deduction of €75.0 million of income taxes. Earnings per share would have increased by €0.40 in 2001.

(i)   Other adjustments

This item primarily includes the adjustment of provisions for stock compensation.

F-23

---

Following
a resolution by the Board of Executive Directors in 2002, stock options are to be settled in cash. Under U.S. GAAP, such obligations are to be accounted for as stock
appreciation rights based on the intrinsic value of the options on the balance sheet date. However, options granted in prior years, for which cash settlement was not foreseen, are to be accounted for
in accordance with SFAS 123 as equity instruments based upon the fair value on the grant date.

In
the present Financial Statements, all obligations resulting from stock options are accounted for based upon the fair value on the balance sheet date. A provision is accrued over the
vesting period of the options. The different accounting methods led to an increase in net income in accordance with U.S. GAAP of €17.2 million in 2003, and a decrease of
€10.7 million in 2002 and €8.3 million in 2001.

In
the present Financial Statements, obligations resulting from stock options are shown as provisions. In accordance with U.S. GAAP, options for which cash settlement was not originally
foreseen are recorded as additions to stockholders' equity.

Overall,
the accounting for stock options resulted in a decrease in stockholders' equity of €14.6 million in 2003, and an increase of
€11.2 million in 2002.

(j)   Deferred taxes

The adjustments required to conform with U.S. GAAP would result in taxable temporary differences between the valuation of assets and liabilities
in the Consolidated Financial Statements and the carrying amount for tax purposes. Resulting adjustments for deferred taxes primarily relate to the following:

|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|
|
|
|Capitalization of interest                                                                                   | 
|Capitalization of software developed for internal use                                                        | 
|Accounting for pensions                                                                                      | 
|Accounting for provisions                                                                                    | 
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates | 
|Valuation of securities at market values                                                                     | 
|Valuation adjustments relating to companies accounted for under the equity method                            | 
|Reversal of goodwill amortization and write-offs due to permanent impairment                                 | 
|Other adjustments                                                                                            | 
|Recognition of tax credit for dividend payments                                                              | 
|                                                                                                             | 
|                                                                                                             | 
|                                                                                                             | 

Other adjustments include in 2001 expenses from the elimination of deferred taxes on tax loss carryforwards, which are recorded in the financial
statements since 2001.

The
change of the deferred taxes for foreign currency translation adjustments is recognized in other comprehensive income.

Following
a change in German tax law in 2003, the tax credit related to the distribution of retained earnings previously taxed at higher rates can only be used to reduce corporate income
taxes in installments starting in 2006. In 2002 and 2001, the tax credit for dividend payments was booked in the

F-24

---

financial
year for which the dividend was recommended, in accordance with the tax-law situation that was valid in those years.

In
accordance with U.S. GAAP, such tax credits are to be recognized as a reduction of income tax expenses in the period in which the tax credits will be recognized for tax purposes. The
previous difference in the treatment of tax credits has been discontinued. The previous adjustments in income and stockholders' equity according to U.S. GAAP were eliminated in 2003.

(k)  Minority interests

The share of minority shareholders in the aforementioned reconciliation items to U.S. GAAP of net income and stockholders' equity are reported
separately.

Consolidation of majority-owned subsidiaries:U.S. GAAP requires the consolidation of all controlled subsidiaries. Under
German GAAP, the Company does not consolidate certain subsidiaries if their individual or their combined effect on financial position, results of operations and cash flows is not material. The effect
of non-consolidated subsidiaries for 2003, 2002 and 2001, on total assets, total liabilities, stockholders' equity, net sales and net income was less than 2%.

Additionally,
under German GAAP, the Company accounts on a prospective basis for previous unconsolidated subsidiaries that are added to the scope of consolidation. U.S. GAAP requires
consolidation for all periods that a subsidiary is controlled. The effects of adding previously unconsolidated companies to the scope of consolidation on net sales, net income, assets and liabilities
was immaterial.

Balance Sheet presentation:The classification of the balance sheet is as required by German GAAP. Noncurrent portions of
receivables and prepaid expenses are disclosed in Notes 17 and 19. Current portions of provisions and liabilities are disclosed in Notes 24 and 25.

New U.S. GAAP accounting standards not yet adopted

FIN 46, "Consolidation of Variable Interest Entities," which was issued in January 2003 and revised in December 2003, requires
consolidation of variable interest entities by the primary beneficiary, even in the absence of a majority of the voting rights. FIN 46 is to be applied for interests in special purpose entities for
periods ending after December 15, 2003 and for interests in all other entities for periods ending after March 15, 2004. The application of FIN 46 within the BASF group was analyzed, and
it was determined that it would not have a significant impact on the assets, profitability, or financial situation of the BASF Group.

F-25

---

Reporting of comprehensive income

Comprehensive income in accordance with SFAS 130, "Reporting Comprehensive Income," includes the impact of expenses and earnings that are
not included in net income under U.S. GAAP.

|                                                                            | 
|--------------------------------------------------------------------------- | 
|
|
|
|Comprehensive income                                                        | 
|Net income in accordance with U.S. GAAP (before other comprehensive income) | 
|Change of foreign currency translation adjustments                          | 
|/*/    Gross                                                                | 
|/*/    Deferred taxes                                                       | 
|Changes in unrealized holding gains on securities                           | 
|/*/    Gross                                                                | 
|/*/    Deferred taxes                                                       | 
|Changes in unrealized losses from cash flow hedges                          | 
|/*/    Gross                                                                | 
|/*/    Deferred taxes                                                       | 
|Additional minimum liability for pensions                                   | 
|/*/    Gross                                                                | 
|/*/    Deferred taxes                                                       | 
|                                                                            | 
|Other comprehensive income (loss), net of tax                               | 
|                                                                            | 
|Comprehensive income, net of tax                                            | 
|                                                                            | 

|                                                                                                | 
|----------------------------------------------------------------------------------------------- | 
|
|
|
|Statement of stockholders' equity                                                               | 
|Stockholders' equity in accordance with U.S. GAAP before accumulated other comprehensive income | 
|Accumulated other comprehensive income:                                                         | 
|Translation adjustments                                                                         | 
|/*/    Gross                                                                                    | 
|/*/    Deferred taxes                                                                           | 
|Unrealized holding gains on securities                                                          | 
|/*/    Gross                                                                                    | 
|/*/    Deferred taxes                                                                           | 
|Unrealized losses from cash flow hedges                                                         | 
|/*/    Gross                                                                                    | 
|/*/    Deferred taxes                                                                           | 
|Additional minimum liability for pensions                                                       | 
|/*/    Gross                                                                                    | 
|/*/    Deferred taxes                                                                           | 
|                                                                                                | 
|Accumulated other comprehensive income:                                                         | 
|                                                                                                | 
|Total stockholders' equity in accordance with U.S. GAAP including comprehensive income          | 
|                                                                                                | 

5.    Reporting by segment and region

The Company is a worldwide manufacturer and supplier of more than 8,000 products. The Company offers a wide range of products, including
chemicals, plastics, dyes and pigments,

F-26

---

dispersions,
automotive and industrial coatings, agricultural products, fine chemicals, crude oil and natural gas.

The
Company conducts its worldwide operations through 12 operating divisions, which have been aggregated into five business segments based on the nature of the products and production
processes, the type of customers, the channels of distribution and the nature of the regulatory environment. Certain business units and operating divisions were transferred within the segments
Chemicals, Plastics & Fibers and Performance Products and Other in 2001.

The
business segment Chemicals contains the operating divisions Inorganics, Petrochemicals and Intermediates.

The
business segment Plastics (known as "Plastics & Fibers" until April 30, 2003) includes the operating divisions Styrenics, Performance Polymers and Polyurethanes. The
segment was renamed following the divestiture of the nylon fiber business to Honeywell, United States.

The
business segment Performance Products contains the operating divisions Performance Chemicals, Coatings and Functional Polymers.

The
business segment Agricultural Products & Nutrition includes two reportable segments, Agricultural Products and Fine Chemicals. Figures for the divested pharmaceuticals
business formerly a third reportable segment are included in the segment's figures through February 2001.

The
Oil & Gas segment consists of the operating division Oil & Gas, which conducts oil and gas exploration and production, and trades in natural gas.

Business
activities not allocated to any operating division are shown as "Other" and comprise the sale of feedstock, remaining fertilizers activities, engineering and other services as
well as rental income. The income from operations recorded as "Other" includes mainly costs of exploratory and biotechnological research of €181 million in 2003
(€197 million in 2002, €202 million in 2001). "Other" also includes net losses from foreign currency transactions of €(1) million in 2003,
€(143) million in 2002, and €(35) million in 2001, which are related to financial indebtedness and foreign currency derivatives, and are not allocated to the
segments.

Transfers
between the reportable segments are generally valued at market-based prices, and the revenues generated by these transfers are shown in the table below as "Intersegmental
transfers."

The
allocation of assets and depreciation to the segments is based on economic ownership. Assets used by more than one segment are allocated based on the percentage of usage.

F-27

---

Segment Data 2003

|                                                    
|----------------------------------------------------
|
|
|
|Net sales                                           
|                                                    
|Intersegmental transfers                            
|                                                    
|Sales including transfers                           
|Income from operations                              
|                                                    
|Assets                                              
|Return on operational assets (%)                    
|Research and development expense                    
|Additions to tangible and intangible fixed assets   
|Depreciation of tangible and intangible fixed assets

---

Segment Data 2002

|                                                     |           
|---------------------------------------------------- | ----------
|
|
|
|Net sales                                            |           
|                                                     | Change (%)
|Intersegmental transfers                             |           
|                                                     |           
|Sales including transfers                            |           
|Income from operations                               |           
|                                                     | Change (%)
|Assets                                               |           
|Return on operational assets (%)                     |           
|Research and development expense                     |           
|Additions to tangible and intangible fixed assets    |           
|Depreciation of tangible and intangible fixed assets |           

F-28

---

Segment Data 2001

|                                                     |           
|---------------------------------------------------- | ----------
|
|
|
|Net sales                                            |           
|                                                     | Change (%)
|Intersegmental transfers                             |           
|                                                     |           
|Sales including transfers                            |           
|Income from operations                               |           
|                                                     | Change (%)
|Assets                                               |           
|Return on operational assets (%)                     |           
|Research and development expenses                    |           
|Additions to tangible and intangible fixed assets    |           
|Depreciation of tangible and intangible fixed assets |           

---

F-29

---

Geographical segment data

|                                                        | 
|------------------------------------------------------- | 
|
|
|2003                                                    | 
|Location of customers                                   | 
|Sales                                                   | 
|Change (%)                                              | 
|Share (%)                                               | 
|Location of companies                                   | 
|Sales                                                   | 
|Sales including transfers                               | 
|Income from operations                                  | 
|Assets                                                  | 
|Additions to tangible and intangible fixed fixed assets | 
|Depreciation of tangible and intangible assets          | 
|2002                                                    | 
|Location of customers                                   | 
|Sales                                                   | 
|Change (%)                                              | 
|Share (%)                                               | 
|Location of companies                                   | 
|Sales                                                   | 
|Sales including transfers                               | 
|Income from operations                                  | 
|Assets                                                  | 
|Additions to tangible and intangible fixed assets       | 
|Depreciation of tangible and intangible fixed assets    | 
|2001                                                    | 
|Location of customers                                   | 
|Sales                                                   | 
|Change (%)                                              | 
|Share (%)                                               | 
|Location of companies                                   | 
|Sales                                                   | 
|Sales including transfers                               | 
|Income from operations                                  | 
|Assets                                                  | 
|Additions to tangible and intangible fixed assets       | 
|Depreciation of tangible and intangible fixed assets    | 

F-30

---

6.    Other operating income

|                                                       
|-------------------------------------------------------
|
|
|Release and adjustment of provisions                   
|Income from miscellaneous revenue-generating activities
|Gains from foreign currency transactions               
|Gains from foreign currency conversion                 
|Gains from disposal of assets                          
|Other                                                  
|                                                       
|                                                       
|                                                       

Release and adjustments of provisionsrelate principally to sales and purchase provisions,
personnel cost provisions, maintenance provisions and various other items in the normal course of business.

Provision
releases and adjustments arise because present circumstances indicate that they are no longer probable and estimable or that the probable amount has been reduced.

Income from miscellaneous revenue-generating activitiesprimarily represents revenues from energy sales, sales of raw materials, as well
as income from rentals and logistics services.

Gains from foreign currency transactionsinclude realized gains from foreign currency derivatives and the conversion of
short-term receivables and liabilities in foreign currency at
year-end rates when these rates are higher in case of receivables or lower in case of liabilities compared to the rate at first measurement.

Gains from foreign currency conversionincludes gains from currency exposures of financial statements in foreign currency, which are
converted into euros under the temporal method. They are related to a higher net asset exposure or lower net liability exposure after conversion into euros than at the previous balance sheet date.

Gains from the disposal of assetsin 2003 are primarily related to the sale of the soil conditioner business in the Agricultural Products
and Nutrition segment. Gains in 2002 were related to the ordinary course of business. Gains in 2001 were especially related to the sale of the generics business of the Pharmaceuticals operating
division to Novartis.

Otherincludes dissolution of valuation allowances on receivables, miscellaneous sales and various other sundry items.

F-31

---

7.    Other operating expenses

|                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|Integration measures, restructuring and shutdowns                                                                                                     
|Environmental protection and safety measures, costs of demolition of fixed assets and costs related to the preparation of capital expenditure projects
|Goodwill amortization                                                                                                                                 
|Costs from miscellaneous revenue-generating activities                                                                                                
|Losses from foreign currency transactions                                                                                                             
|Losses from foreign currency conversion                                                                                                               
|Losses from disposal of assets                                                                                                                        
|Other                                                                                                                                                 
|                                                                                                                                                      
|Total                                                                                                                                                 
|                                                                                                                                                      

Integration measures, restructuring and shutdownsin 2003 primarily contain efficiency
improvements related to the Ludwigshafen site project, as well as expenses related to the corporate services restructuring in North America (NAFTA).

Measures
in 2002 were mainly related to the closure of the ethylene oxide and glycol plants in North America (NAFTA), several measures in the Agricultural Products & Nutrition
Segment, as well as expenses associated with restructuring at the Ludwigshafen site.

In
2001, charges arose primarily for the planned shutdown of sites and plants in North America (NAFTA), South America, the United Kingdom, the Netherlands, Germany, Australia and other
countries. Additionally, restructuring measures were necessary at European companies due to reorganization of marketing and sales structures. These charges amounted to
€747.4 million in total.

Environmental protection measuresof €9.6 million in 2003, €10.3 million in 2002, and
€20.7 million in 2001 were accrued. Further expenses are related to the cost of demolition of fixed assets as well as the preparation of capital expenditure projects if these
costs did not fulfill the requirements for capitalization.

Costs from miscellaneous revenue-generating activitiesrepresents costs related to other miscellaneous revenue-generating activities as
shown in Note 6.

Otherincludes in 2003, valuation adjustments in accounts receivable, the write-off of no longer usable inventories, and many
other items.

In
2002, provisions of €100 million for damage claims associated with antitrust violations in the vitamins business were accrued. Further charges relate in
particular to amortization of intangible assets as well as various other items.

In
2001, additional provisions of €200 million were accrued for the fine imposed by the E.U. Commission related to the antitrust proceedings against several
vitamins producers. Further charges related to provisions for expected losses on accounts receivables in Argentina, waiving the peg of the Argentine peso to the U.S. dollar, as well as scrapping of
inventories.

F-32

---

8.    Financial result

|                                                                                                            |                                  
|----------------------------------------------------------------------------------------------------------- | ---------------------------------
|
|
|
|Income from participating interests and similar income                                                      |                                  
|                                                                                                            | Thereof from affiliated companies
|Income from profit transfer agreements                                                                      |                                  
|Losses from loss transfer agreements                                                                        |                                  
|Income (losses) from companies accounted for under the equity method                                        |                                  
|                                                                                                            |                                  
|Net income (loss) from financial assets                                                                     |                                  
|                                                                                                            |                                  
|Write-down of, and losses from, retirement of financial assets as well as securities held as current assets |                                  
|                                                                                                            |                                  
|Income from other securities and financial assets                                                           |                                  
|                                                                                                            | Thereof from affiliated companies
|Other interest, income from sale of marketable securities and similar income                                |                                  
|                                                                                                            | Thereof from affiliated companies
|Interest and similar expenses                                                                               |                                  
|                                                                                                            | Thereof to affiliated companies  
|                                                                                                            |                                  
|Interest result                                                                                             |                                  
|                                                                                                            |                                  
|Financial result                                                                                            |                                  
|                                                                                                            |                                  

Shares in participating interests were sold in 2003 resulting in income from participating interests and similar income of
€41.7 million.

In
2002, income from participating interests and similar income included special income of €85.5 million from the sale of BASF Waren- und
Anlagenvetriebs- und -leasing Gesellschaft mbH.

Amortization
of goodwill of companies accounted for under the equity method totaling €74.3 million in 2003 (2002: €87.7 million, 2001:
€67.6 million) as well as income from the release of negative goodwill of €2.0 million in 2001 are included in income (losses) from companies accounted
for under the equity method.

The
income (losses) from companies accounted for under the equity method included in 2001 charges at Basell Group for closures of its sites in Wilton, United Kingdom, and Tarragona,
Spain, as well as restructuring charges for sites in the United States.

Write-down
of, and losses from, retirement of financial assets as well as securities held as current assets relate in particular to a write-down for the
participation in DyStar Textilfarben GmbH & Co. Deutschland KG and DyStar Textilfarben GmbH in 2003.

The
valuation of DAX-LIBOR swaps is included within interest income. In 2003 the valuation of DAX-LIBOR swaps at their fair values produced income of
€28 million, following a loss of €48 million in 2002.

Other
interest, income from the sale of marketable securities and similar income included gains from the sale of securities and swaps of €243 million in 2002 and
€0 in 2003 and 2001.

F-33

---

9.    Extraordinary income

|                      
|----------------------
|
|
|Extraordinary revenues
|Extraordinary expenses
|                      
|Extraordinary income  
|                      

Extraordinary revenues were generated in 2001 from the sale of the pharmaceuticals business including compensation for the surrendered liquid
funds net of assumed financial debt as well as the payment for excess net assets compared to reference net assets at the date of the contract.

Extraordinary
expenses in 2001 included the book values of the pharmaceuticals business and the liquid funds. Further included are provisions for warranties or risks retained in
connection with the sale of the pharmaceuticals business.

10.  Income taxes

|                                                                                          |                                             
|----------------------------------------------------------------------------------------- | --------------------------------------------
|
|
|German corporate income tax                                                               |                                             
|German trade income tax                                                                   |                                             
|Foreign income tax                                                                        |                                             
|Income taxes on oil-producing operations non-compensable with German corporate income tax |                                             
|Taxes for prior years                                                                     |                                             
|                                                                                          |                                             
|Current taxes                                                                             |                                             
|Deferred taxes                                                                            |                                             
|                                                                                          |                                             
|Income taxes                                                                              |                                             
|                                                                                          |                                             
|Other taxes                                                                               |                                             
|                                                                                          |                                             
|Tax expense                                                                               |                                             
|                                                                                          | Thereof income taxes on extraordinary income
|                                                                                          |                                             

"Other taxes" includes real estate taxes and other comparable taxes; they are shown under the appropriate functional costs of the statement of
income.

Following
a change in German tax law in 2003, corporate income tax reductions for dividend payments that were taxed at a higher rate in prior years can only be claimed in installments
starting from 2006. In 2002, a refund claim was presented as a tax receivable and reduction of tax expenses in accordance with the tax-law situation that was valid at the time. The
reversal of this receivable led to a charge of €124.2 we have appealed the first as assessment relating to this change in the law in 2003.

The
regional breakdown of income before taxes from ordinary activities was as follows:

|        | 
|------- | 
|
|
|Germany | 
|Foreign | 
|        | 
|        | 
|        | 

F-34

---

A federal German corporate income tax of 25% plus a 5.5% solidarity surcharge is levied on corporate income. As a result of the German Flood Victim Solidarity Act, the corporate tax was
raised on a one-time basis in 2003 from 25% to 26.5%.

In
addition to corporate income tax, earnings generated in Germany are subject to a trade income tax that varies depending on the municipality in which the company is located. After
accounting for trade income tax, which is a deductible operating expense, BASF has a weighted average trade income tax rate of 15.3%. Because German trade income tax is deductible, it also reduces the
assessment basis for corporate income tax.

Income
from foreign sources is taxed at the income tax rates applicable in the respective countries of domicile.

For
German companies, deferred taxes are calculated using a tax rate of 38%. For foreign companies, deferred taxes are calculated using the tax rates applicable in the individual foreign
countries. Such rates averaged 33% in 2003, 30% in 2002, and 34% in 2001.

Income
from foreign sources that are distributed in the form of a dividend to the parent company is up to 95% exempt from additional German corporate income tax. Income taxes on
oil-producing operations in certain regions, which can amount to up to 85%, may be compensated up to the level of the German corporate income tax on this foreign taxable income. The
non-compensable amount is shown separately in the reconciliation from the statutory tax rate in Germany to the effective tax rate.

Reconciliation from the statutory tax rate in Germany to the effective tax rate

|                                                                                          | 
|----------------------------------------------------------------------------------------- | 
|
|
|
|German corporate income tax (excluding extraordinary income in 2001)                      | 
|Additional corporate tax due to the German Flood Victim Solidarity Act                    | 
|Solidarity surcharge                                                                      | 
|Credit for dividend distribution                                                          | 
|German trade income tax net of corporate income tax                                       | 
|Foreign tax-rate differential                                                             | 
|Non-taxable income                                                                        | 
|Non-deductible expenses, including amortization of goodwill                               | 
|Loss from companies accounted for under the equity method                                 | 
|Taxes for previous years                                                                  | 
|Income taxes on oil-producing operations non-compensable with German corporate income tax | 
|Other                                                                                     | 
|                                                                                          | 
|Income taxes/effective tax rate                                                           | 
|                                                                                          | 

Deferred taxes are recorded in conformity with U.S. GAAP. Beginning in 2001, deferred tax assets on tax loss carryforwards including those for
prior years are recorded. If expected future earnings of a company make it more likely than not that the future tax benefits will not be realized, adequate valuation allowances are established.

F-35

---

Deferred
tax assets or liabilities relate to the following items:

|                                                |                               
|----------------------------------------------- | ------------------------------
|
|
|Intangible assets                               |                               
|Property, plant and equipment                   |                               
|Financial assets                                |                               
|Inventories and accounts receivable             |                               
|Provisions for pensions and similar obligations |                               
|Other provisions and liabilities                |                               
|Loss carryforwards                              |                               
|Securities and others                           |                               
|Valuation allowances                            |                               
|                                                | Thereof for loss carryforwards
|                                                |                               
|Total                                           |                               
|                                                |                               
|                                                | Thereof short-term            
|                                                |                               
|Deferred tax liabilities                        |                               
|Property, plant and equipment                   |                               
|Intangible assets                               |                               
|Other                                           |                               
|                                                |                               
|Total                                           |                               
|                                                |                               
|                                                | Thereof short-term            
|                                                |                               

Deferred tax liabilities are included in "provisions for taxes" in the Consolidated Balance Sheets. The regional distribution of tax loss
carryforwards is as follows:

|                      
|----------------------
|
|
|Tax loss carryforwards
|German subsidiaries   
|Foreign subsidiaries  
|                      
|Total                 
|                      

German tax losses may be carried forward indefinitely. Foreign loss carryforwards exist primarily in North America (NAFTA). These expire starting
in 2020.

11.  Minority interests

|                              | 
|----------------------------- | 
|
|
|Minority interests in profits | 
|Minority interests in losses  | 
|                              | 
|                              | 
|                              | 

Minority interests in profits relate primarily to the Group companies engaged in trading and distribution of natural gas, and, in 2003 as well to
the operating company for the steam cracker in Port Arthur, Texas.

Minority
interests in losses in 2003 and 2002 are mainly related to BASF SONATRACH PropanChem S.A., Spain. Minority interests in losses in 2001 relate mainly to BASF PETRONAS Chemicals
Sdn. Bhd., Malaysia and BASF FINA Petrochemicals Ltd., United States.

F-36

---

See
Note 22 for a detailed analysis of consolidated subsidiaries with minority shareholdings.

12.  Other information

Additional information on statements of cash flows

Cash generated from operating activities was derived after interest payments of €276.3 million in 2003,
€281.8 million in 2002, and €428.9 million in 2001. Income taxes paid totaled €1,013.1 million in 2003,
€1,021.2 million in 2002, and €1,214.9 million in 2001.

Personnel costs

|                                                                      
|----------------------------------------------------------------------
|
|
|Wages and salaries                                                    
|Social security contributions and expenses for pensions and assistance
|                                                                      
|                                                                      
|Total                                                                 
|                                                                      

German Group companies incurred costs for employee representatives to comply with statutory regulations of €10.5 million in
2003, €11.3 million in 2002 and €9.9 million in 2001.

Average number of employees

|                          
|--------------------------
|
|
|Europe                    
|                          
|North America (NAFTA)     
|South America             
|Asia, Pacific Area, Africa
|                          
|BASF Group                
|                          
|                          
|                          

The number of employees of proportionally consolidated companies is shown above in full. If they are taken into account at 50%, the average number
of personnel for the Company was 88,167 in 2003, 90,899 in 2002, and 94,744 in 2001.

As
a result of the acquisition of Honeywell's business with engineering plastics in 2003, 263 employees transferred to BASF. At the same time, 140 BASF employees transferred to Honeywell
as part of the sale of our fibers business. In 2004, about 1,200 additional BASF employees will transfer to Honeywell.

F-37

---

Compensation for the Board of Executive Directors and Supervisory Board of BASF Aktiengesellschaft

|                                                                                                              
|--------------------------------------------------------------------------------------------------------------
|
|
|Board of Executive Directors emoluments                                                                       
|                                                                                                              
|                                                                                                              
|Exercise of option rights by the Board of Executive Directors                                                 
|Supervisory Board emoluments                                                                                  
|                                                                                                              
|                                                                                                              
|Total emoluments of former members of the Board of Executive Directors and their surviving dependents         
|Exercise of option rights by former members of the Board of Executive Directors and their surviving dependents
|Pension provisions for former members of the Board of Executive Directors and their surviving dependents      
|Loans to the Board of Executive Directors and the Supervisory Board                                           
|Contingent liabilities for the benefit of the Board of Executive Directors and the Supervisory Board          

The criterion used to determine the size of performance-related bonuses is the return on assets, which corresponds to income from ordinary
activities plus interest expenses as a percentage of average assets.

In
2003, the members of the Board of Executive Directors were also granted 116,612 options under the BASF stock option program. Together with the options granted in previous years, and
the options already exercised, current and former members of the Board of Executive Directors hold 477,006 options. In 2003, the issue of options resulted in additional personnel costs totaling
€3.9 million. Of this amount, €0.6 million was related to options issued in 2003, and €3.3 million to options issued in 1999
through 2002, which result in personnel costs over the vesting period.

In
2003, the exercising of options granted in 1999 and 2000 resulted in cash payments totaling €2.3 million to members of the Board of Executive Directors and
€1.3 million to previous members or their surviving dependants. The cash payments do not influence personnel costs associated with the issuing of options, as the payments were
charged against provisions established for this purpose in previous years. See Note 28 for further details.

The
Board of Executive Directors and the Supervisory Board of BASF Aktiengesellschaft issued a compliance statement with regard to the German Corporate Governance Code in accordance with
Section 161 of the German Stock Corporations Act.

The
members of the Board of Executive Directors and the Supervisory Board as well as their memberships on other supervisory boards are shown in "Item 6."

F-38

---

13.  Intangible assets

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Amortization                           | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Net book value as of December 31, 2003 | 
|                                       | 
|Acquisition costs                      | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Amortization                           | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Net book value as of December 31, 2002 | 
|                                       | 

---

Additions in 2003 primarily relate to the acquisition of the fipronil crop protection business from Bayer CropScience (goodwill of
€302 million in the Agricultural Products segment) and the purchase of the worldwide engineering plastics business from Honeywell, United States (goodwill of
€58 million in the Plastics segment). Net disposals of goodwill of €14 million in 2003 relates to the sale of the soil improvements products business in
the Agricultural Products segment. Additions in 2002 primarily include concessions for oil and gas production in the Dutch North Sea and goodwill of €66 million from the
acquisition of Clyde Netherlands B.V. and Clyde Petroleum Exploratle B.V., the Netherlands in the Oil & Gas segment.

On
December 31, 2003, the carrying value of goodwill is allocated primarily to the following reportable segments: Plastics, €118 million (2002:
€93 million); Performance Products; €253 million (2002: €331 million); Agricultural Products,
€1,567 million (2002: €1,545 million); and Oil & Gas, €64 million (2002: €66 million).

F-39

---

14.  Property, plant and equipment

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Depreciation                           | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Net book value as of
December 31, 2003 | 
|                                       | 
|Acquisition costs                      | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Depreciation                           | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Net book value as of
December 31, 2002 | 
|                                       | 

---

Impairment losses in 2003 in the amount of €81.1 million relate to various production sites. Impairment losses in 2002 in
the amount of €51.4 million were primarily necessary due to dry holes at Wintershall AG.

F-40

---

15.  Financial assets

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2003          | 
|Change in scope in consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Accumulated depreciation               | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Net book value as of December 31, 2003 | 
|                                       | 

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Accumulated depreciation               | 
|Balance as of January 1, 2003          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2003        | 
|                                       | 
|Net book value as of December 31, 2003 | 
|                                       | 

In 2003, disposals of "Shares in affiliated companies" primarily concerned a capital reduction for BASF Future Business GmbH of
€175.0 million. Transfers of "Shares in associated companies" include the participation in the DyStar group, which was accounted for according to the equity method until

F-41

---

September 2003.
Since then, the holdings of the DyStar Textilfarben GmbH & Co. Deutschland KG and DyStar Textilfarben GmbH are accounted for as other assets, due to the intent to dispose
of the assets.

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Accumulated depreciation               | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Net book value as of December 31, 2002 | 
|                                       | 

|                                       | 
|-------------------------------------- | 
|
|
|Acquisition costs                      | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Accumulated depreciation               | 
|Balance as of January 1, 2002          | 
|Change in scope of consolidation       | 
|Additions                              | 
|Disposals                              | 
|Transfers*                             | 
|                                       | 
|Balance as of December 31, 2002        | 
|                                       | 
|Net book value as of December 31, 2002 | 
|                                       | 

---

Additions to "Shares in affiliated companies" include a capital increase of €16.3 million at BASF Chemicals
Company Ltd., China. Retirements were related to the merger of the non-consolidated BASF Polyurethanes Elastomers Ltd. and BASF Japan Ltd. Additions to "Shares in
participating interests"

F-42

---

primarily
include the acquisition of shares in Aethylen Rohrleitungsgesellschaft mbH & Co. KG, Germany.

Other financial assets

The book and market values of available-for-sale "Securities held as fixed assets" and "Shares in participating interests"
is summarized below:

|                                       | 
|-------------------------------------- | 
|
|
|
|Fixed-term interest bearing securities | 
|Mutual funds                           | 
|Other shareholdings and securities     | 
|                                       | 
|Total                                  | 
|                                       | 

The disposal of available-for-sale securities generated proceeds of €62 million a gain of
€42 million in 2003, and neither proceeds nor gains in 2002 and 2001.

16.  Inventories

|                                               
|-----------------------------------------------
|
|
|Raw materials and factory supplies             
|Work-in-process, finished goods and merchandise
|Construction in progress                       
|Advance payments                               
|                                               
|Total                                          
|                                               

"Work-in-process"
and "Finished goods and merchandise" are combined into one item due to the production conditions in the chemical industry.

The
acquisition or production cost of raw materials, work-in-process, finished goods and merchandise is mainly determined by the
last-in-first-out (LIFO) method. Factory supplies are carried at average cost. Inventories of €2,535.4 million or 61% of total inventories in
2003, and €3,036.9 million or 63% of total inventories in 2002 were valued according to the LIFO method. The difference between the carrying value determined according to the
LIFO method and higher average cost or lower market values was €62 million in 2003 and €65 million in 2002.

F-43

---

17.  Receivables and other assets

|                                          
|------------------------------------------
|
|
|
|Accounts receivable, trade                
|Receivables from affiliated companies     
|Miscellaneous receivables and other assets
|Thereof:                                  
|                                          
|                                          
|                                          
|Total                                     
|                                          

Composition of other assets

|                                             
|---------------------------------------------
|
|
|Tax refund claims                            
|Loans and interest receivables               
|Deferrals from financial derivatives         
|Receivables from the sale of non-trade assets
|Employee receivables                         
|Rents and deposits                           
|Insurance claims                             
|Receivables with consortium partners         
|Other                                        
|                                             
|Total                                        
|                                             

Valuation allowances for doubtful accounts

|                                          
|------------------------------------------
|
|
|
|
|Accounts receivable, trade                
|Miscellaneous receivables and other assets
|                                          
|Total                                     
|                                          

F-44

---

|                                          
|------------------------------------------
|
|
|
|
|Accounts receivable, trade                
|Miscellaneous receivables and other assets
|                                          
|Total                                     
|                                          

|                                          
|------------------------------------------
|
|
|
|
|Accounts receivable, trade                
|Miscellaneous receivables and other assets
|                                          
|Total                                     
|                                          

Additions
and releases not affecting income related primarily to changes in scope of consolidation, to translation adjustments and write-offs of receivables previously
written down.

18.  Marketable securities

|                                      
|--------------------------------------
|
|
|
|Fixed-term interest bearing securities
|Shares                                
|Mutual funds                          
|Other securities                      
|                                      
|Total                                 
|                                      

There was no significant disposal of available-for-sale securities in 2003. The disposal of
available-for-sale securities in 2002 generated proceeds of €492.3 million and a tax-free gain of €243 million. There
was no disposal of available-for-sale securities in 2001.

|                     
|---------------------
|
|
|
|Less than 1 year     
|Between 1 and 5 years
|                     
|Total                
|                     

F-45

---

19.  Prepaid expenses

|                    
|--------------------
|
|
|
|
|Discounts           
|Prepaid benefit cost
|Miscellaneous       
|                    
|Total               
|                    

The discounts from the issuance of the 5.75% Euro Bond 2000/2005 and the 3.5% Euro Benchmark Bond 2003/2010 of BASF Aktiengesellschaft are
capitalized and amortized as interest expense over the term of the underlying obligations.

Prepaid
benefit cost resulted primarily from contributions to pension funds in North America (NAFTA).

The
pension plan assets as assessed in accordance with German GAAP exceed the minimum pension liability in accordance with German GAAP. The contributions to the pension fund are
therefore expenses for future periods and accounted for as prepaid expenses.

Other
prepaid expenses are related to prepayments of operating costs of €23.5 million in 2003 and €32.3 million in 2002, as well as prepaid
insurance premiums of €11.8 million in 2003, and €10.4 million in 2002.

20.  Capital and reserves

|                                                                                                                                                                                                                                  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|
|
|January 1                                                                                                                                                                                                                         | 
|Cancellation of option rights for option bonds to be issued until April 1, 2001                                                                                                                                                   | 
|Authorization through the Annual Meeting on April 26, 2001, for the issuance of new shares to fulfill the exercising of warrants related to option bonds, which may be issued until April 1, 2006                                 | 
|Authorization through the Annual Meeting on April 26, 2001, for the issuance of new shares under the BASF Stock Option Program BOP 2001/2005 and BOP 1999/2000                                                                    | 
|Limitation of the issuance of new shares to be issued under the BASF Stock Option Program BOP 1999/2000 to the 3,923,344 options issued until April 25, 2001, according to the resolution at the Annual Meeting on April 26,
2001 | 
|Reduction resulting from exercise or expiration of option rights                                                                                                                                                                  | 
|Issuance of new shares from the conditional capital through the exercise of warrants attached to the 1996/2001 3% U.S. Dollar Option Bond of BASF Finance Europe N.V.                                                             | 
|Cancellation of warrants from the Option Bond 1996/2001                                                                                                                                                                           | 
|Issuance of new stock as conditional capital through the exercise of conversion rights of former Wintershall stockholders, below €0.1 million in 2002                                                                             | 
|                                                                                                                                                                                                                                  | 
|December 31                                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                                  | 

F-46

---

|                     
|---------------------
|
|
|
|January 1/December 31
|                     

|                                                           
|-----------------------------------------------------------
|
|
|Outstanding shares as of December 31, 2003                 
|Repurchased shares intended to be cancelled                
|                                                           
|Outstanding shares as disclosed in the financial statements
|                                                           

A total of 13,673,000 shares were repurchased in 2003, of which 11,455,000 shares were cancelled as of December 31, 2003, and the
cancellation was entered into the commercial register. The Board of Executive Directors decided in 2003 to cancel the remaining 2,218,000 shares; the cancellation has not yet been entered into the
commercial register. The subscribed capital is shown net of these shares.

Share repurchase

The Board of Executive Directors received approval at the Annual Meeting on May 6, 2003, to repurchase BASF's shares to a maximum amount of
10% of subscribed capital by November 1, 2004. The shares shall be purchased on the stock exchange or through a public purchase offer addressed to all shareholders. If BASF shares are purchased
on a stock exchange, the price paid for the shares may not be higher than the highest market price on the buying day and it may not be lower than 25% of that market price. In the case of a public
purchase offer, the price offered by BASF may be a maximum of 25% higher than the highest market price on the third trading day prior to the publishing of the public purchase offer. This authorization
supersedes the validity of the prior authorizations to repurchase BASF shares.

The
Board of Executive Directors is authorized to cancel repurchased shares without further shareholder approval. A sale of repurchased BASF shares requires the respective authorization
through the Annual Meeting unless the shares are utilized to serve options from the BASF Stock Option Program BOP 1999/2000 and BOP 2001/2005, or with the authorization of the Supervisory Board, to
acquire companies, parts of companies or holding in companies in return for the transfer of shares.

Based
on the respective authorizations, a total of 13,673,000 shares, or 2.4% of the issued shares have been acquired in 2003. The average purchase price was €36.55 per
share. Of these shares a total of 11,455,000 shares were cancelled by December 31, 2003. The remaining 2,218,000 shares of BASF Aktiengesellschaft were acquired for the purpose of cancellation.
Therefore, the subscribed capital is shown net of these shares at December 31, 2003. During 2002, BASF purchased and cancelled a total of 13,085,000 shares, or 2.2% of issued shares, at an
average price of €38.20 per share.

Conditional capital

The Annual Meeting on April 26, 2001, authorized the Board of Executive Directors to make an additional conditional increase in the
subscribed capital of up to €384.0 million to fulfill the exercising of warrants related to option bonds which may be issued until April 1, 2006. Additional conditional
capital of €38.4 million is reserved to fulfill stock options granted under the BASF Stock Option Program (BOP) 2001/2005 to the members of the Board of Executive Directors and
other senior executives of BASF and its subsidiaries; up to €2.9 million conditional capital is reserved to fulfill stock options from the Stock Option Program 1999/2000. An
amount of less than €0.1 million is reserved to meet compensation claims of former shareholders of Wintershall.

F-47

---

Authorized capital

At the Annual Meeting of April 29, 1999, shareholders authorized the Board of Executive Directors, with the approval of the Supervisory
Board, to increase subscribed capital by issuing new shares in an amount of up to €500.0 million against cash or contribution in kind through May 1, 2004. The Board of
Executive Directors is empowered to decide on the exclusion of shareholders' subscription rights, for these new shares.

Capital surplus

Capital surplus includes premiums from the issuance of shares, the fair value of warrants attached to option bonds and negative goodwill from the
capital consolidation resulting from acquisitions of subsidiaries in exchange for issue of BASF shares at par value.

21.  Retained earnings

|                                           
|-------------------------------------------
|
|
|Legal reserves                             
|Other retained earnings and profit retained
|                                           
|Total                                      
|                                           

The changes in scope of consolidation increased the legal reserves by €0.1 million in 2003, and reduced them by less than
€0.1 million in 2002, and by €49.9 million in 2001. Transfers from "Other retained earnings and profit retained" increased legal reserves by
€18.5 million in 2003, €18.0 million in 2002, and by €16.3 million in 2001.

22.  Minority interests

|                                                          
|----------------------------------------------------------
|
|
|Company                                                   
|WINGAS GmbH, Kassel, Germany                              
|                                                          
|Yangzi-BASF Styrenics Co. Ltd., Nanjing, China            
|                                                          
|BASF India Ltd., Mumbai, India                            
|                                                          
|BASF PETRONAS Chemicals Sdn. Bhd., Petaling Jaya, Malaysia
|                                                          
|BASF SONATRACH Propanchem S.A., Tarragona, Spain          
|                                                          
|BASF FINA Petrochemicals Ltd., Port Arthur, Texas, USA    
|                                                          
|Others                                                    
|                                                          
|                                                          
|                                                          

F-48

---

23.  Provisions for pensions and similar obligations

In addition to governmental pension schemes, most employees are entitled to Company pension benefits from defined contribution and defined benefit
plans. Benefits generally depend on years of service, contribution or compensation and consider the legal, fiscal and economic conditions of the countries where companies are located. For BASF
Aktiengesellschaft and other German subsidiaries, a basic level of benefits is provided by the legally independent funded plan, BASF Pensionskasse VVaG, which is financed by equal contributions of
employees and the Company and the returns on its assets.

For
German Group subsidiaries, additional Company pension commitments are financed primarily by pension provisions. In the case of non-German subsidiaries, pension
entitlements are covered in some cases by pension provisions, but mainly by external insurance companies or pension funds.

The
measurement date for most of the pension plans is December 31 of the reporting period.

Assumptions used to determine the projected benefit obligation (weighted average)

|                                        
|----------------------------------------
|
|
|Interest rate                           
|Projected increase of wages and salaries
|Projected pension increase              

Assumptions used to determine net periodic benefit cost (weighted average)

|                                        
|----------------------------------------
|
|
|Interest rate                           
|Projected increase of wages and salaries
|Projected pension increase              
|Expected return on plan assets          

Similar
obligations refer to commitments by BASF's North American Group companies to provide for the costs of medical and life insurance benefits for employees and eligible dependents
after retirement. They are based upon an actuarial valuation, considering the future cost trend and a discount rate of 6.0%.

The
assumptions regarding the overall expected long-term rate of return are based on forecasts of expected individual asset class returns and the desired portfolio structure.
The forecasts are based on long-term historical average returns and take the current yield level and the inflation trend into consideration.

The
portfolio structure of the pension plan assets including the plan assets of BASF Pensionskasse (see Note 4c) is as follows:

|               
|---------------
|
|
|Equities       
|Debt securities
|Real estate    
|Other          
|               
|Total          
|               

F-49

---

The
Target Asset Allocation has been defined with an Asset Liability Study and is reviewed regularly. This ensures that plan assets are aligned with plan liabilities, and that investment
risk and legal requirements are taken into consideration. The current portfolio structure is generally oriented towards the Target Asset Allocation. In addition, current market views are taken into
consideration. In order to mitigate investment risks and to benefit from a large number of return sources individual investments are broadly globally diversified.

Development of the projected benefit obligation:

|                                               | 
|---------------------------------------------- | 
|
|
|Projected benefit obligation as of January 1   | 
|Service cost                                   | 
|Interest cost                                  | 
|Benefits paid                                  | 
|Participants' contributions                    | 
|Change in actuarial assumptions                | 
|Settlements and other changes                  | 
|Exchange rate changes                          | 
|                                               | 
|Projected benefit obligation as of December 31 | 
|                                               | 

Development of the plan assets:

|                                                       | 
|------------------------------------------------------ | 
|
|
|Plan assets as of January 1                            | 
|Actual return on plan assets                           | 
|Employer contributions                                 | 
|Participants' contributions                            | 
|Benefits paid                                          | 
|Exchange rate changes                                  | 
|Other changes                                          | 
|                                                       | 
|Plan assets as of December 31                          | 
|Non-capitalized pre-financing of foreign pension plans | 
|                                                       | 
|Plan assets as of December 31 excluding pre-financing  | 
|                                                       | 

The
valuation of the pension fund assets of foreign pension funds under SFAS 87 showed the pre-financing shown above.

In
2003 the pension funds held securities that were issued by BASF Group companies, whose total market value amounted to €7.7 million. No material transactions
took place between the pension funds and BASF group companies, or related companies in 2003.

F-50

---

The
funded status, excluding pre-financing, is as follows:

|                                                                                    | 
|----------------------------------------------------------------------------------- | 
|
|
|Projected benefit obligation as of December 31                                      | 
|Less pension fund assets as of December 31, excluding non-capitalized pre-financing | 
|                                                                                    | 
|Funded status                                                                       | 
|Unrecognized amounts                                                                | 
|Prepaid pension assets                                                              | 
|                                                                                    | 
|Provisions for pensions                                                             | 
|Provisions for similar obligations                                                  | 
|                                                                                    | 
|Provisions for pensions and similar obligations                                     | 
|                                                                                    | 

The
benefit obligation based on current compensation levels (accumulated benefit obligation "ABO") was €5,434.9 million on December 31, 2003 and
€5,550.9 million on December 31, 2002.

Unrecognized
amounts refer in particular to actuarial gains or losses as well as expenses due to prior service costs, which are amortized over the average remaining period of service of
the pension recipients in the current Financial Statements. Deviations between the expected return from fund assets and the effective change in value are generally distributed over a period of five
years.

Plans with accumulated benefit obligations in excess of plan assets:

The aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with an accumulated benefit obligation (ABO) in
excess of plan assets is shown below. Pension liabilities without asset funding relate predominately to pension plans in Germany that are covered by provisions.

|                                                
|------------------------------------------------
|
|
|
|Unfunded pension plans                          
|Partially funded pension plans                  
|                                                
|Total of pension plans that are not fully funded
|Fully funded pension plans                      
|                                                
|Total                                           
|                                                

Composition
of the net periodic benefit cost:

|                                        | 
|--------------------------------------- | 
|
|
|Service cost                            | 
|Interest cost                           | 
|Expected return on plan assets          | 
|Amortization of prior service cost      | 
|Other amortization amounts              | 
|Settlement gains                        | 
|                                        | 
|Expenses for defined benefit plans      | 
|Expenses for defined contribution plans | 
|Expenses for similar obligations        | 
|                                        | 
|Net periodic benefit cost               | 
|                                        | 

F-51

---

Expenses
for defined contribution plans include increases in employer's contributions to BASF Pensionskasse in 2003.

The
estimated contribution payments including BASF Pensionskasse for 2004 are €99.8 million.

24.  Other provisions

|                                                        
|--------------------------------------------------------
|
|
|
|Oil and gas production                                  
|Environmental protection and remediation costs          
|Personnel costs                                         
|Sales and purchase risks                                
|Integration, shutdown and restructuring costs           
|Legal, damage claims, guarantees and related commitments
|Maintenance and repair costs                            
|Outstanding billings from suppliers                     
|Other                                                   
|                                                        
|                                                        
|                                                        

Oil and gas production:Accrued costs for filling of wells and the removal of
production equipment after the end of production are accumulated individually using the unit of production method according to the amount of cumulative production.

Environmental protection and remediation costs:Expected costs for rehabilitating contaminated sites,
water protection, recultivating landfills, removal of environmental contamination at existing production or warehouse equipment and other measures.

Personnel costs:The personnel cost provision includes obligations to grant long-time
service bonuses and anniversary payments, vacation pay, variable compensation including related social security contributions and other accruals as well as provisions for early retirement and short-
working programs for employees nearing retirement. Most German BASF companies have various programs that entitle employees who are at least 55 years old to reduce their working hours to 50% for
up to six years. Under such arrangements, employees generally work full time during the first half of the transition period and leave the Company at the start of the second period. Employees receive a
minimum 85% of their net salary throughout the transition period.

Sales and purchase risks:The sales and purchase risks provision includes warranties, product
liability, customer rebates, payment discounts and other price reductions, sales commissions and provisions for expected losses on committed purchases or similar obligations.

Integration, shutdown and restructuring costs:Such provisions include severance payments to
employees as well as specific site shutdown or restructuring costs, including the costs for demolition and similar measures.

F-52

---

The movement in shutdown and restructuring provisions is as follows:

|                            
|----------------------------
|
|
|Severance                   
|Plant closure and demolition
|Other                       
|                            
|Total                       
|                            

|                            
|----------------------------
|
|
|Severance                   
|Plant closure and demolition
|Other                       
|                            
|Total                       
|                            

|                            
|----------------------------
|
|
|Severance                   
|Plant closure and demolition
|Other                       
|                            
|Total                       
|                            

Additions in 2003 consisted, in particular, of personnel measures at the Ludwigshafen site, as well as restructuring measures for corporate
services in North America (NAFTA).

Additions
in 2002 consisted of personnel measures at the Ludwigshafen site, as well as restructuring measures in the Agricultural Products division.

Amounts
paid in 2003 and 2002 are related to the realization of restructuring measures initiated in the prior year.

In
2001, provisions for severance payments had to be set up for the planned shutdown of numerous plants and production sites located predominantly in North America (NAFTA), South
America, the United Kingdom, the Netherlands and Italy. Further charges arose from the restructuring of the Company's sales and marketing organization.

Legal, damage claims, guarantees and related commitments:Provisions are recorded for the expected
cost of outstanding litigation and claims of third parties, including regulatory authorities, other guarantees and warrantees for trust proceedings. The significant proceedings are described in
Note 27.

Payments
were made in 2002 for compensation claims of vitamin customers in the United States after finalization of a settlement and for fines of €296.2 million. An
additional €100 million was added to

F-53

---

the
provision for the settlement of vitamin litigation in 2002 due to the ongoing settlement of indirect vitamin customers' claims in the United States and the unsettled litigation in some countries.

Additions
in 2001 relate to guarantees granted and risks retained in connection with the sale of the pharmaceuticals business. An additional €200 million resulted
from the fine imposed by the European Commission for violations of antitrust laws relating to the sale of vitamin products. The provisions set up hitherto were insufficient due to the unexpectedly
high fine. In addition, claims for damages by customers for vitamins from a class action lawsuit settled in 2000 that were previously reported as liabilities have been switched to provisions because
numerous large customers have elected to opt out of the settlement.

Maintenance and repair costs:Provisions for maintenance and repair costs cover maintenance
procedures as of the end of the year that are expected to be incurred within the first three months of the following year and certain provisions for the overhauling of large-scale plants within
prescribed intervals required by official agencies.

Maintenance
and repair provisions for overhauls required by regulatory authorities were as follows:

|                                            
|--------------------------------------------
|
|
|Overhauls required by regulatory authorities

|                                            
|--------------------------------------------
|
|
|Overhauls required by regulatory authorities

25.  Liabilities

Financial liabilities

|                                                              
|--------------------------------------------------------------
|
|
|5.75% Euro Bond 2000/2005 of BASF Aktiengesellschaft          
|3.50% Euro Benchmark Bond 2003/2010 of BASF Aktiengesellschaft
|Other bonds                                                   
|Commercial paper                                              
|                                                              
|Bonds and other liabilities to the capital market             
|Liabilities to credit institutions                            
|                                                              
|Financial liabilities                                         
|                                                              

F-54

---

Financial
liabilities are denominated predominantly in the following currencies:

|                 
|-----------------
|
|
|U.S. dollars     
|Euros            
|Chinese renminbi 
|Malaysian ringgit
|Korean won       
|Other            
|                 
|Total            
|                 

Of
the U.S. dollar liabilities, €54.7 million exist at BASF Aktiengesellschaft which also has U.S. dollar accounts receivable, and forward exchange contracts to
reduce foreign exchange risk.

Financial
liabilities have the following maturities as of December 31, 2003:

|          
|----------
|
|2004      
|2005      
|2006      
|2007      
|2008      
|Thereafter
|          
|Total     
|          

The
3.5% Euro Benchmark Bond 2003/2010 of BASF Aktiengesellschaft was issued in July 2003 in the amount of €1,000 million. The 5.75% Euro Bond 2000/2005 of
BASF Aktiengesellschaft was issued in July 2000 in the amount of €1,250 million.

"Other
bonds" consist primarily of industrial revenue and pollution control bonds that are used to finance investments in the United States. The weighted average interest rate of these
bonds was 1.4% in 2003, 2.1% in 2002, and 2.3% in 2001.

"Commercial
paper" comprises BASF Aktiengesellschaft's commercial paper program and in 2002 corresponding borrowings of our subsidiaries in India.

Liabilities to credit institutions

Liabilities to credit institutions relate to a large number of different credit institutions in various countries. The weighted average interest
rate on short-term borrowings was 4.4% on December 31, 2003 (2002: 5.1%). Liabilities to credit institutions denominated in ringgit, won und renminbi result from the local financing of
investments in Malaysia, Korea, and China.

The
Company had committed and unused credit lines with variable interest rates of €1,980 million as of December 31, 2003, and
€2,380 million as of December 31, 2002. In addition, the Company had €127 million additional credit lines as of December 31, 2003, as well
as €323 million as of December 31, 2002, which are without commitment fees.

F-55

---

Miscellaneous liabilities

|                                                         
|---------------------------------------------------------
|
|
|
|Advances received on account of orders                   
|Liabilities on bills                                     
|Liabilities to companies in which participations are held
|Tax liabilities                                          
|Liabilities relating to social security                  
|Non-trade liabilities of joint venture to partners       
|Other miscellaneous liabilities                          
|                                                         
|Total                                                    
|Deferred income                                          
|                                                         
|Total miscellaneous liabilities and deferred income      
|                                                         

Liabilities
to companies in which participations are held include liabilities, which are not eliminated, to jointly owned companies accounted for using the proportional consolidation
method of €140.1 million as of December 31, 2003, and €129.4 million as of December 31, 2002. Further liabilities relating to associated
companies accounted for under the equity or costs method were €37.1 million as of December 31, 2003, and €52.4 million as of December 31,
2002.

Maturities of liabilities

|                                                         
|---------------------------------------------------------
|
|
|
|
|Bonds and other liabilities to the capital market        
|Liabilities to credit institutions                       
|Accounts payable, trade                                  
|Liabilities to affiliated companies                      
|Advances received on account of orders                   
|Liabilities on bills                                     
|Liabilities to companies in which participations are held
|Other miscellaneous liabilities                          
|                                                         
|Total                                                    
|                                                         

Secured liabilities

|                                  
|----------------------------------
|
|
|Liabilities to credit institutions
|Miscellaneous liabilities         
|                                  
|                                  
|                                  

The
above liabilities are collateralized by mortgages or securities. In addition, BASF Aktiengesellschaft has given covenants in favor of BASF Pensionskasse VVaG with regard to adhering
to certain balance sheet ratios and to forgo encumbering property as security for creditors.

F-56

---

26.  Contingent liabilities and other financial obligations

The contingent liabilities listed below, are stated at nominal value.

Contingent liabilities

|                                                        
|--------------------------------------------------------
|
|
|Bills of exchange                                       
|                                                        
|Guarantees                                              
|Warranties                                              
|Granting collateral on behalf of third-party liabilities
|                                                        
|                                                        
|                                                        

Other financial obligations

|                                                       
|-------------------------------------------------------
|
|
|Remaining cost of construction in progress             
|                                                       
|Commitments from long-term rental and leasing contracts
|Capital contribution and loan commitments              
|Repurchase commitments                                 
|                                                       
|Total                                                  
|                                                       

BASF
had payment commitments in 2003 to Shanghai BASF Polyurethane Company, China, which is not yet included in the scope of consolidation. The company is constructing a plant for the
production of TDI/MDI in Shanghai, China. In 2002 BASF had payment commitments to BASF Chemicals Company Ltd., China. Repurchase commitments in 2003 related to accounts receivable.

Obligations
from long-term rental and lease contracts are due as follows:

|                   
|-------------------
|
|2004               
|2005               
|2006               
|2007               
|2008               
|2009 and thereafter
|                   
|Total              
|                   

F-57

---

Purchase commitments for raw materials and natural gas from long-term contracts

The Company has entered into long-term purchase contracts for natural gas, the vast majority of which are coupled with
long-term supply contracts to customers. In addition, the Company purchases raw materials globally, both on the basis of long-term contracts and in spot markets. In general,
such commitments are at prices that are regularly adjusted to market conditions. The fixed and determinable portions of long-term purchase contracts with a remaining term of more than one
year as of December 31, 2003, are as follows:

|                   
|-------------------
|
|2004               
|2005               
|2006               
|2007               
|2008               
|2009 and thereafter
|                   
|Total              
|                   

27.  Litigation and claims

In the context of its ordinary business operations, BASF is a defendant in class action lawsuits brought before United States courts and
individual actions before labor courts and civil courts or comparable institutions in Germany and abroad. Significant proceedings are discussed below.

Antitrust Claims Relating to Vitamins

In 1999 and in 2000, BASF Aktiengesellschaft as well as BASF Australia Ltd. entered into agreements with the United States Department of
Justice, the Canadian Competition Bureau and the Australian Department of Justice by which BASF Aktiengesellschaft and BASF Australia Ltd. agreed to plead guilty to certain violations of
antitrust laws relating to the sale of vitamin products in respective countries. The relevant courts accepted the guilty pleas. On November 21, 2001, the European Commission imposed a fine of
€296.2 million against BASF Aktiengesellschaft. BASF has appealed against this decision. Further proceedings are still pending in Brazil, and Australia.

All
lawsuits in the U.S. in connection with said antitrust law violations filed by direct customers that purchased vitamins in the U.S. have been settled.

State
court class actions on behalf of indirect purchasers have been filed separately in 28 states. In October 2000, class actions in 24 of these states, as well as related claims
by various state government entities, were settled with terms calling for the vitamin manufacturers to pay, after a reduction to reflect nonparticipation of certain claimants of approximately
$340 million. BASF Aktiengesellschaft will be obligated to pay approximately $83 million of the total amount. The settlements have been finally approved by the respective state courts
and partially fulfilled. Certain of indirect purchasers plaintiffs who did not wish to participate in these settlement or were not eligible to do so have filed suits. Certain of those suits have been
settled. Certain other suits by indirect purchasers are still pending. Further claims for damages have been filed in Canada, Germany, France and Australia.

For
these antitrust proceedings the company has established provisions for the costs that it can currently anticipate in excess of the amounts agreed upon and paid. BASF does not
believe, that additional charges relating to these proceedings will have a substantial impact on the profitability of the company.

F-58

---

BASF
Aktiengesellschaft has been named as a defendant in Empagran S.A. v. F. Hoffman-LaRoche, Ltd., et al., a federal class action filed in the U.S. District Court for the
District of Columbia purportedly on behalf of all persons who purchased vitamins from the defendants outside the United States between January 1, 1988 and February 1999. The Empagran
complaint alleges that the plaintiffs were overcharged on their vitamins purchases as the result of a worldwide conspiracy among the defendants to fix vitamin prices. By decision dated June 7,
2001, the District Court for the District of Columbia dismissed the Empagran complaint for lack of subject matter jurisdiction. On January 17, 2003, a divided panel of the United States Court
of Appeals for the District of Columbia Circuit reversed the District Court's ruling. The Court of Appeals held that the United States antitrust laws permit the assertion of federal subject matter
jurisdiction over claims by foreign purchasers based on purchases made and purported damages felt outside the United States. The defendants named in Empagran, including BASF Aktiengesellschaft, filed
a timely petition for rehearing by the full Court of Appeals, but that Court by a 4-3 vote, with two judges abstaining declined on September 11, 2003, to rehear the panel's
decision. As a result, the named defendants (including BASF Aktiengesellschaft) filed a petition for certiorari seeking review of the Court of Appeals' decision, which the United States Supreme Court
granted on December 15, 2003. The Supreme Court will likely argue the case in spring 2004. A decision is anticipated by June 30, 2004. If the Supreme Court reverses the Court of Appeals'
decision and remands the case for dismissal on subject matter jurisdiction grounds, the proceedings would be terminated and the case dismissed. If, on the other hand, the Supreme Court upholds the
Court of Appeals' decision, then BASF Aktiengesellschaft will vigorously defend the case at each stage of the proceedings, including personal jurisdiction, venue, attempted certification of a
worldwide class, number of liability issues and purported damages in various countries. An ultimate finding against BASF Aktiengesellschaft could cause significant financial charges.

Synthroid®-Related Claims

This proceeding concerned class action lawsuits against Knoll Pharmaceutical Company (KPC) of BASF's Pharmaceutical business, discontinued in
2001. The lawsuits challenged Knoll's delaying the publication of a study comparing Synthroid® to certain branded and generic products. Final approval of a proposed settlement of 1997 was
not granted. KPC subsequently negotiated a new proposed settlement with consumers and third-party payors providing for a payment of $25.5 million in addition to the $98 million paid into
escrow in late 1997 (plus the accrued interest thereon). The United States District Court of Chicago granted final approval of the new proposed settlement on August 4, 2000. A number of
appeals have been filed. On August 31, 2001, the United States Court of Appeals granted final confirmation of the settlement. The only
issue outstanding before payment can be made is the possible appeal of consumer class counsels' litigation costs and expenses.

Meridia® Class Actions against BASF Corporation and BASF Aktiengesellschaft

In various class actions in the U.S., KPC and BASF Corporation (and partly BASF Aktiengesellschaft) as well as Abbott Laboratories, Inc.
and Glaxo Wellcome are being sued for an unknown amount of damages as well as for the reimbursement of costs for preventive medical check-ups. The claims are based on the possible
hazardousness, alleged insufficient trials, and failures during the admission procedure of Meridia® (trade name of the obesity drug sibutramine). The legal proceedings are still at a very
early stage. Both actions against BASF Aktiengesellschaft have been dropped or dismissed. BASF Corporation processed and still processes the drug for KPC by way of toll manufacture. Beyond this BASF
Corporation has no relationship with the product. The mere fact, that BASF Corporation held the interest in KPC, does not provide a sufficient basis for compensation claims. The overall material risk
for BASF is considered as rather low.

F-59

---

Additional Proceedings

In 2001, class action lawsuits against BASF Aktiengesellschaft and some of its affiliates were filed at United States courts. It was alleged that
sales of automotive refinish coatings had violated antitrust laws. BASF considers these allegations to be unfounded and consequently filed for dismissal of the lawsuits.

In
a ruling of February 19, 2004, the Supreme Court of Minnesota confirmed the decision of an appeals court in which BASF Corporation was ordered to pay damages totaling
$52 million. The appeals court considered the sale of the crop protection products Poast® and Poast Plus® at different prices to be in contravention of consumer
protection regulations. BASF regards different prices to be justified because they are based on different patents and approvals for the products and is reviewing whether to file a Writ of
Certiorari to with the U.S. Supreme Court.

28.  Stock-based compensation

BASF stock option program (BOP):In 2003, BASF continued the BASF stock option program (BOP) for
senior executives of the company worldwide. This program has existed since 1999. Approximately 1,000 senior executives, including the Board of Executive Directors, are currently entitled to
participate in this program.

To
participate in the stock option program, each participant must hold as a personal investment BASF shares in the amount of 10% to 30% of his or her individual variable compensation.
The number of shares is determined by the amount of variable compensation designated by the participant and the weighted average market price quotation for BASF shares on the first business day after
the annual meeting, which was €38.94 on May 7, 2003 (base price).

For
each BASF share of the individual investment, a participant receives four options. Each option consists of two parts, right A and right B, which may be exercised if defined
thresholds have been met: The threshold of right A is met if the price of the BASF share has increased by more than 30% in comparison to the base price (absolute threshold). The value of right A will
be the difference between the market price of BASF shares at the exercise date and the base price; it is limited to 100% of the base price. Right B may be exercised if the cumulative percentage
performance of BASF shares exceeds the percentage performance of the Dow Jones Global Chemicals Total Return Index (DJ Chemicals). The value of right B will be the base price of the option multiplied
by twice the percentage outperformance of BASF shares compared to the DJ Chemicals index on the exercise date; the value of right B is limited to the closing price on the date of exercise, minus the
calculated nominal value of the BASF share.

The
options were granted on July 1, 2003 and can be exercised between July 1, 2005 and June 30, 2011. During the exercise period it is not possible to exercise
options during certain periods (closed periods). Each option right may only be exercised if the performance targets are achieved and may only be exercised once, meaning that if only one performance
target is met and that option is exercised, the other option right expires. The maximum gain for a participant from the BOP program is limited to 10 times the original individual investment and
will be principally settled in cash.

The
stock option programs BOP 1999 to BOP 2002 were structured in a similar way to the BOP 2003 program. To participate in the BOP program, each participant must hold BASF shares in the
amount of 10% to 30% of his or her individual variable compensation (BOP 2002 and 2001) or must make an individual investment in BASF shares in the amount of 10% to 30% of his or her individual
variable compensation that is used to purchase BASF shares at the market price on the first business day after the Annual Meeting (BOP 1999 and 2000). The options may be exercised following a vesting
period of two years (BOP 2002 and 2001) or three years (BOP 1999 and 2000).

The
benchmark index used to determine the value of right B for BOP 1999 and 2000 is the Dow Jones EURO STOXXSM Total Return Index (EURO STOXXSM). For BOP 2001
it was replaced by the

F-60

---

DJ Chemicals
Index, which is considered a more meaningful benchmark as a worldwide index for the chemical sector.

Details
on the fair value and the number of options issued are described below.

Fair value and parameters used as of December 31, 2003*

|                                        
|----------------------------------------
|
|
|Fair value                              
|Dividend yield of BASF shares           
|Risk free interest rate                 
|Volatility of BASF shares               
|Volatility of Index : DJ Chemicals      
|Correlation BASF quotation: DJ Chemicals

---

The fair value at the option grant date was €16.82 (BOP 2003), €30.30 (BOP 2002), and €35.91 (BOP
2001).

|                                     
|-------------------------------------
|
|
|Options outstanding as of January 1  
|Options granted                      
|Options lapsed*                      
|Options exercised                    
|                                     
|Options outstanding as of December 31
|                                     
|                                     

---

The weighted average maturity of the outstanding options was 5.92 years on December 31, 2003, 5.33 years on
December 31, 2002, and 5.14 years on December 31, 2001. The base prices were within a range of €38.94 to €47.87 in 2003, €41.60 to
€47.87 in 2002, and €41.60 to €47.87 in 2001.

In
accordance with a resolution by the Board of Executive Directors in 2002 stock options will be settled in cash instead of delivering shares. Options outstanding as of
December 31, 2002 and 2003 are valued with the fair value as of the balance sheet date. This amount is accrued as a provision over the respective vesting period. An amount of
€28.1 million was charged to income in 2003, and €16.7 million in 2002. The compensation cost of €30.2 million in 2001 was
determined based upon the number of outstanding options, their vesting period, and the fair value of the options at the grant date.

BASF "plus" incentive share program:In 1999, BASF started an incentive share program called "plus"
for all eligible employees except the senior executives entitled to participate in the BOP. Currently, employees of German and of various European and Mexican subsidiaries are entitled to participate
in the program. Each participant must make an individual investment in BASF shares from his or her variable compensation. For each 10 BASF shares purchased in the program, a participant receives one
BASF share at no cost after one, three, five, seven and 10 years of holding the BASF shares. The right to receive free BASF shares expires if a participant sells the individual investment in
BASF shares, if the participant stops working for the Company or one year after retirement.

F-61

---

In
2002, most companies improved the employee share purchase program. The first block of 10 shares purchased in any year now attracts one free incentive share in each of the
following 10 years.

Details
on the incentive share program are described below.

|                                                                
|----------------------------------------------------------------
|
|
|Number of shares held as individual investment as of January 1  
|Number of shares added to the individual investment             
|Number of subscription rights lapsed                            
|                                                                
|Number of shares held as individual investment as of December 31
|                                                                

The Company provides for the value of the free shares over the period until the shares are to be issued based on the year-end price of
BASF shares.

Compensation
cost of €10.8 million was recorded in 2003, €5.7 million in 2002, and €4.4 million in 2001.

In
addition, in 2003, all new employees with permanent contracts were offered five free BASF shares that must be held for 10 years. In 2003, 10,955 BASF shares were provided free
of charge, resulting in €0.4 million of expenses.

All
employees with permanent contracts were provided the same offer. In 2002 174,130 BASF shares were provided free of charge. The resulting expenses of
€8.0 million were already accrued as a provision in 2001.

29.  Financial instruments and derivative instruments

Derivative instruments:The Company is exposed to foreign currency, interest rate and commodity risks
during the normal course of business. In cases where the Company intends to hedge against these risks, derivatives are used, including forward exchange contracts, currency options, interest
rate/currency swaps or combined instruments, or commodity derivatives. In addition, derivative instruments are used to replace transactions in original financial instruments, such as shares or
fixed-interest securities. Derivative instruments are only used if they have a corresponding underlying position or planned transaction arising from the operating business, cash investments and
financing. The leverage effect that can be achieved with derivatives is deliberately not used. The derivative instruments held by the Company are not held for the purpose of trading.

Where
derivatives have a positive market value, the Company is exposed to credit risks in the event of non-performance of their counterparts. The credit risk is minimized by
exclusively trading contracts with major creditworthy financial institutions.

To
ensure efficient risk management, market risks are centralized at BASF Aktiengesellschaft, except when certain subsidiaries have been authorized to close derivative contracts under
the principles mentioned above. The Company has developed and implemented internal guidelines based on the principles of separation of functions for completion and execution of derivative instruments.

The
risks arising from changes in exchange rates and interest rates as a result of the underlying transactions and the derivative transactions concluded to secure them are monitored
constantly. The same is true of the derivative instruments, which are used to replace transactions in original financial instruments. For this purpose, market quotations or computer or mathematical
models are used to determine the current market values not only of the underlying transactions but also of the derivative transactions and these are compared with each other.

F-62

---

Foreign exchange and interest rate risk management:Foreign currency derivatives are primarily aimed
at hedging the exchange rate risk against the U.S. dollar, the Canadian dollar, the Australian dollar, the British pound, the Brazilian real, the Japanese yen, the Mexican peso, and the Singapore
dollar. Foreign exchange contracts, or combined interest/currency derivatives were entered into to hedge loans granted to group companies. In the case of interest swaps or combined instruments, the
difference between interest paid and interest received is deferred and is reflected in the interest result.

Fair value of financial instruments:The fair value of a financial instrument is the price at which
the instrument could be exchanged between willing parties. Fair value amounts are estimated by the Company management based on available market information and appropriate valuation techniques. These
estimates do not necessarily reflect the amount that could be realized or would be paid in the current market.

Book
and estimated fair values of financial instruments, for which it is practicable to estimate the fair value, were as follows:

|                                             
|---------------------------------------------
|
|
|
|Assets                                       
|Financial assets (details, see Note 15)      
|Accounts receivable, trade and other assets  
|Marketable securities (details, see Note 18) 
|Cash and cash equivalents                    
|Liabilities                                  
|Financial liabilities                        
|Accounts payable, trade and other liabilities

Accounts receivable and other assets, accounts payable and other liabilities:For
trade accounts receivable, liquid funds and other assets, trade accounts payable and other liabilities, the book value approximates the fair value. For non-current amounts, the difference
between book value and fair value represents primarily unrecognized losses from foreign currency balances.

The
fair value of financial assets and marketable securities represents market values from securities exchanges at the balance sheet date. The market value of financial liabilities
represents a valuation of bonds at inter-bank rates.

Other
assets in 2003 contained the book value of the DAX-LIBOR swaps in the amount of €54.4 million (2002; €33.5 million). The
book value of the payment liabilities in 2003 was €56.7 million in 2003 and €77.5 million in 2002.

F-63

---

Breakdown of derivative financial instruments:

|                                            | 
|------------------------------------------- | 
|
|
|Forward exchange contracts                  | 
|Currency options                            | 
|                                            | 
|Foreign currency derivatives                | 
|                                            | 
|Interest rate swaps                         | 
|Interest rate/cross currency swaps          | 
|                                            | 
|Interest rate derivatives                   | 
|                                            | 
|Commodity derivatives and other derivatives | 
|                                            | 

Forward exchange contracts generally mature within one year.

The
nominal values are the totals of the purchases and sales of the particular derivatives on a gross basis. The fair market values correspond to the difference between the cost and
resale value, which is determined from market quotations or by the use of option pricing models or, in the case of unlisted contracts, the termination amount in the event of premature cancellation.
Offsetting changes in the valuation of the underlying transactions are not taken into account.

Provisions
for probable losses from fluctuations of foreign exchange rates, interest rates or prices amounted to €2.2 million in 2003 and
€2.7 million in 2002. The changes of the fair value of financial instruments and derivative contracts had been recognized as required by U.S. GAAP and the impact on net income
and stockholders' equity in accordance to U.S. GAAP is disclosed in Note 4.

Commodity
derivatives are used to hedge raw material prices, e.g., for naphtha.

Supplementary information concerning oil and gas producing activities (unaudited)

Oil and gas producing activities

"Additional Petroleum Data" disclosures are presented in accordance with the provisions of SFAS No. 69, "Disclosure of Oil and Gas
Producing Activities." Accordingly, volumes of reserves and production exclude royalty interests of third parties, and royalty payments are shown as reductions in revenues.

In
2001, Wintershall began accounting for an investment in Russia in accordance with the equity method. The respective results of operations, costs incurred, capitalized costs, reserves
and discounted future net cash flows are disclosed proportionally to Wintershall's participation.

In
2002, Wintershall acquired Clyde Netherlands B.V. from ConocoPhillips, effective November 5, 2002. The respective effects of this acquisition will be described in detail for
each disclosure of this section.

Results of operations from oil and gas producing activities

Results of operations from oil and gas producing activities represent only those revenues and expenses directly associated with Wintershall's oil
and gas production. These amounts do not include any allocation of interest expenses or corporate overheads and are therefore not necessarily indicative

F-64

---

of
contributions to consolidated net earnings of the Company. Estimated income taxes were computed by applying the statutory income tax rates to the pretax income from producing activities.

|                                                       
|-------------------------------------------------------
|
|
|Results of operations                                  
|/*/ Sales to consolidated companies                    
|/*/ Sales to third parties                             
|/*/ Royalties                                          
|                                                       
|Total sales                                            
|                                                       
|/*/ Production costs                                   
|/*/ Exploration expenses                               
|/*/ Depreciation, depletion, amortization and valuation
|/*/ Other                                              
|                                                       
|Total costs                                            
|                                                       
|Result before taxes                                    
|/*/ Income taxes                                       
|                                                       
|Result after taxes                                     
|                                                       

|                                                       
|-------------------------------------------------------
|
|
|Results of operations                                  
|/*/ Sales to consolidated companies                    
|/*/ Sales to third parties                             
|/*/ Royalties                                          
|                                                       
|Total sales                                            
|                                                       
|/*/ Production costs                                   
|/*/ Exploration expenses                               
|/*/ Depreciation, depletion, amortization and valuation
|/*/ Other                                              
|                                                       
|Total costs                                            
|                                                       
|Result before taxes                                    
|/*/ Income taxes                                       
|                                                       
|Result after taxes                                     
|                                                       

F-65

---

|                                                       
|-------------------------------------------------------
|
|
|Results of operations                                  
|/*/ Sales to consolidated companies                    
|/*/ Sales to third parties                             
|/*/ Royalties                                          
|                                                       
|Total sales                                            
|                                                       
|/*/ Production costs                                   
|/*/ Exploration expenses                               
|/*/ Depreciation, depletion, amortization and valuation
|/*/ Other                                              
|                                                       
|Total costs                                            
|                                                       
|Result before taxes                                    
|/*/ Income taxes                                       
|                                                       
|Result after taxes                                     
|                                                       

Costs incurred in oil and gas property acquisition, exploration and development activities

Costs incurred represent amounts capitalized or charged against income as incurred in connection with oil and gas property acquisition,
exploration and development activities. Exploration and development costs include applicable depreciation of support equipment and sites used in such activities.

The
major portion of Costs incurred 2002 resulting from Property acquisitions shown under Rest of World represents the effect from the acquisition of Clyde Netherlands B.V. (purchase
price allocation to assets before taxes).

|                      
|----------------------
|
|
|Costs incurred        
|Property acquisitions:
|/*/ Proved            
|/*/ Unproved          
|Exploration           
|Development           
|                      
|Total costs           
|                      

F-66

---



|                      
|----------------------
|
|
|Costs incurred        
|Property acquisitions:
|/*/ Proved            
|/*/ Unproved          
|Exploration           
|Development           
|                      
|Total costs           
|                      

|                      
|----------------------
|
|
|Costs incurred        
|Property acquisitions:
|/*/ Proved            
|/*/ Unproved          
|Exploration           
|Development           
|                      
|Total costs           
|                      

Capitalized costs relating to oil and gas producing activities

Capitalized costs represent total expenditures on proved and unproved oil and gas properties with related accumulated depreciation, depletion and
amortization.

|                                                                           
|---------------------------------------------------------------------------
|
|
|Capitalized Costs                                                          
|Gross costs:                                                               
|                                                                           
|                                                                           
|                                                                           
|Accumulated depreciation, depletion, amortization and valuation allowances:
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total net costs                                                            
|                                                                           

F-67

---

|                                                                           
|---------------------------------------------------------------------------
|
|
|Capitalized Costs                                                          
|Gross costs:                                                               
|                                                                           
|                                                                           
|                                                                           
|Accumulated depreciation, depletion, amortization and valuation allowances:
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total net costs                                                            
|                                                                           

|                                                                           
|---------------------------------------------------------------------------
|
|
|Capitalized Costs                                                          
|Gross costs:                                                               
|                                                                           
|                                                                           
|                                                                           
|Accumulated depreciation, depletion, amortization and valuation allowances:
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Total net costs                                                            
|                                                                           

Oil and natural gas reserves

Proved oil and gas reserves are the estimated volumes of crude oil, natural gas and natural gas liquids that are shown by geological and
engineering data with reasonable certainty to be recoverable in future years from known reserves under existing economic and operating conditions, i.e., prices and costs as of the date the estimates
are made. Prices only reflect changes in existing prices resulting from contractual arrangements, not escalation based on future conditions. Proved reserves exclude royalties and interests of third
parties.

Proved
developed reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be
obtained through the application of fluid injection or other improved recovery techniques for supplementing natural forces and mechanisms of primary recovery are included as proved developed reserves
only after testing in the form of a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

Numerous
uncertainties are inherent in estimating quantities of proved reserves and in projecting future rates of production and timing development expenditures. The accuracy of any
reserve estimate

F-68

---

is
a function of the quality of available data and engineering and geological interpretation and judgement. Results of drilling, testing and production after the date of the estimate may necessitate
substantial upward or downward revisions. In addition, changes in oil and natural gas prices could have an effect on the quantities of proved reserves because the estimates of reserves are based on
prices and costs at the date when such estimates are made.

The
tables below show the estimated net quantities, calculated in compliance with Regulation S-X, Rule 4-10(a), as of December 31, 2001, 2002
and 2003 of the Company's proved oil and gas reserves and proved developed oil and gas reserves, as well as changes in estimated proved reserves as a result of production and other factors. The
Company's reserves for 2001, 2002 and 2003 include reserves owned directly by the Company and its consolidated subsidiaries.

The
major portion of additions of reserves 2002 resulting from Purchase of reserves shown under Rest of World represents the effect from the acquisition of Clyde Netherlands B.V.

|                                                             |                                
|------------------------------------------------------------ | -------------------------------
|
|
|Estimated proved oil reserves                                |                                
|Proved developed and undeveloped reserves, beginning of year |                                
|                                                             | /*/ Revisions and other changes
|                                                             | /*/ Extensions and discoveries 
|                                                             | /*/ Improved recovery          
|                                                             | /*/ Purchase of reserves       
|                                                             | /*/ Sale of reserves           
|                                                             | /*/ Production                 
|                                                             |                                
|End of year                                                  |                                
|Proved developed reserves, beginning of year                 |                                
|End of year                                                  |                                
|Estimated proved gas reserves (BSCF)                         |                                
|Proved developed and undeveloped reserves, beginning of year |                                
|                                                             | /*/ Revisions and other changes
|                                                             | /*/ Extensions and discoveries 
|                                                             | /*/ Improved recovery          
|                                                             | /*/ Purchase of reserves       
|                                                             | /*/ Sale of reserves           
|                                                             | /*/ Production                 
|                                                             |                                
|End of year                                                  |                                
|Proved developed reserves, beginning of year                 |                                
|End of year                                                  |                                

F-69

---

|                                                            
|------------------------------------------------------------
|
|
|Estimated proved oil reserves                               
|Proved developed and undeveloped reserves, beginning of year
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|End of year                                                 
|Proved developed reserves, beginning of year                
|End of year                                                 
|Estimated proved gas reserves (BSCF)                        
|Proved developed and undeveloped reserves, beginning of year
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|End of year                                                 
|Proved developed reserves, beginning of year                
|End of year                                                 
|                                                            

F-70

---

|                                                            
|------------------------------------------------------------
|
|
|Estimated proved oil reserves                               
|Proved developed and undeveloped reserves, beginning of year
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|End of year                                                 
|Proved developed reserves, beginning of year                
|End of year                                                 
|Estimated proved gas reserves (BSCF)                        
|Proved developed and undeveloped reserves, beginning of year
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|End of year                                                 
|Proved developed reserves, beginning of year                
|End of year                                                 

Standardized measure of discounted future net cash flows relating to proved oil and gas reserves

The information presented below has been prepared in accordance with SFAS No. 69, which requires the standardized measure of discounted
future net cash flows to be based on year-end sales prices, costs and statutory income tax rates and a 10% annual discount rate. Because prices used in the calculation are as of December,
the standardized measure could vary significantly from year to year depending on market conditions at that specific date.

The
projection should not be viewed as realistic estimates of future cash flows nor should the "standardized measure" be interpreted as representing current value to the company.
Material revisions of estimates of proved reserves may occur in the future, development and production of the reserves may not occur in the period assumed, actual prices realized are expected to vary
significantly from those used and actual costs may also vary. The company's investment and operating decisions are not based on the information presented below, but on a wide range of reserves, and on
different price and cost assumptions from those reflected in this information.

Beyond
the above considerations, the "standardized measure" is also not directly comparable with asset balances appearing elsewhere in the Consolidated Financial Statements because any
such comparison would require a reconciling adjustment.

F-71

---

Standardized measure of discounted future net cash flows relating to proved oil and gas reserves

|                                                
|------------------------------------------------
|
|
|Discounted future net cash flow                 
|Revenues                                        
|Production/development costs                    
|Income taxes                                    
|Future net cash flows                           
|Discounted to present value at a 10% annual rate
|                                                
|Total                                           
|                                                

|                                                
|------------------------------------------------
|
|
|Discounted future net cash flow                 
|Revenues                                        
|Production/development costs                    
|Income taxes                                    
|Future net cash flows                           
|Discounted to present value at a 10% annual rate
|                                                
|Total                                           
|                                                

|                                                
|------------------------------------------------
|
|
|Discounted future net cash flow                 
|Revenues                                        
|Production/development costs                    
|Income taxes                                    
|Future net cash flows                           
|Discounted to present value at a 10% annual rate
|                                                
|Total                                           
|                                                

F-72

---

Summary of changes in standardized measure of discounted future net cash flows relating to proved oil and gas reserves

The major portion of changes 2002 resulting from Purchase (sales) of reserves in place  net shown under Rest of World represents the
effect from the acquisition of Clyde Netherlands B.V.

|                                                                     | 
|-------------------------------------------------------------------- | 
|
|
|Summary of changes                                                   | 
|Balance as of January 1                                              | 
|Sales and transfers of oil and gas produced, net of production costs | 
|Net changes in price and in development and production cost          | 
|Extension, discoveries and improved recovery, less related costs     | 
|Revisions of previous quantity estimates                             | 
|Development costs incurred during the period                         | 
|Changes in estimated future development costs                        | 
|Purchase (sales) of reserves in place  net                          | 
|Accretion of discount                                                | 
|Net changes in income taxes                                          | 
|Other                                                                | 
|Balance as of December 31                                            | 

F-73

---

|                                                                     | 
|-------------------------------------------------------------------- | 
|
|
|Summary of changes                                                   | 
|Balance as of January 1                                              | 
|Sales and transfers of oil and gas produced, net of production costs | 
|Net changes in price and in development and production cost          | 
|Extension, discoveries and improved recovery, less related costs     | 
|Revisions of previous quantity estimates                             | 
|Development costs incurred during the period                         | 
|Changes in estimated future development costs                        | 
|Purchase (sales) of reserves in place  net                          | 
|Accretion of discount                                                | 
|Net changes in income taxes                                          | 
|Other                                                                | 
|Balance as of December 31                                            | 

F-74

---

|                                                                    
|--------------------------------------------------------------------
|
|
|Summary of changes                                                  
|Balance as of January 1                                             
|Sales and transfers of oil and gas produced, net of production costs
|Net changes in price and in development and production cost         
|Extension, discoveries and improved recovery, less related costs    
|Revisions of previous quantity estimates                            
|Development costs incurred during the period                        
|Changes in estimated future development costs                       
|Purchase (sales) of reserves in place  net                         
|Accretion of discount                                               
|Net changes in income taxes                                         
|Other                                                               
|Balance as of December 31                                           

F-75

---

Item 19.    Exhibits

|     |  |                                                                                                                                                                                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | Articles of Association (Satzung) of BASF Aktiengesellschaft as amended to date (previously filed as Exhibit 2.1 to BASF Aktiengesellschaft's Registration Statement on
Form 20-F dated May 25, 2000, File No. 1-15909).
|4.2  |  | List of subsidiaries of BASF Aktiengesellschaft (List of Shares Held 2003).                                                                                                                                             
|12.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                     
|12.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                     
|13.1 |  | Certification Chief Executive Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                        
|13.2 |  | Certification Chief Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                        

E-1

---

SIGNATURES

The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this
annual report on its behalf.

|                     |  | BASF AKTIENGESELLSCHAFT
|-------------------- |  | -----------------------
|Date: March 18, 2004 |  | By:                    
|                     |  |                        
|                     |  |                        
|                     |  |                        
|                     |  | By:                    
|                     |  |                        
|                     |  |                        
|                     |  |                        

---

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