As filed with the Securities and Exchange Commission on March 18, 2003

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

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FORM 20-F

(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, 2002

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, 2002, there were 570,316,410 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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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).

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, 2002, which was U.S. $1.0485 = €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, 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:



i

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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.

ii

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TABLE OF CONTENTS

PART I

|         |  |                                                                              |  | Page
|-------- |  | ---------------------------------------------------------------------------- |  | ----
|Item 1.  |  | Identity of Directors, Senior Management and Advisers                        |  | 1   
|Item 2.  |  | Offer Statistics and Expected Timetable                                      |  | 1   
|Item 3.  |  | Key Information                                                              |  | 3   
|Item 4.  |  | Information on the Company                                                   |  | 11  
|         |  | History and Development of the Company                                       |  | 11  
|         |  | Business Overview                                                            |  | 11  
|         |  | Organizational Structure                                                     |  | 74  
|         |  | Description of Property                                                      |  | 75  
|Item 5.  |  | Operating and Financial Review and Prospects                                 |  | 81  
|         |  | Overview                                                                     |  | 81  
|         |  | Basis of Presentation                                                        |  | 81  
|         |  | Results of Operations                                                        |  | 83  
|         |  | Liquidity and Capital Resources                                              |  | 107 
|         |  | Exchange Rate Exposure and Risk Management                                   |  | 113 
|         |  | Research and Development                                                     |  | 114 
|Item 6.  |  | Directors, Senior Management and Employees                                   |  | 117 
|Item 7.  |  | Major Shareholders and Related Party Transactions                            |  | 131 
|Item 8.  |  | Financial Information                                                        |  | 133 
|Item 9.  |  | The Offer and Listing                                                        |  | 137 
|Item 10. |  | Additional Information                                                       |  | 139 
|Item 11. |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 145 
|Item 12. |  | Description of Securities Other than Equity Securities                       |  | 158 
|PART II 
|Item 13. |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 159 
|Item 14. |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 159 
|Item 15. |  | Controls and Procedures                                                      |  | 159 
|Item 16. |  | [Reserved]                                                                   |  | 159 
|PART III
|Item 17. |  | Financial Statements                                                         |  | 161 
|Item 18. |  | Financial Statements                                                         |  | 161 
|Item 19. |  | Exhibits                                                                     |  | F-78

iii

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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.

1

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(This
page has been left blank intentionally.)

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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, 2002 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.

Since
1998, 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 2000, 2001 and 2002 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 dollars for 2002 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, 2002, which was U.S. $1.0485 = €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.

3

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|                                                             |                                             | 2002 |        | 2002  |         | 2001  |         | 2000   |         | 1999  |         | 1998 
|------------------------------------------------------------ | ------------------------------------------- | ---- | ------ | ----- | ------- | ----- | ------- | ------ | ------- | ----- | ------- | -----
|
|Income Statement Data                                        |                                             |      |        |       |         |       |         |        |         |       |         |      
|German GAAP                                                  |                                             |      |        |       |         |       |         |        |         |       |         |      
|Sales, net of petroleum and natural gas taxes(1)             |                                             | $    | 33,778 |       | €32,216 |       | €32,500 |        | €35,946 |       | €29,473 |      
|Gross profit on sales                                        |                                             |      | 10,904 |       | 10,400  |       | 10,312  |        | 12,691  |       | 11,081  |      
|Income from operations                                       |                                             |      | 2,769  |       | 2,641   |       | 1,217   |        | 3,070   |       | 2,009   |      
|                                                             | thereof special items                       |      |        | (252  | )       | (240  | )       | (1,076 | )       | (330  | )       | (941 
|Income from ordinary activities                              |                                             |      | 2,769  |       | 2,641   |       | 609     |        | 2,827   |       | 2,606   |      
|Extraordinary income before taxes                            |                                             |      |       |       |        |       | 6,121   |        |        |       |        |      
|Income before taxes and minority interests                   |                                             |      | 2,769  |       | 2,641   |       | 6,730   |        | 2,827   |       | 2,606   |      
|Income before minority interests                             |                                             |      | 1,676  |       | 1,599   |       | 5,826   |        | 1,282   |       | 1,245   |      
|Net income                                                   |                                             |      | 1,577  |       | 1,504   |       | 5,858   |        | 1,240   |       | 1,237   |      
|Basic earnings per share                                     |                                             |      | 2.73   |       | 2.60    |       | 9.72    |        | 2.02    |       | 2.00    |      
|Balance Sheet Data                                           |                                             |      |        |       |         |       |         |        |         |       |         |      
|German GAAP                                                  |                                             |      |        |       |         |       |         |        |         |       |         |      
|Fixed assets                                                 |                                             |      | 21,450 |       | 20,458  |       | 21,493  |        | 21,769  |       | 16,070  |      
|Current assets including deferred taxes and prepaid expenses |                                             |      | 15,337 |       | 14,628  |       | 15,382  |        | 16,788  |       | 13,939  |      
|                                                             |                                             |      |        |       |         |       |         |        |         |       |         |      
|Total assets                                                 |                                             |      | 36,787 |       | 35,086  |       | 36,875  |        | 38,557  |       | 30,009  |      
|                                                             |                                             |      |        |       |         |       |         |        |         |       |         |      
|Stockholders' equity                                         |                                             |      | 17,764 |       | 16,942  |       | 17,522  |        | 14,295  |       | 14,145  |      
|                                                             | thereof subscribed capital                  |      |        | 1,531 |         | 1,460 |         | 1,494  |         | 1,555 |         | 1,590
|Provisions and Liabilities                                   |                                             |      | 19,024 |       | 18,144  |       | 19,353  |        | 24,262  |       | 15,864  |      
|                                                             | thereof long-term                           |      |        | 9,658 |         | 9,211 |         | 9,955  |         | 9,059 |         | 7,529
|                                                             |                                             |      |        |       |         |       |         |        |         |       |         |      
|Total stockholders' equity and liabilities                   |                                             |      | 36,787 |       | 35,086  |       | 36,875  |        | 38,557  |       | 30,009  |      
|                                                             |                                             |      |        |       |         |       |         |        |         |       |         |      
|Capital Expenditures and Depreciation                        |                                             |      |        |       |         |       |         |        |         |       |         |      
|Additions to fixed assets                                    |                                             |      | 3,449  |       | 3,289   |       | 4,053   |        | 8,637   |       | 3,800   |      
|Depreciation and amortization of fixed assets                |                                             |      | 2,622  |       | 2,501   |       | 2,945   |        | 2,921   |       | 2,681   |      
|U.S. GAAP Reconciliation                                     |                                             |      |        |       |         |       |         |        |         |       |         |      
|Net income                                                   |                                             |      | 1,800  |       | 1,717   |       | 5,692   |        | 1,454   |       | 1,325   |      
|                                                             | thereof from continuing operations          |      |        | 1,800 |         | 1,717 |         | (238   | )       | 1,302 |         | 1,329
|Basic earnings per share                                     |                                             |      | 3.10   |       | 2.96    |       | 9.45    |        | 2.37    |       | 2.14    |      
|                                                             | Income from continuing operations per share |      |        |      |         |      |         | (0.39  | )       | 2.13  |         | 2.15 
|Diluted earnings per share                                   |                                             |      | 3.10   |       | 2.96    |       | 9.45    |        | 2.35    |       | 2.12    |      
|Stockholders' equity                                         |                                             |      | 18,789 |       | 17,920  |       | 18,538  |        | 15,229  |       | 14,753  |      
|Key Ratios                                                   |                                             |      |        |       |         |       |         |        |         |       |         |      
|Return on sales (%)(2)                                       |                                             |      | 8.2    |       | 8.2     |       | 3.7     |        | 8.5     |       | 6.8     |      
|Return on assets (%)(3)                                      |                                             |      | 8.4    |       | 8.4     |       | 3.1     |        | 9.9     |       | 10.2    |      
|Return on equity after taxes (%)(4)                          |                                             |      | 9.3    |       | 9.3     |       | (1.0    | )      | 9.0     |       | 9.1     |      

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

|                           |  | 2002        |  | 2001        |  | 2000        |  | 1999        |  | 1998       
|-------------------------- |  | ----------- |  | ----------- |  | ----------- |  | ----------- |  | -----------
|Basic earnings per share   |  | 579,118,368 |  | 602,586,176 |  | 612,806,123 |  | 618,073,268 |  | 622,476,129
|Diluted earnings per share |  | 579,118,368 |  | 602,586,176 |  | 621,581,022 |  | 627,161,758 |  | 636,651,309

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4

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REPORTABLE OPERATING SEGMENT DATA

|                                                |                                           | 2002                  |        | 2002  |        | 2001  |        | 2000   |        | 1999  |        | 1998  |       
|----------------------------------------------- | ----------------------------------------- | --------------------- | ------ | ----- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ----- | ------
|
|Chemicals                                       |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           | $                     | 5,575  |       | €5,317 |       | €4,494 |        | €4,504 |       | €3,289 |       | €3,220
|Income from operations                          |                                           |                       | 666    |       | 635    |       | 362    |        | 640    |       | 629    |       | 837   
|                                                | thereof special items                     |                       |        | (43   | )      | (41   | )      | (63    | )      | (5    | )      | (37   | )     
|Assets                                          |                                           |                       | 5,239  |       | 4,997  |       | 4,847  |        | 4,232  |       | 3,386  |       | 2,853 
|Plastics & Fibers                               |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           |                       | 8,888  |       | 8,477  |       | 8,185  |        | 11,030 |       | 8,628  |       | 7,663 
|Income from operations                          |                                           |                       | 610    |       | 582    |       | (2     | )      | 902    |       | 656    |       | 562   
|                                                | thereof special items                     |                       |        | (12   | )      | (11   | )      | (182   | )      | 101   |        | 2     |       
|Assets                                          |                                           |                       | 6,473  |       | 6,174  |       | 6,344  |        | 6,086  |       | 6,937  |       | 5,072 
|Performance Products                            |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           |                       | 8,403  |       | 8,014  |       | 8,154  |        | 8,418  |       | 7,553  |       | 7,292 
|Income from operations                          |                                           |                       | 677    |       | 646    |       | 99     |        | 586    |       | 708    |       | 753   
|                                                | thereof special items                     |                       |        | (7    | )      | (7    | )      | (298   | )      | (32   | )      | (74   | )     
|Assets                                          |                                           |                       | 5,471  |       | 5,218  |       | 6,048  |        | 6,266  |       | 4,975  |       | 4,522 
|Agricultural Products and Nutrition(1), thereof |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|                                                | Agricultural Products                     |                       |        |       |        |       |        |        |        |       |        |       |       
|                                                | Sales                                     |                       |        | 3,097 |        | 2,954 |        | 3,478  |        | 2,428 |        | 1,745 |       
|                                                | Income from operations                    |                       |        | 64    |        | 61    |        | 18     |        | (443  | )      | 195   |       
|                                                |                                           | thereof special items |        |       | (40    | )     | (38    | )      | (182   | )     | (341   | )     | (3    
|                                                | Assets                                    |                       |        | 5,339 |        | 5,092 |        | 6,377  |        | 6,607 |        | 1,949 |       
|                                                | Fine Chemicals                            |                       |        |       |        |       |        |        |        |       |        |       |       
|                                                | Sales                                     |                       |        | 2,066 |        | 1,970 |        | 1,984  |        | 1,739 |        | 1,636 |       
|                                                | Income from operations                    |                       |        | (6    | )      | (6    | )      | (210   | )      | (5    | )      | (774  | )     
|                                                |                                           | thereof special items |        |       | (130   | )     | (124   | )      | (283   | )     | (50    | )     | (829  
|                                                | Assets                                    |                       |        | 1.460 |        | 1,392 |        | 1,488  |        | 1,368 |        | 1,338 |       
|                                                | Pharmaceuticals  discontinued operations |                       |        |       |        |       |        |        |        |       |        |       |       
|                                                | Sales                                     |                       |        |      |        |      |        | 364    |        | 2,526 |        | 2,197 |       
|                                                | Income from operations                    |                       |        |      |        |      |        | 30     |        | 243   |        | (13   | )     
|                                                |                                           | thereof special items |        |       |       |       |       |        | 29     |       | (62    | )     | (164  
|                                                | Assets                                    |                       |        |      |        |      |        |       |        | 2,228 |        | 1,887 |       
|Oil & Gas                                       |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           |                       | 4,403  |       | 4,199  |       | 4,516  |        | 3,957  |       | 3,051  |       | 2,685 
|Income from operations                          |                                           |                       | 1,269  |       | 1,210  |       | 1,308  |        | 1,310  |       | 741    |       | 276   
|                                                | thereof special items                     |                       |        |      |        |      |        |       |        | 44    |        | 138   |       
|Assets                                          |                                           |                       | 3,825  |       | 3,648  |       | 3,149  |        | 3,540  |       | 3,003  |       | 2,622 
|Others                                          |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           |                       | 1,347  |       | 1,285  |       | 1,325  |        | 1,344  |       | 1,374  |       | 1,709 
|Income from operations                          |                                           |                       | (511   | )     | (487   | )     | (388   | )      | (163   | )     | (133   | )     | (183  
|Assets                                          |                                           |                       | 8,980  |       | 8,565  |       | 8,622  |        | 8,230  |       | 6,534  |       | 6,751 
|BASF Group                                      |                                           |                       |        |       |        |       |        |        |        |       |        |       |       
|Sales                                           |                                           |                       | 33,778 |       | 32,216 |       | 32,500 |        | 35,946 |       | 29,473 |       | 27,643
|Income from operations                          |                                           |                       | 2,769  |       | 2,641  |       | 1,217  |        | 3,070  |       | 2,009  |       | 2,624 
|                                                | thereof special items                     |                       |        | (252  | )      | (240  | )      | (1,076 | )      | (330  | )      | (941  | )     
|Assets                                          |                                           |                       | 36,787 |       | 35,086 |       | 36,875 |        | 38,557 |       | 30,009 |       | 26,702

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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. Invitations to the Annual
Meeting are issued four weeks in advance.

5

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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 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 2002 proposed by the Supervisory Board and the Board of Executive Directors for approval at the Annual Meeting to be held on May 6, 2003. The table does not reflect
the related tax credits available to eligible taxpayers. See "Item 10. Additional Information  Taxation of Dividends" for further information.

|     |  | Dividend Paid for Each
BASF Share
|---- |  | ---------------------------------
|
|
|2002 |  | 1.40                             
|2001 |  | 1.30                             
|2000 |  | 2.00                             
|1999 |  | 1.13                             
|1998 |  | 1.12                             

---

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 2003 for the year ended December 31, 2002, the euro amount is translated into U.S. dollars (rounded to the
nearest cent) on the basis of the Noon Buying Rate for the conversion from U.S. dollars into euros at the Noon Buying Rate on December 31, 2002 of $1.0485 = €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.

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

6

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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.

|     |  | U.S. dollar for one euro
|---- |  | ------------------------
|
|2002 |  | 1.0485                  
|2001 |  | 0.9520                  
|2000 |  | 1.0335                  
|1999 |  | 1.1812                  
|1998 |  | 1.2178                  

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

|                |  | U.S. dollar for one euro
|--------------- |  | ------------------------
|
|
|February, 2003  |  | 1.0875                  
|January, 2003   |  | 1.0861                  
|December, 2002  |  | 1.0485                  
|November, 2002  |  | 1.0139                  
|October, 2002   |  | 0.9881                  
|September, 2002 |  | 0.9959                  

The Noon Buying Rate for the euro on March 3, 2003 was quoted by the Federal Reserve Bank of New York at 1.0835 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 would 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

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agricultural, 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, manufacture and marketing of many of its products. BASF expects that regulatory controls worldwide, and
especially in the European Union (E.U.), will become increasingly demanding. A proposed new E.U. chemicals policy could require a significant increase in safety testing for chemical products. These
safety 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, a proposed E.U. directive on emissions trading, if implemented, could reduce BASF's growth opportunities, especially in Europe. The directive requires carbon dioxide
emissions to be reduced by 21% in Germany and 7.5% in Belgium, in each case based on 1990 carbon dioxide emission levels. Compliance with this 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 28 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."

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

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Cyclicality may adversely affect BASF's operating margins

The
results of BASF's Chemicals, Plastics & Fibers 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 industry is used to 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 comprise
partially 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.

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.

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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 (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 26 to the Consolidated Financial Statements.

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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 aims to increase its corporate value through growth and innovation. BASF is comprised of the parent company, BASF
Aktiengesellschaft of Ludwigshafen, Germany, and 154 consolidated subsidiaries. The company has customers in more than 160 countries and operates production sites in 39 countries.

For
the year ended December 31, 2002, BASF reported sales of €32,216 million, income from operations of €2,641 million, and net
income after taxes and minority interests of €1,504 million. Based on customer location, BASF's activities in Europe accounted for 54.9% of BASF's total sales in 2002; North
America (which includes the United
States, Mexico and Canada) accounted for 24.2% of sales; the Asia, Pacific Area, Africa region accounted for 15.7% of sales; and South America accounted for 5.2% of sales.

Business Segments

BASF has five separate business segments: Chemicals, Plastics & Fibers, 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.



BASF produces a full range of chemicals in a highly integrated approach to manufacturing. BASF's chemical production starts with basic petrochemicals and
inorganic chemicals substantially for captive use within the company and extends to specialty intermediates and related products sold to external customers. BASF sells its chemicals to a multitude of
industries, particularly the chemical, construction, automotive and electronics industries. The segment comprises the Inorganics, Petrochemicals and Intermediates divisions.



BASF is one of the world's largest producers of plastics and is also a manufacturer of fiber products. The segment's products include styrenic plastics,
engineering and high-performance plastics, thermoplastics, foams, nylon intermediates and polyurethanes. On January 14, 2003, BASF announced agreements with Honeywell
International inc., Morris Township, New Jersey, to acquire their worldwide engineering plastics business, and sell to Honeywell, BASF's nylon fibers business. Regulatory approval is still
pending. The segment comprises the Styrenics, Performance Polymers and Polyurethanes divisions.

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The Performance Products segment produces a number of BASF's high-value chemicals. Among the segment's products are surfactants, pigments, automotive
and industrial coatings, dispersions and adhesive raw materials. BASF also is a leading producer of acrylic acid and its derivatives as well as polymers such as superabsorbents, which are used to
manufacture sanitary care products. The segment consists of the Performance Chemicals, Coatings and Functional Polymers divisions.



The Agricultural Products & Nutrition segment consists of the Agricultural Products and Fine Chemicals divisions, which are separate reportable operating
segments. The segment produces a variety of agricultural products, covering herbicides, fungicides and insecticides. BASF is also a leading supplier of fine chemicals, including vitamins; carotenoids;
pharmaceutical active ingredients; polymers for pharmaceuticals, cosmetics and human nutrition; aroma chemicals; UV (ultraviolet) filters; amino acids; and feed enzymes. In addition the Agricultural
Products & Nutrition Segment includes the BASF Plant Science activities. BASF Plant Science seeks to develop crops with improved properties, such as: greater agricultural efficiency, improved
nutrition, and the use of plants as "green factories". The segment, which was formerly known as the Health & Nutrition segment, was renamed after BASF sold its pharmaceuticals business on
March 2, 2001 to Abbott Laboratories Inc. of Abbott Park, Illinois.



BASF operates its Oil & Gas segment through BASF's subsidiary Wintershall AG and its corresponding subsidiaries and affiliates. The main activities of the
Oil & Gas segment are the exploration and production of crude oil and natural gas and, together with Wintershall AG's partner Gazprom of Russia, the marketing, distribution and trading of
natural gas in Central and Eastern Europe.

BASF's Financial Target

BASF aims to achieve a premium on the company's cost of capital.

Group Strategy

BASF's goal is to increase the company's corporate value through growth and innovation. As the world's largest chemical company based on sales of
€32,216 million in 2002, BASF aims to actively capitalize on the opportunities that are emerging from the restructuring process currently affecting the global chemical industry.
BASF's long-term strategy and activities are guided by the principles of Sustainable Development and by the company's stated values and principles.

BASF's
strategy is based on the following principles:



In optimizing its portfolio, BASF seeks to expand highly profitable business activities and concentrate on its core competencies. To achieve this growth, BASF
exploits the commercial benefits of its innovations, expands manufacturing capacities for specific products and actively manages its portfolio. BASF discontinues business activities which are unlikely
to show long-term profitability and acquires innovative businesses with a high potential for growth. Between 1993 and 2002, BASF sold businesses which, at the time of their divestiture,
generated sales valued at approximately €11 billion. During the same period, the company acquired businesses, which at the

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time of their acquisition, generated sales valued at approximately €9.5 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 uses the cost efficiencies offered by
integrated large-scale plants and by the technological advances in its production processes. 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 (referred to by the company asVerbundsites  a
German word for integrated) 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.

At
our Ludwigshafen site alone, BASF aims to reduce costs by €450 million 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. 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 aims to be the preferred partner for its strategic customers. In response to growing pressures in its commodities business, BASF is turning to modern
e-commerce solutions to contain costs. In its non-commodities businesses, the company aims to provide added value by expanding the scope of its customer services.

Through
new sales strategies, BASF is optimally positioning itself to meet the needs of customers who require smaller volumes and less advice. Eight new trading centers have started
sales activities for specialty chemicals targeted at such customers in Western Europe. In Europe, the handling of small lot sales of engineering plastics and styrenics has increasingly been
transferred to external sales partners.

BASF
believes that by working closely with innovative customers the company can exploit the potential of its research and development activities more effectively to develop the
customized solutions customers want. The company believes this gives it an advantage over its competitors, thereby enhancing the company's earnings potential.



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

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

BASF
aims to be among the top three suppliers 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.



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 considers teamwork to be an asset and believes it has an impact in particular on the effectiveness of the company's research and development
activities.

The
market-oriented organization introduced in 2001 is making an impact: It increases BASF's customer focus, strengthens market presence and fosters a spirit of entrepreneurship within
the company.

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:

|                               |  | 2002 |       | 2001 |   | 2000 
|------------------------------ |  | ---- | ----- | ---- | - | -----
|
|Sales to third parties         |  | €    | 5,317 |      | € | 4,494
|Percentage of total BASF sales |  |      | 17%   |      |   | 14%  
|Intersegmental transfers       |  | €    | 2,598 |      | € | 2,452
|Income from operations         |  | €    | 635   |      | € | 362  
|Capital expenditures           |  | €    | 495   |      | € | 929  

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, and 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, 32.8% 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.

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The
divisions comprising the Chemicals segment and their principal products are:

|Division       |  | Major Products                                                                                                                    |  | Primary Applications                                                                                                                            
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Inorganics     |  | Inorganic basic chemicals such as chlorine, sodium hydroxide, nitric acid and sulfuric acid, as well as sodium and ammonium salts |  | Used as starting materials for propylene oxide, polyvinyl chloride, superabsorbents, fertilizers and other high-value chemicals                 
|               |  | Glues and impregnating resins including their raw materials ammonia, urea, formaldehyde, methanol and melamine                    |  | Wood-to-wood adhesives and bonding applications, decorative paper manufacturing                                                                 
|               |  | Inorganic specialties such as Catamold® products (for powder injection molding) and carbonyl iron powder                          |  | Used for manufacturing tiny, intricate devices                                                                                                  
|               |  | Electronic grade chemicals                                                                                                        |  | Used for treating metal surfaces and for manufacturing semiconductors                                                                           
|               |  | Catalysts                                                                                                                         |  | Used in chemical reactions to increase product yields                                                                                           
|Petrochemicals |  | Cracker products including propylene, ethylene, benzene and butadiene                                                             |  | Starting materials primarily for captive use within BASF to manufacture plastics, plasticizers, solvents, dispersions and higher-value chemicals
|               |  | Industrial gases such as hydrogen, carbon monoxide and oxygen                                                                     |  | Starting materials primarily for captive use within BASF to manufacture higher-value chemicals                                                  
|               |  | Alkylene oxides such as ethylene oxide, propylene oxide, as well as glycols                                                       |  | Precursors for products such as polyester fibers, films and PET plastic bottles, anti-freeze, surfactants, dispersants and detergents           
|               |  | Solvents including oxo alcohols, acetates, glycol ethers and specialty solvents                                                   |  | Solvents to process, apply, clean or separate materials mainly in the coatings, pharmaceuticals and cosmetics industries                        
|               |  | Standard and specialty plasticizers as well as plasticizer raw materials                                                          |  | Additives to soften plastics for use in the construction, cable and wire, coated fabrics and medical industries                                 
|Intermediates  |  | Amines such as alkylamines and their derivatives, ethanolamines and specialty amines                                              |  | Precursors or components for detergents and cleaning products, process chemicals and agricultural products                                      
|               |  | Diols and polyalcohols including butanediol and its derivatives like PolyTHF® and N-methylpyrrolidone, hexanediol, Neol®          |  | Chemical building blocks for plastics, polyurethanes, fibers, paints and coatings                                                               
|               |  |                                                                                                                                   |  |                                                                                                                                                 

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| |  | Acids such as formic and propionic acid and specialty intermediates such as phosgene derivatives, chiral intermediates, glyoxal and its derivatives |  | Preservatives for the feed and food industries, precursors for textile and leather applications, specialties for paper manufacturing, polymers, textiles, leather products, pharmaceuticals as well as agricultural products
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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. The competitiveness of the Chemicals segment mainly depends upon
cost leadership, achieved through economies of scale, leading technology and efficient production processes. The high and steady internal demand for the basic chemical building blocks produced in 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 optimized its plastizicer's business in 2002. After shutting down unprofitable plants in Tarragona, Spain, the production is now consolidated in world scale plants in Ludwigshafen, Germany, and
Feluy, Belgium. Acquired from the SISAS Group in mid-2001, the production facilities at the Feluy site furthermore strengthen the Chemical segment's activities in butanediol and its
derivatives. In 2002, BASF acquired a share in the Aethylen Rohrleitungs Gesellschaft mbH & Co. KG (ARG). The ARG forms the integral part of the Northwest European ethylene pipeline grid. The
improved integration of BASF's cracker activities at the Verbund sites Antwerp, Belgium and Ludwigshafen, Germany offers the opportunity to further optimize operations across Europe.

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, TotalFinaElf S.A, this new steam cracker supplies propylene, ethylene and other products to BASF's Verbund sites in Geismar, Louisiana, and Freeport,
Texas. In the US, two out of three ethylene oxide plants and a glycol plant were shut down in 2002 due to missing economies of scale. BASF is now focusing on adding more value to its surfactants core
business.

In
Asia, BASF has a number of major projects underway. These include the expansion of the Verbund site in Kuantan, Malaysia. BASF began manufacturing at the site in mid-2000,
and in April 2001 an oxo alcohol and syngas complex went on stream. BASF is also constructing a new Verbund site in Nanjing, China. The construction work is well under progress and proceeding
according to schedule. BASF expects plants at the Nanjing site to begin operations in 2005.

In
2002, the Chemicals segment invested approximately €98 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.

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

|Location              |  | Project                                            |  | Projected Annual
Capacity at Completion
of Project
(metric tons) |     | Projected
Start-Up of
Operations
|--------------------- |  | -------------------------------------------------- |  | ---------------------------------------------------------------- | --- | --------------------------------
|Caojing, China        |  | Tetrahydrofuran/
Polytetrahydrofuran               |  | 80,000/60,000                                                    |     | 2004                            
|Nanjing, China        |  | Integrated production site Major products include: |  |                                                                  | (1) | 2005                            
|                      |  | ethylene                                           |  | 600,000                                                          |     |                                 
|                      |  | ethylene glycol                                    |  | 300,000                                                          |     |                                 
|                      |  | aromatics                                          |  | 300,000                                                          |     |                                 
|                      |  | oxo alcohols                                       |  | 250,000                                                          |     |                                 
|Kuantan, Malaysia     |  | Butanediol                                         |  | 100,000                                                          | (2) | 2003                            
|Port Arthur, Texas    |  | Butadiene                                          |  | 410,000                                                          | (3) | 2004                            
|Ludwigshafen, Germany |  | Formaldehyde                                       |  | 480,000                                                          |     | 2003                            

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Inorganics



BASF's Inorganics division sells approximately 400 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, which are based on market prices, 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 good capacity utilization rates at the division's production plants. The remaining amount is sold to external customers worldwide from 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, chlorine, sodium hydroxide, formaldehyde, nitric acid and sulfuric acid at the company's Verbund site in Antwerp, Belgium.

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Offering
customers inorganic specialties and innovative products, especially in the areas of electronic grade chemicals, catalysts and powder injection molding is also important for BASF
to maintain a competitive edge and thus contributes to BASF'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 €695 million in 2002.



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.



BASF produces inorganic chemicals through value-adding chains of production based on nitrogen, sulfur and sodium chloride. Products range from basic chemicals
such as chlorine, sodium hydroxide, nitric acid and sulfuric acid to inorganic salts such as sodium and potassium alcoholates as well as 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 cost-effective supply of the BASF group with
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 by 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. 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 above-average growth compared to the chemical industry, with high margin products.

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The
production capacities as of December 31, 2002 for the Inorganics division's major products are as follows:

|Product                                      |  | Annual Production Capacity
(metric tons) |  | Primary Applications
|-------------------------------------------- |  | ---------------------------------------- |  | --------------------
|Ammonia                                      |  | 1,255,000                                |  | 



           
|Chlorine                                     |  | 360,000                                  |  | 

               
|Formaldehyde condensation products           |  | 750,000                                  |  |                    
|Formaldehyde                                 |  | 510,000                                  |  | 
                 
|Hydroxylamine free base 50% aqueous solution |  | 7,000                                    |  |                    
|Methanol                                     |  | 450,000                                  |  | 


             
|Melamine                                     |  | 65,000                                   |  |                    
|Sulfuric acid and oleum                      |  | 720,000                                  |  |                    
|Sulfur dioxide                               |  | 150,000                                  |  |                    
|Sodium hydroxide                             |  | 360,000                                  |  |                    
|Urea                                         |  | 545,000                                  |  | 
                 



In 2002, Europe accounted for 77% of the Inorganics division's sales to external customers; North America for 9%; South America for 3%; and the Asia, Pacific
Area, Africa region for 11%.

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. of France, Norsk Hydro of Norway and Gentek Inc. of the United States.

Petrochemicals



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

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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 good 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 end of 2001, BASF and its 40% partner TotalFinaElf S.A. have run a steam cracker at TotalFinaElf's
refinery located in Port Arthur, Texas, with an annual production capacity of 920,000 metric tons of ethlylene and 550,000 metric tons of propylene. It supplies olefins and aromatics to BASF's Verbund
sites in Geismar, Louisiana, and Freeport, Texas. In Tarragona, Spain, BASF and its partner Sonatrach have built a propandehydrogenation plant (PDH). The plant has started operations in the first
quarter of 2003 and will supply BASELL with 350,000 metric tons of propylene.

In
Asia, the Petrochemicals division is expanding its operations. An oxo alcohol complex has been on stream at our Verbund site in Kuantan, Malaysia since 2001. 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 €2,902 million in 2002.



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.

20

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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.

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Production
capacities as of December 31, 2002 for the major products in the Petrochemicals division are as follows:

|Product                                       |  | Annual Production Capacity
(metric tons) |     | Primary Applications                                      
|--------------------------------------------- |  | ---------------------------------------- | --- | ----------------------------------------------------------
|Ethylene                                      |  | 2,340,000                                | (1) |  Plastics
 Specialty chemicals
 Solvents
 Dispersions 
|Propylene                                     |  | 1,350,000                                | (1) |  Plastics
 Plasticizers
 Solvents
 Specialty chemicals
|Benzene                                       |  | 635,000                                  | (1) |  Plastics                                                
|Acetylene                                     |  | 90,000                                   |     |  Plastics
 Vitamins
 Pharmaceuticals                   
|Oxo C4 alcohols
(calculated as butyraldehyde) |  | 1,070,000                                | (2) |  Plasticizers
 Dispersions
 Solvents                   
|Phthalic anhydride                            |  | 242,000                                  | (2) |  Plasticizers
 Resins
 Dyestuffs                       
|Higher oxo alcohols                           |  | 240,000                                  |     |  Plasticizers
 Detergents (ethoxylates)                 
|Plasticizers                                  |  | 455,000                                  | (2) |  Wire & Cable
 Film & Sheet
 Coated Fabrics            
|Ethylene oxide                                |  | 870,000                                  |     |  Nonionic surfactants
 Ethylene glycols                 
|Propylene oxide                               |  | 125,000                                  |     |  Nonionic surfactants
 Propylene glycol                 
|Ethylene glycols                              |  | 360,000                                  |     |  Antifreeze
 Polyester                                  
|Propylene glycol                              |  | 80,000                                   |     |  Unsaturated polyesters, solvents
 Polyester            
|Glycol ethers                                 |  | 125,000                                  |     |  Solvents, brake and hydraulic fluids                    

---

22

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In 2002, Europe accounted for 44% of the Petrochemicals division's sales to external customers; North America for 47%; South America for 1%; and the Asia, Pacific
Area, Africa region for approximately 8%.

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 of the United Kingdom; Eastman Chemicals Corp., Exxon Chemicals Company and The Dow Chemical Co. of the United States; SABIC
EuroPetrochemicals B.V. of the Netherlands; Celanese AG and Oxeno of Germany, a unit of Degussa AG, to be the main competitors in its Petrochemicals division.

Intermediates



The Intermediates division manufactures approximately 500 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 surfactants, plastics, polyurethanes,
textile fibers, resins, paints, colorants, coatings, pharmaceuticals and agricultural products.

The
Intermediates division represents an important link in BASF's Verbund approach to integration because it purchases approximately 80% of its feedstock from other BASF operations, thus
benefiting from efficiencies in logistics and savings in energy, transportation, purchasing and infrastructure costs. The division also consumes by-products of other BASF chemical
operations, thus adding value to otherwise wasted product streams. 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 generally 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. However, the Intermediates division also manufactures products that are commodities
characterized by cyclicality in pricing. The trend toward commodity pricing is increasing. 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 20% 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.
To increase its global presence, the Intermediates division intends to expand its operations outside of Europe, particularly in Asia with a major focus on the new Verbund sites in Kuantan, Malaysia,
and Nanjing, China. In 2002 the approval from the Chinese authorities was

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received to build plants for tetrahydrofuran and polytetrahydrofuran (PolyTHF®) in Caojing, Shanghai, China, representing a wholly-owned investment. The plants will utilize BASF's newly
developed proprietary technology to convert butane directly to tetrahydrofuran and subsequently PolyTHF. Avoiding the traditional intermediate step of 1,4-butanediol as well as any joint
products this innovative technology will ensure BASF's leading cost position.

BASF
is specifically aiming to extend its global leadership position in the production of diols and to globally expand its production of amines in order to capture an increased share of
global markets. Recently, the annual PolyTHF capacity in Ulsan, South Korea, has been increased by 10,000 tons to
40,000 tons. In Kuantan, Malaysia, BASF will soon start up the production of butanediol in the joint venture BASF PETRONAS Chemicals.

The
Intermediates division's sales to third parties were €1,720 million in 2002 and, on a comparable basis, €1,701 million in 2001.



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



The products of this area BASF produces and sells 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. With the acquisition of the SISAS Group's Feluy production site in 2001, this product area now also includes maleic anhydride. The polyalcohols
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, glutaraldehyde 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.

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As
of December 31, 2002 the production capacities of the major products of the Intermediates division are as follows:

|Product                                           |  | Annual Production Capacity
(metric tons) |     | Primary Applications                                                                           
|------------------------------------------------- |  | ---------------------------------------- | --- | -----------------------------------------------------------------------------------------------
|Alkylamines                                       |  | 190,000                                  |     |  Agricultural products
 Water treatment
 Pharmaceuticals
 Rubber chemicals                 
|Ethanolamines/
alkylalkanolamines/
ethyleneamines |  | 255,000                                  |     |  Laundry and cleaning materials
 Water treatment
 Agricultural products
 Gas purification  
|Specialty amines                                  |  | 90,000                                   |     |  Surfactants
 Rubber industry applications
 Agricultural products
 Polyurethane and epoxies
|Acid and alkyl chlorides, chloroformates          |  | 60,000                                   |     |  Organic peroxides
 Pharmaceuticals                                                          
|1,4-butanediol                                    |  | 470,000                                  | (1) |  Plastics
 Polyurethanes                                                                     
|Polytetrahydrofuran (PolyTHF®)                    |  | 124,000                                  |     |  Fibers
 Polyurethanes                                                                       
|Glyoxal® (40% solution)                           |  | 80,000                                   |     |  Textile resins                                                                               
|1,6-hexanediol                                    |  | 42,000                                   |     |  Plastics
 Coating resins                                                                    
|Formic acid/ propionic acid                       |  | 180,000
80,000                           | /   |  Preservatives                                                                                
|Formamide                                         |  | 100,000                                  |     |  Sequestering agents                                                                          
|Maleic anhydride                                  |  | 135,000                                  |     |  Unsaturated polyester resins                                                                 
|Neopentylglycol (Neol®)                           |  | 135,000                                  | (2) |  Coatings                                                                                     
|N-Methylpyrrolidone                               |  | 63,000                                   |     |  Electronics, solvents                                                                        
|chiral Intermediates (ChiPros)                   |  | 4,500                                    |     |  Life sciences                                                                                
|Trimethylolpropane                                |  | 20,000                                   |     |  Coatings                                                                                     

---



In 2002, Europe accounted for approximately 53% of the Intermediates division's sales to external customers. North and South America together accounted for
approximately 21% and the

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Asia, Pacific Area, Africa region for approximately 26%. 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 Corp., The Dow Chemical Company and Huntsman Corporation. In BASF's diols and polyalcohols activities, the company's major competitors are International Specialty Products Inc.,
E.I. du Pont de Nemours and Company, Lyondell Chemical Company and Mitsubishi Chemicals Corporation respectively 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 & FIBERS

Segment Overview

BASF
is one of the world's leading plastics and fiber products 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 January 14, 2003, BASF announced agreements to acquire Honeywell's worldwide engineering plastics business, and to sell its
nylon fibers businesses to Honeywell. These agreements are subject to regulatory approval, but expected to close in the first half of 2003.

|                               |  | 2002 |       | 2001 |   | 2000(1)
|------------------------------ |  | ---- | ----- | ---- | - | -------
|
|Sales to third parties         |  | €    | 8,477 |      | € | 8,185  
|Percentage of total BASF sales |  |      | 26%   |      |   | 25%    
|Intersegmental transfers       |  | €    | 436   |      | € | 406    
|Income from operations         |  | €    | 582   |      | € | (2     
|Capital expenditures           |  | €    | 636   |      | € | 891    

---

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The three divisions comprising the Plastics & Fibers segment and their principal products are:

|Division  |  | Major Products                                                         |  | Primary Applications                                                                             
|--------- |  | ---------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------
|Styrenics |  | PS (polystyrene)                                                       |  | Packaging
Household appliances
Housings for consumer electronics                                 
|          |  | ABS (acrylonitrile-butadiene-styrene copolymers)                       |  | Electrical and electronics equipment
Household appliances
Automotive components                  
|          |  | ASA (acrylonitrile-styrene-acrylate copolymers)                        |  | Exterior automotive components
Sports equipment
Electrical and electronic equipment              
|          |  | SAN (styrene-acrylonitrile copolymers)                                 |  | Household and toiletry items
Packaging
Office and household equipment                            
|          |  | MABS (methacrylate-acrylonitrile-butadiene-styrene copolymer           |  | Containers for hygiene and cosmetic products
Medical equipment housings
Office equipment housings
|          |  | ABS/PA blend (acrylonitrile-butadiene-styrene copolymer and polyamide) |  | Automotive components
Garden equipment
Children's toys                                           
|          |  | EPS (expandable polystyrene)                                           |  | Building insulation
Packaging                                                                    
|          |  | XPS (extruded polystyrene)                                             |  | Building insulation                                                                              
|          |  | EPP (expandable polypropylene)                                         |  | Automotive components
Packaging
Sports equipment                                                 
|          |  | MF (melamine resin foam)                                               |  | Automotive components
Soundproofing materials
Household and consumer appliances                  

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|Performance Polymers |  | PA (polyamide)                                                                                                           |  | Automotive components
Electronics and electrical equipment
Films for food packaging
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------
|                     |  | PBT (polybutylene terephthalate)                                                                                         |  | Electrical and electronics equipment
Automotive components                         
|                     |  | POM (polyoxymethylene)                                                                                                   |  | Clips and fasteners
Mechanical and engineering equipment                           
|                     |  | PES (polyethersulfone) and PSU (polysulfone)                                                                             |  | Automotive components
Household items
Medical equipment                            
|                     |  | Fiber intermediate products (including caprolactam, polycaprolactam, adipic acid, adiponitrile and hexamethylenediamine) |  | Carpeting
Apparel
Upholstery fabrics                                               
|                     |  | Carpet products                                                                                                          |  | Commercial, residential and automotive carpets                                     
|Polyurethanes        |  | Isocyanates                                                                                                              |  | Furniture interiors
Automotive components
Carpet backings
Shoe soles               
|                     |  | Polyols                                                                                                                  |  | Rigid and flexible foams
Cable sheathings, shoe soles                              
|                     |  | Polyurethane systems                                                                                                     |  | Automotive components
Cable coverings
Household appliances                         
|                     |  | Polyurethane special elastomers                                                                                          |  | Cable coverings
Shock absorbers and buffers in vehicles
Sports equipment           

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:



28

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In
2002, the Plastics & Fibers segment spent approximately €138 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 & Fibers segment currently include:

|Location              |  | Project                                                |  | Projected Annual
Capacity at Completion
of project
(metric tons) |     | Projected
Start-Up of
Operation
|--------------------- |  | ------------------------------------------------------ |  | ---------------------------------------------------------------- | --- | -------------------------------
|Caojing, China        |  | MDI (diphenylmethane diisocyanate)                     |  | 160,000                                                          | (1) | 2005                           
|                      |  | TDI (toluene diisocyanate)                             |  | 130,000                                                          | (2) | 2005                           
|Yeosu, Korea          |  | TDI                                                    |  | 140,000                                                          |     | 2003                           
|                      |  | MDI expansion                                          |  | 160,000                                                          |     | 2004                           
|Altamira, Mexico      |  | Styrolux® (styrene-butadiene-styrene block copolymers) |  | 45,000                                                           |     | 2003                           
|Antwerp, Belgium      |  | MDI expansion                                          |  | 320,000                                                          |     | 2003                           
|Schwarzheide, Germany |  | Basotect® (melamine resin foam)                        |  | 2,000                                                            |     | 2003                           

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29

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Styrenics



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 achieving cost and technology leadership, as well as strengthening its global presence are crucial to ensuring the continued competitiveness of its styrenics products.
Major projects over the last two years included 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 SMPO (styrene monomer/propylene oxide) plant in Singapore on stream in the second half of 2002.

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 its styrene copolymers business, the division's
restructuring efforts include improving production processes and reducing fixed costs. BASF intends to continue expanding its production capacities for specialties. 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 €3,387 million in 2002.



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:



30

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Terluran® and Ronfalin® are trade names for BASF's top styrene copolymer plastic. It offers superior surface quality, colorfastness and
luster.

Primary
applications:





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:



31

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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.



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, 2002 for the major products in the Styrenics division are as follows:

|Product                                                                                               |  | Annual Production Capacity
(metric tons) |    
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---
|Styrene and styrene-based polymers (styrene monomer, polystyrene, expandable polystyrene, copolymers) |  | 5,472,000                                | (1)
|XPS (extruded polystyrene)                                                                            |  | 1,150,000                                | (2)
|EPP (expanded polypropylene)                                                                          |  | 10,800                                   |    
|MF (melamine resin foam)                                                                              |  | 150,000                                  | (2)

---

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In 2002, Europe accounted for approximately 47% of the Styrenics division's sales; North America for approximately 21%; the Asia, Pacific Area, Africa region for
approximately 27%; 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 for distributing its products. Activities include BASF's Plastics Portal as well as the company's participation in Omnexus, an independent
business-to-business online marketplace that focuses on delivering products and related services to plastics injection molders around the world.

The
market for styrenics is global and characterized by intense price competition and requires increasingly global delivery capabilities. The division's major customers require that top
suppliers have a global presence and provide accompanying services, such as technical support. Demand for styrenics continues to rise due to overall economic growth in both industrial and emerging
markets.

The
principal global competitor of the Styrenics division is The Dow Chemical Company of the United States. The division also competes in North America with Nova Chemical Corporation of
Canada and in Europe with ATOFINA of France and Enichem of Italy. In Asia, BASF competes with other regional competitors, such as Chi Mei of Taiwan.

Performance Polymers



BASF is one of the world's leading producers of engineering plastics and fiber intermediates. Regulatory approval is pending on the sale of the nylon fibers
business to, and the purchase of the engineering plastics business from Honeywell International Inc.

Engineering
plastics are sold to approximately 1,500 customers worldwide. The 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
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.

The
Performance Polymers division also produces two types of nylon  nylon 6 and nylon 6,6  as well as their monomers caprolactam, adipic acid and
hexamethylenediamine. The division sells its fiber and fiber intermediates products to approximately 500 customers worldwide. In North America, customers include commercial and residential carpet
producers, and tier one automotive carpet suppliers. BASF has been experiencing overcapacity for its fiber products in North America and has been consolidating its production capacities in this region
to improve capacity utilization rates and control costs. Part of this was the sale of the Basofil fiber manufacturing operation located at the Enka, North Carolina site to
McKinnon-Land-Moran LLC (MLM)  an American manufacturer of products for the home furnishings industry.

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

33

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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 is
being 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. The division's important
Engineering Plastics business benefits significantly from backward integration. 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 €2,270 million in 2002.



The Performance Polymers division offers the following product lines:







34

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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.

Primary
applications include precursors for fibers used in:





BASF is a leading supplier of nylon 6 BCF (bulk continuous filaments). BASF's trade names for nylon fibers and yarns include Zeftron 2000®
solution-dyed nylon and SAVANT, a new carpet fiber, which is resistant to stains and to the effects of ozone exposure, and which is targeted at the high-end
commercial carpet segment.

Primary
applications:



Production
capacities as of December 31, 2001 for the major products in the Performance Polymers division are as follows:

|Product              |  | Annual Production Capacity
(metric tons) |    
|-------------------- |  | ---------------------------------------- | ---
|Polyamide            |  | 620,000                                  |    
|PBT                  |  | 80,000                                   | (1)
|POM                  |  | 40,000                                   |    
|PES and PSU          |  | 5,000                                    |    
|Polyamide precursors |  | 1,290,000                                |    
|Nylon carpet fibers  |  | 120,000                                  |    

---

35

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In 2002, Europe accounted for 43% of the Performance Polymers division's sales; North America for 36%; the Asia, Pacific Area, Africa region for 20%; 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. Besides operating its own website, Plastics Portal, BASF
also participates in Omnexus, an independent business-to-business online marketplace that focuses on delivering products and related services to plastics injection molders
around the world.

Major
global competitors in the engineering plastics market include: Bayer AG and Celanese AG of Germany, E.I. du Pont de Nemours and Company and General Electric Company of the United
States, DSM N.V. of the Netherlands and Rhodia of France. The nylon market is characterized by a small number of global producers, including E.I. du Pont de Nemours and Company, Honeywell Inc.
and Solutia Inc. of the United States, Rhodia of France, and DSM N.V. of the Netherlands.

Polyurethanes



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.

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



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

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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.

The
Polyurethanes division's success can be traced to maintaining low costs, establishing a global presence for polyurethane basic materials and maintaining strong relationships with
customers for polyurethane systems and special elastomers.

To
build on its strong relationships with customers, the Polyurethanes division is expanding its regional activities, focusing above all on the Asian market. BASF and its joint venture
partner Shell Eastern Petroleum Pte Ltd., built a world-scale propylene oxide plant in Singapore. This plant went on stream in the second half of 2002 with an annual production capacity of
250,000 metric tons. In Caojing, China, BASF plans to build an integrated isocyanates manufacturing facility with Huntsman and local partners that is scheduled to come on stream in 2005.

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 €2,820 million in 2002.



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.



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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.



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Production
capacities as of December 31, 2001 for the major products in the Polyurethanes division are as follows:

|Product                          |  | Annual Production Capacity
(metric tons) |    
|-------------------------------- |  | ---------------------------------------- | ---
|Isocyanates                      |  | 810,000                                  |    
|Polyols                          |  | 627,000                                  |    
|TPU (thermoplastic polyurethane) |  | 45,000                                   |    
|Propylene oxide                  |  | 500,000                                  | (1)

---

Markets and Distribution

In 2002, Europe accounted for approximately 42% of the Polyurethanes division's sales; North America for approximately 33%; the Asia, Pacific Area, Africa region
for approximately 22%; 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 approach to
manufacturing by delivering customized products quickly and at the appropriate time.

The
main competitors of the Polyurethanes division are Bayer AG of Germany, The Dow Chemical Company, Huntsman-ICI and Lyondell Chemical Company of the United States and
Shell Chemicals U.K. of the United Kingdom.

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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 that it sells to many global companies in the automotive, oil, paper, packaging, textile, sanitary care, construction, coatings, printing and leather
industries. Key information is provided in the following table:

|                               |  | 2002 |       | 2001 |   | 2000 
|------------------------------ |  | ---- | ----- | ---- | - | -----
|
|Sales to third parties         |  | €    | 8,014 |      | € | 8,154
|Percentage of total BASF sales |  |      | 25%   |      |   | 25%  
|Intersegmental transfers       |  | €    | 326   |      | € | 322  
|Income from operations         |  | €    | 646   |      | € | 99   
|Capital expenditures           |  | €    | 288   |      | € | 418  

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 and application technologies tailored to the specific requirements of customers, and better meeting customer needs by
establishing and expanding manufacturing plants and application development centers in regions where customers are active. BASF is also investing capital in highly efficient plants to reduce
production costs.

The
divisions comprising the Performance Products segment and their principal products are:

|Division              |  | Major Products                                        |  | Primary Applications                                                                                  
|--------------------- |  | ----------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------
|Performance Chemicals |  | Pigments and resins for coatings and plastics         |  | Automotive, decorative, industrial paint and wood applications as well as plastics                    
|                      |  | Printing systems                                      |  | Printing inks and printing plates for print media and packaging industries, pigments for printing inks
|                      |  | Isobutene derivatives such as polyisobutene           |  | Precursors and components for products such as fuel additives                                         
|                      |  | Surfactants                                           |  | Products for detergents and cleaners, textile and leather auxiliaries                                 
|                      |  | Hydrocyanic acid derivatives such as chelating agents |  | For pulp manufacturing, electroplating, laundry detergents and photographic chemicals                 
|                      |  | Performance chemicals for textiles                    |  | Entire textile processing chain including ink-jet inks                                                
|                      |  |                                                       |  |                                                                                                       

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|                    |  | Leather dyes and chemicals                                |  | Leather production using beamhouse agents and tanning auxiliaries, fatliquors and water repellents, drum dyes and dyeing auxiliaries as well as products for leather finishing
|------------------- |  | --------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Coatings            |  | Automotive OEM (original equipment manufacturer) coatings |  | Automotive coatings for vehicle manufacturers                                                                                                                                 
|                    |  | Automotive refinish coatings                              |  | Automotive coatings for repair work                                                                                                                                           
|                    |  | Industrial coatings                                       |  | Commercial vehicles, household appliances, industrial buildings, automotive components and wood finishes                                                                      
|                    |  | Decorative paints in South America                        |  | Interior and exterior use in residential and commercial buildings                                                                                                             
|Functional Polymers |  | Acrylic monomers                                          |  | Precursors for dispersions, superabsorbents, detergents, flocculants and fibers                                                                                               
|                    |  | Polymers                                                  |  | Adhesives; paints and finishes; and non-woven materials and chemicals for the construction industry                                                                           
|                    |  | Paper chemicals                                           |  | Paper-processing chemicals, paper dyes, dispersions for paper coating                                                                                                         
|                    |  | Superabsorbents                                           |  | Absorbent materials for diapers and sanitary care products                                                                                                                    

Segment Strategy

The focus of the Performance Products segment is on developing integrated system solutions that provide customers with tailor-made products and
application processes. BASF believes that through these efforts it can differentiate the segment's products and services from those of its competitors and foster close, lasting relationships with its
customers.

Key
strategies for the divisions in this segment are as follows:



The
Performance Chemicals division aims to more effectively market and sell BASF's high-value chemicals, which customers purchase mainly on the basis of product quality and
performance. To compete successfully with low-cost suppliers and new competitors from Asia and South America, the division undertook restructuring measures over the past years to improve
its cost structures. The division aims to further strengthen its position in major markets through close cooperation with key customers. The Performance Chemicals division is focusing its capital
spending on continuing

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to improve cost structures by employing the most efficient technologies and processes available. In this division, BASF is intensifying its marketing activities in Asia and North America.



In
the past year, the Coatings division streamlined its product lines to eliminate less profitable products and improve its financial performance. 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 also 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. BASF believes that the Coatings division can achieve and sustain a leading market position and attain high profitability in
these product lines. The division aims to strengthen its position in Asia in particular.



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. To achieve these goals, the division is focusing its capital spending on building production plants close to
customers to reduce transportation costs. Despite a current oversupply of acrylic monomers in Asia, demand in this region is expected to continue increasing. BASF currently plans to build 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:

|Location              |  | Project                                                            |  | Projected Annual
Capacity at Completion
of Project
(metric tons) |  | Projected
Start-Up-
of Project
|--------------------- |  | ------------------------------------------------------------------ |  | ---------------------------------------------------------------- |  | ------------------------------
|Nanjing, China        |  | New plant for acrylic monomers                                     |  | 160,000                                                          |  | 2005                          
|Ludwigshafen, Germany |  | New plant for crosslinked Polyvinylpyrrolidon (PVP)-based Products |  | N/A                                                              |  | 2003                          

In 2002, capital expenditures for the Performance Products segment totaled €288 million. The segment also spent
€222 million on research and development activities in 2002.

Performance Chemicals



BASF is one of the world's largest manufacturers of high-value chemicals, which the company sells through its Performance Chemicals division 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 nearly 90% of its products to external customers.

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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 recent past, the division's products for the pigment, textile and leather industries had experienced continuous pressure on prices, a drop in demand and worldwide overcapacity.
Restructuring measures that were undertaken over the past four years have largely been completed. As a result, the division has improved its capacity utilization rates 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 €3,343 million in 2002.



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 Keropur® and Puradd® brand 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 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.

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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, 2002 were:

|Product              |  | Annual Production Capacity
|-------------------- |  | --------------------------
|Organic pigments     |  | 34,500 metric tons        
|HDI                  |  | 10,000 metric tons        
|Printing inks        |  | 200,000 metric tons       
|Printing plates      |  | 1,000,000 square meters   
|Polyisobutene        |  | 75,000 metric tons        
|Nonionic surfactants |  | 305,000 metric tons       



In 2002, Europe was the Performance Chemicals division's principal market, accounting for 58% of its sales. The Asia, Pacific Area, Africa region accounted for
19%; North America for 18%; 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. In the
Performance Chemicals division, BASF generally considers Ciba Specialty Chemicals Holding Inc. and Clariant International Ltd. of Switzerland, Shell Chemicals U.K. of the United Kingdom,
DIC/Sun Group of Asia and Bayer AG of Germany to be its main competitors.

The
Performance Chemicals division is organized into the following business units, which each market and sell the division's products to specific industries and have specific
competitors:



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.



The primary market for BASF's printing systems products is Europe, but Asian competitors dominate the global market.

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This business unit sells the division's fuel additives primarily under the brand names Puradd (in the United States) and Keropur, and mainly in North America and
Europe.



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



BASF is one of the world's top three producers of performance chemicals for textiles, along with Clariant and Ciba. 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 of Germany; Stahl International B.V. of the Netherlands 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 16 countries to best meet the needs of a highly fragmented market comprised primarily of small customers.

Coatings



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 a new second-generation slurry coating system it jointly developed in partnership with DaimlerChrysler AG and
Dürr Systems GmbH of Germany.

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 developing environmentally friendly coating technologies with high quality characteristics such as scratch resistance. Ultraviolet (UV) curing coatings represent a particularly
promising technology.

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 approach to manufacturing. To satisfy

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these needs, BASF's Coatings division is locating 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,
and 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
€2,137 million in 2002.



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 a complete line of automotive OEM coatings and extensive technical support to major vehicle manufacturers. BASF is a leading supplier for
electrodeposition coats, primer surfacers, top-coats including basecoats, and clearcoats. All of the world's leading automobile manufacturers are long-standing customers of
BASF.



For the refinishing of automobiles and commercial vehicles, BASF offers topcoat and undercoat materials through coating systems under the well-known
brand names Glasurit® and R-M®. 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 cover powder, liquid, electro-deposition, and coil
coatings that are used on household appliances, commercial vehicles, industrial buildings, radiators and automotive components. Wood finishes in the furniture and construction industry represent
another use for BASF's industrial coatings. BASF is the second largest coil coating 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, 2002 for the major products in the Coatings division are as follows:

|Product                        |  | Annual Production Capacity
(metric tons)
|------------------------------ |  | ----------------------------------------
|Electrodeposition coatings     |  | 210,000                                 
|Powder coatings                |  | 30,000                                  
|Solventborne coatings          |  | 415,000                                 
|Waterborne coatings            |  | 45,000                                  
|Waterborne (Decorative paints) |  | 320,000                                 

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In 2002, Europe accounted for 42% of the Coatings division's sales. North America accounted for 35% 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 to the automotive refinish, 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 a just-in-time approach to 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 and PPG Industries, Inc. of the United States and Akzo Nobel N.V. of the Netherlands to be the primary global competitors of the
Coatings division, and Nippon Paint Company Ltd. and Kansai Paint Company Ltd. of Japan to be the division's competitors in Asia.

Functional Polymers



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 purchases approximately 70% of its raw materials from other BASF operations through the company's 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.

In
Europe and North America, a comprehensive restructuring program to improve the division's competitiveness is nearly complete. The division has streamlined its workforce in Europe and
shifted production from older plants to new, more efficient plants and to plants closer to customers in an effort to reduce transportation costs. The latest investments are the new superabsorbents
plant in Antwerp that is directly fed with acrylic acid from the existing acrylic complex, and the new plant for paper coating binders in Hamina/Finland that is ideally located to supply the paper
mills in Northern Europe.

In
North America, the division has reduced its workforce and consolidated its production activities to control costs and increase capacity utilization rates of some plants.

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The
Functional Polymers division continues to strengthen its position in Asia, the fastest growing region worldwide. In Nanjing/China, BASF laid the cornerstone for the second Asian
Verbund site where the division will start the production of acrylic acid and its esters by 2005.

The
Functional Polymers division's sales to third parties were €2,534 million in 2002.



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's strengths lie particularly 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 complete and integrated 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.

In
2000, BASF introduced an innovative new class of process chemicals known as polyvinylamines. Polyvinylamines are process chemicals which improve the performance of paper production
lines by removing undesirable materials and also increase the strength of paper and board grades. A commercial-scale production plant for this class of products started operation in Ludwigshafen,
Germany, in 2001.



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, 2002 for the major products of the Functional Polymers division are as follows:

|Product             |  | Annual Production Capacity
(metric tons)
|------------------- |  | ----------------------------------------
|Acrylic monomers(1) |  | 850,000                                 
|Superabsorbents     |  | 305,000                                 

---

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The biggest market for the Functional Polymers division is Europe, which accounted for more than 47% of the division's sales in 2002. North America accounted for
approximately 29%; the Asia, Pacific Area, Africa region for 19%; and South America for 5% of sales in 2002. The Functional Polymers division's strategic goal is to increase market share in growing
markets, especially in North and South America and 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, however, are distributed globally from production sites in Ludwigshafen, Germany; Antwerp, Belgium; Freeport, Texas; Kuantan, Malaysia; and Guaratinguetá,
Brazil.

The
Functional Polymers continues to develop e-commerce as a distribution channel for its products. The division began 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 Hercules of the United States are BASF's main competitors
in paper chemicals. In the superabsorbents business, BASF's main global competitors are Degussa AG of Germany and Nippon Shokubai Co., Ltd. of Japan.

AGRICULTURAL PRODUCTS & NUTRITION

Segment Overview

BASF's Agricultural Products & Nutrition business segment is active in agricultural products and fine chemicals businesses that offer opportunities for
high returns and are typically resilient to economic cycles.

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The Agricultural Products & Nutrition business segment conducts its activities through its Agricultural Products and Fine Chemicals divisions, which are treated as separate
reportable operating segments. Key information is provided in the following table:

|                                          |  | 2002 |       | 2001 |   | 2000  |  
|----------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|
|Agricultural Products                     |  |      |       |      |   |       |  
|Sales to third parties                    |  | €    | 2,954 |      | € | 3,478 |  
|Percentage of total BASF sales            |  |      | 9%    |      |   | 11%   |  
|Intersegmental transfers                  |  | €    | 21    |      | € | 30    |  
|Income from operations                    |  | €    | 61    |      | € | 18    |  
|Capital expenditures                      |  | €    | 88    |      | € | 130   |  
|Fine Chemicals                            |  |      |       |      |   |       |  
|Sales to third parties                    |  | €    | 1,970 |      | € | 1,984 |  
|Percentage of total BASF sales            |  |      | 6%    |      |   | 6%    |  
|Intersegmental transfers                  |  | €    | 36    |      | € | 29    |  
|Income from operations                    |  | €    | (6    | )    | € | (210  | )
|Capital expenditures                      |  | €    | 157   |      | € | 199   |  
|Pharmaceuticals  discontinued operations |  |      |       |      |   |       |  
|Sales to third parties                    |  |      |      |      | € | 364   |  
|Percentage of total BASF sales            |  |      |      |      |   | 1%    |  
|Intersegmental transfers                  |  |      |      |      | € | 5     |  
|Income from operations                    |  |      |      |      | € | 30    |  
|Capital expenditures                      |  |      |      |      | € | 20    |  

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 herbicides, fungicides and insecticides; and fine chemicals such as
vitamins, carotenoids, pharmaceutical active ingredients; 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 purchasing 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. The
following table indicates the segment's major products and primary applications.

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Agricultural Products:

|Major Products |  | Primary Applications            
|-------------- |  | --------------------------------
|Herbicides     |  | Control of weeds                
|Fungicides     |  | Protection against fungal attack
|Insecticides   |  | Protection against insects      

Fine Chemicals:

|Major Products                    |  | Primary Applications                                                                                                                     
|--------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Vitamins                          |  | Animal and human nutrition                                                                                                               
|Carotenoids                       |  | Animal and human nutrition                                                                                                               
|Enzymes                           |  | Animal nutrition                                                                                                                         
|Amino acids                       |  | Animal nutrition                                                                                                                         
|Organic acids                     |  | Grain and compound feed preservation                                                                                                     
|Cosmetic ingredients              |  | Personal care items such as skin-care additives and sunscreen agents                                                                     
|Polymers                          |  | Hair sprays, styling mousses, gels and hair conditioners for the cosmetics industry; finished dosage forms; filtration aids for beverages
|Aroma chemicals                   |  | Fragrance and flavor raw materials                                                                                                       
|Pharmaceutical active ingredients |  | Pharmaceuticals                                                                                                                          
|Advanced intermediates            |  | Pharmaceuticals                                                                                                                          

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 the research, development and marketing of innovative products to improve the yields and quality of agricultural crops. Through the acquisition
of the crop protection business of AHP, BASF has gained a leading position in the significant agricultural markets of North and South America while strengthening its well established position in
Europe. The acquisition of Fipronil, and certain fungicides from Bayer Crop Science, is expected to improve this position further.

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 current Good Manufacturing Practice (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.

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Agricultural Products



The Agricultural Products division, headquartered in Mount Olive, New Jersey, is a leading supplier and marketer of herbicides, fungicides and insecticides. The
division's principal products are used mainly by farmers to improve crop yields and crop quality. Recent acquisitions include the agricultural products business of American Home Products Corp. (AHP)
of Madison, New Jersey, in 2000, as well as the insecticide Fipronil, and certain fungicides for seed treatment from Bayer Crop Science in 2003, which is still subject to approval by the
anti-trust authorities.

BASF
is expanding its activities in the field of plant biotechnology in response to advances in the market for agricultural products in which agricultural chemicals, plant seed and
biotechnology are becoming increasingly integrated. All BASF activities involving plant biotechnology are incorporated in BASF Plant Science, which was founded in 1999. BASF Plant Science coordinates
an international research and technology platform with seven sites in four countries in Europe and
North America. Through use of plant biotechnology, BASF Plant Science seeks to develop crops with improved properties, such as nutritional qualities or cultivation properties, for example; higher
tolerance to drought.



F 500® (Pyraclostrobin), a major new fungicidal active ingredient of the strobilurin class of chemistry, has received registration by 2002 for over 20
countries. Products containing F 500® are currently being introduced in all major markets. F 500 controls major plant pathogens from all classes of fungi, and is effective against a broad
spectrum of diseases in many crops including cereals, grapes, vegetables and fruits. It is also 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.

The
most recent active ingredient from our research is Boscalid, which is highly effective for formulations for the management of fungal diseases. With its broad spectrum of activity and
crop uses, Boscalid will become the backbone for our specialty crop business being complementary to our strobilurines. Boscalid is expected to be launched in time for the season 2003/04.

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:

|Active Ingredient |  | Brand Name                 |  | Applications                                             |  | Primary Markets                        
|----------------- |  | -------------------------- |  | -------------------------------------------------------- |  | ---------------------------------------
|Herbicides        |  |                            |  |                                                          |  |                                        
|Bentazon          |  | Basagran®                  |  | Vegetables
Cereals
Potatoes
Rice
Soybeans
Turf
Corn
Flax |  | North America
South America
Europe
Asia
|Dicamba           |  | Banvel®
Clarity®
Distinct® |  | Corn
Cereals                                             |  | North America
Europe                   

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|Dimethenamid    |  | Frontier®
Guardsman®                                  |  | Corn
Soybeans                         |  | North America
Europe                           
|--------------- |  | ----------------------------------------------------- |  | ------------------------------------- |  | -----------------------------------------------
|Dimethenamid-P  |  | Outlook®                                              |  | Corn
Broadleaf crops                  |  | North America                                  
|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               
|Sethoxydim      |  | Poast®                                                |  | Soybeans
Cotton
Peanuts               |  | North America
South America                    
|Fungicides      |  |                                                       |  |                                       |  |                                                
|Cyazofamide     |  | Ranman®                                               |  | Potatoes                              |  | Europe                                         
|Dimethomorph    |  | Acrobat®
Forum®                                       |  | Potatoes
Vines                        |  | South America
Europe                           
|Epoxiconazole   |  | Opus®                                                 |  | Cereals
Coffee
Rice
Sugar beets       |  | Europe
South America                           
|Fenoxanil       |  | Helmet®                                               |  | Rice                                  |  | Asia                                           
|Kresoxim-methyl |  | Allegro®
Juwel®
Ogam®
Mentor®
Stroby®/Sovran®
Cygnus® |  | Cereals
Grapes
Fruits
Vegetables      |  | Europe
North America                           
|Pyraclostrobin  |  | Opera®
Comet®
Headline®
Cabrio®                       |  | Cereals
Grapes
Fruits
Vegetables      |  | Europe
North America
South America
South Africa

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|Insecticides      |  |                            |  |                                                          |  |                            
|----------------- |  | -------------------------- |  | -------------------------------------------------------- |  | ---------------------------
|Alphacypermethrin |  | Fastac®
Mageos®
Contest®   |  | Citrus
Fruits
Vines                                      |  | Europe
Asia
South America  
|Chlorphenapyr     |  | Phantom®
Mythic®, Stealth® |  | Fruits
Vegetables
Cotton
Ornamentals;
Non Crop: Termites |  | North America
Europe
Japan 
|Terbufos          |  | Counter®                   |  | Corn
Sugar beets
Bananas                                 |  | North America
South America

In addition to herbicides, fungicides and insecticides, BASF's portfolio of agricultural products includes the CLEARFIELD® Production
System, which combines herbicide-resistant seeds developed using enhanced plant breeding methods with custom-designed herbicide solutions. CLEARFIELD crops currently being marketed include corn,
wheat, rice, canola and sunflower, and 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.

BASF
has started to further consolidate the division?s product portfolio in order to significantly reduce complexity and to focus resources. As part of the streamlining
effort, a variety of active ingredients, formulations and articles will be eliminated. By the end of 2002, active ingredients have been reduced by almost one third.

On
October 28, 2002, BASF signed a contract to acquire the worldwide business of the leading new chemistry insecticide Fipronil for all uses except animal health, as well as
selected fungicides especially in the seed treatment applications, from Bayer CropScience. This transaction, valued at €1.2 billion, is still subject to the approval of the
antitrust authorities. The aim of the transaction is to:



Through
the acquisition, BASF is stepping into attractive markets, further broadening its expertise as a preferred partner of its customers and the food value chain.



BASF's research and development activities in Agricultural Products cover all three areas of crop protection: fungicides, herbicides and insecticides. The
division's research and development is located in Ludwigshafen and Limburgerhof, Germany, and at the 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. These allow BASF to conduct research throughout the year and on crops that grow only
in specific regions.

In
2002, research and development spending in the Agricultural Products division was approximately 10% of the division's sales to third parties. BASF is constantly striving to increase

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effectiveness, efficiency and focus on market needs of the division?s R&D function. Amongst these are:



Innovation
is particularly important since the effectiveness and efficiency of products might decrease over time for biological reasons. Including recent market introductions, BASF's
product pipeline has 13 projects to be launched by 2007. BASF estimates the total peak sales potential of these projects at around €1.7 billion, making it one of the strongest
pipelines in the industry:

|                                                         |                         | Product Group |             | Uses |                           | Total Peak Sales    
|-------------------------------------------------------- | ----------------------- | ------------- | ----------- | ---- | ------------------------- | --------------------
|Projects in launch (2001/02)                             |                         |               |             |      |                           | about €900 million  
|                                                         | Fenoxanil               |               | Fungicide   |      | Rice                      |                     
|                                                         | Picolinafen             |               | Herbicide   |      | Cereals                   |                     
|                                                         | Dimethenamid-P          |               | Herbicide   |      | Corn                      |                     
|                                                         | Pyraclostrobin (F 500®) |               | Fungicide   |      | Cereals, Vine, Vegetables |                     
|                                                         | Chlorfenapyr            |               | Insecticide |      | Termites                  |                     
|Projects in development (launch targeted before 2006/07) |                         |               |             |      |                           | about €800 million  
|                                                         | Boscalid                |               | Fungicide   |      | Vines, Fruits, Vegetables |                     
|                                                         | Tritosulfuron           |               | Herbicide   |      | Cereals, Corn             |                     
|                                                         | Dimoxystrobin           |               | Fungicide   |      | Cereals                   |                     
|                                                         | Orysastrobin*           |               | Fungicide   |      | Rice                      |                     
|                                                         | Metrafenone*            |               | Fungicide   |      | Cereals, Vine             |                     
|                                                         | n.n.                    |               | Herbicide   |      | Corn                      |                     
|                                                         | n.n.                    |               | Insecticide |      | Vegetables, Potatoes      |                     
|                                                         | n.n.                    |               | Herbicide   |      | Cereals                   |                     
|Total                                                    |                         |               |             |      |                           | about €1,700 million

---

Growth is expected to be strongly driven by our flagship product, the fungicide F 500®, which is currently being introduced in all
major markets, as well as by Boscalid, our multipurpose fungicide for specialty crops. The expansion of the CLEARFIELD Production System to additional regional markets provides further growth
potential.



Plant Biotechnology is significantly changing the agricultural markets. It is one of the most promising technologies of the twenty-first century because it is the
key to the solution to important questions regarding the future; the key to health, nutrition, and the supply of raw materials for a steadily growing world population.

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BASF
has the goal of becoming a leading player in the plant biotechnology market and expanding its position as a major supplier to the agricultural industry. BASF announced in 2000 to
spend about €700 million over 10 years on research and development activities in plant biotechnology.

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.

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

In
2002 BASF Plant Science received a favorable opinion from the European Union's Scientific Committee on Plants on a genetically modified "High Amylopectin" potato. The amylopectin
starch is designed to improve industrial manufacturing processes as well as product quality in the paper, textile, adhesive and cosmetic industry. The amylopectin potato is the first genetically
modified potato, which received a favorable opinion from the EU Committee. It will be ready to be marketed after regulatory approval for commercialization.

BASF
cannot give assurances that any of its research and development projects will survive the development process and ultimately obtain the requisite regulatory approval or, if
approved, will be commercially profitable. Competitors may also launch competing or improved products.



The Agricultural Products division markets its products globally, focusing on strategic markets. Agricultural Products division's sales to third parties were
€2,954 million in 2002. The following tables show sales by product group and region:

|Product Group                                |  | 2002 Sales
|-------------------------------------------- |  | ----------
|
|Herbicides                                   |  | 1,414     
|Fungicides                                   |  | 906       
|Insecticides and other agrochemical products |  | 634       



|Regions             |  | 2002 Sales
|------------------- |  | ----------
|
|Europe              |  | 1,320     
|North America       |  | 945       
|South America       |  | 335       
|Asia/Pacific/Africa |  | 354       

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. In 2002, we have exited our sites in Barranquilla, Colombia; Paulinia, Brazil,
and Chungli, Taiwan as well as closed a formulation plant at our site in Hannibal, Missouri.

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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. In 2002 the US marketing and Sales organization was further streamlined and redirected towards changing market
structures.

The
global market for agricultural products is seasonal, since the main markets for these products are in the Northern Hemisphere. Sales tend to be 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 weaker.

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 of Switzerland; Bayer CropScience AG of Germany (formed in 2002 through the acquisition of the agricultural
products activities of Aventis S.A. of France through Bayer AG of Germany); as well as Monsanto Co., The Dow Chemical Company and E.I. du Pont de Nemours and Company of the United States.

The
market for chemical-based crop protection products decreased compared with 2001 due to:



However,
the market for agricultural products is forecasted to grow in the medium to long term. The main driver is a growing world population and therefore a rising demand for food.



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. In the United States, the EPA (Environmental Protection Agency) has the responsibility for registration of all chemicals released into the environment,
including herbicides, insecticides, fungicides and plant growth regulators irrespective of whether they are used for crop protection or for public health. Significant amounts of EPA resources are
concentrated on the effects of crop protection products on the environment and on the safety of fish, wildlife and water resources. Plant-biotechnology-based crop protection products are also
regulated by the USDA (U.S. Department of Agriculture) for environmental safety of the plant and by the FDA (U.S. Food and Drug Administration) to ensure the safety of food.

Since
human exposure to a crop protection or environmental or public health product may occur from residues on food or from residential lawn use and/or indoor residential use, the safety
assessment considers the human risk from all anticipated routes of exposure. Special sensitivities, food consumption and exposure patterns on infants and children are specifically considered. If the

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product is used on a food crop, a legal limit for residual chemical or a tolerance is established for the specific chemical. This limit is based on a strict health standard and the data provided by
the manufacturer.

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. There are no
statutory time frames in the United States for registration of new crop protection and environmental health products. The standard time frame for registration of an agricultural product is typically
30 to 36 months.

Genetically
modified plants must undergo a regulatory assessment by the USDA for environmental safety including impact on native species and the impact of environmental release. The FDA
considers the safety of the modified food and whether it is "substantially similar" to existing food products. Part of this review considers the possible introduction of new toxins or potential
allergens into the food. Foods that are not considered "substantially similar" must undergo a more detailed review and approval process by the FDA.

Fine Chemicals



BASF's Fine Chemicals division develops, manufactures and sells approximately 900 different high-value specialty products to approximately 8,000
customers. The Fine Chemicals division serves the animal and human nutrition, pharmaceutical, cosmetics and aroma chemicals industries, steadily growing markets driven by a growing world population
with increasing needs in healthcare and lifestyle. In all of the division's main product groups BASF is one of the top three suppliers. BASF further strengthened its animal nutrition business in 2002
with the acquisition of Formi®, the first approved alternative to feed antibiotics for use in pig breeding from Hydro Formates. Additionally BASF formed a Joint venture with the company
Fortitech, USA for the manufacturing, marketing and sales of human nutrition premix products in Europe, Asia, South America and Africa. This will sustain BASF?s respective position as
leading supplier of nutritional ingredients.

BASF's
Fine Chemicals division is 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.

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. These supplies are readily available on the market. Among specialty inputs, no single product accounts for more than 4% of total
external purchases.

Capital
expenditures in the Fine Chemicals division from 2000 to 2002 included production plants and manufacturing equipment in Germany, Denmark and Korea. The Fine Chemicals division's
most significant capacity expansions during this period were for the production and formulation of carotenoids; vitamin E and its precursors; Vitamin B2, pseudoephedrine, purines (caffeine,
theophylline), UV absorbers; and for aroma chemicals such as citral, geranonitrile and Lysmeral®. Citral is also used as a vitamins intermediate.

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The
key elements of the division's success are establishing a global sales presence by maintaining low costs 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 is making process improvements in existing plants and transferring 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. As more and more pharmaceutical companies concentrate on researching,
developing and marketing new products, production of active ingredients is increasingly being contracted out to fine chemical companies that both specialize in the synthesis of complex molecules and
have suitable multipurpose plants that meet the pharmaceutical industry's standards. Over the next five years, BASF's goal is to become a leading contract manufacturer for this industry.



The following are the main product lines of the Fine Chemicals division:



BASF is the second largest vitamins producer worldwide, and vitamins account for approximately one third of sales in the Fine Chemicals division. BASF produces
ten of the 13 naturally occurring vitamins. These include the water-soluble vitamins B2 (riboflavin), Calpan (calcium d-pantothenate) and C, as well as the
fat-soluble vitamins A, E and D3. The Fine Chemicals division sells vitamins mainly to the human and animal nutrition industries. BASF is currently pursuing an investment
program in its vitamins business. In 2001, BASF acquired the vitamins business of Takeda Chemical Industries Ltd., and now offers a complete range of fat- and water-soluble
vitamins. The company estimates that as a result of the acquisition it has a 25% share of the world market for vitamins. In the second phase of the investment program, which is expected to be
completed by 2006, BASF plans to invest in world-scale plants for vitamins E, B2 and C. 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. Market success with carotenoids depends critically
on formulation expertise to provide stability and bio-availability. More than half of BASF's carotenoid sales are in Europe.



The main products in this category are caffeine, pseudoephedrine, theophylline, ibuprofen and povidone iodine. Beverage manufacturers are the primary buyers of
caffeine, while 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 pain. All of BASF's production sites for these products have GMP (good manufacturing practice) certification, a quality standard granted by an independent agency and demanded by companies who
market and sell these products. BASF sells these products worldwide, with the United States being the most important market, followed by Western Europe. BASF is the number one producer worldwide of
all the products in this category.

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



The Fine Chemicals division sells 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 in hair care products such as hairspray, 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 breeding. 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.



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®, which the Fine Chemicals division produces and markets pursuant to a cooperation agreement with DSM N.V. of the Netherlands.
Most of BASF's enzyme sales are roughly divided between Europe and North America.



Organic acids are used as preservatives for grains and compound feeds. 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 promoter, an alternative to antibiotics to be banned in European animal breeding as of 2006. Formi® has been acquired from Norsk Hydro AS in 2002.



Cosmetics ingredients are raw materials for many personal care products, including skin-care additives and sunscreen agents. BASF sells these products
primarily in Europe. The Fine Chemicals division is the world market leader in the UV absorber business and offers the full range of UVA and UVB absorbers.



Aroma chemicals are fragrance and flavor raw materials that are used as precursors for perfumes, food products, detergents and cosmetics. BASF sells these
products primarily in Europe. The new lysmeral plant, which has been on stream since 2002, further strengthens BASF's position as the leading manufacturer of petrochemicals-based aroma chemicals.

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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
2002, the Fine Chemicals division spent approximately 4% of its consolidated sales on research and development activities, essentially unchanged from 2001.

Approximately
half of the Fine Chemicals division's research and development expenses in 2002 were allocated to human nutrition and pharmaceuticals. Around a third was spent on products
for the animal nutrition industry. The remainder was earmarked for applications in cosmetics and aroma chemicals.

In
the animal nutrition business, BASF seeks to increase its market share by ensuring superior product quality. Reducing production costs is essential for the necessary increase in
profitability. BASF also directs research efforts at extending the feed additives product range, for example, by developing CLA (Conjugated linolic acid) to control fat in animals or by adding new
heat-stable enzymes to the Natuphos/Natustarch range of feed enzymes. These enzymes are designed to improve digestion in animals and reduce the phosphate content of excretions.

Biotechnological
production processes are becoming increasingly important to the success of many fine chemical products because they reduce variable production costs and allow for
continuous improvement in the bacteria strains and fermentation processes for vitamins and amino acids. BASF is currently working on optimizing the fermentation and production processes for the amino
acid lysine. BASF has successfully replaced chemical synthesis with biotechnology-based processes to produce vitamin B2 and precursors of vitamin C.



The Fine Chemicals division's sales to third parties were €1,970 million in 2002. In 2002, Europe accounted for 43% of the Fine Chemicals
division's sales; North America for 28%, the Asia, Pacific Area, Africa region for 23%; and South America for 6%. The following table shows the Fine Chemicals division's sales for 2002 by customer
industry:

|Customer Industry                            |  | Sales
|-------------------------------------------- |  | -----
|
|Animal nutrition                             |  | 874  
|Human nutrition                              |  | 371  
|Pharmaceuticals                              |  | 389  
|Personal care, cosmetics and aroma chemicals |  | 336  

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

BASF
sells the vast majority of its fine chemical products through its own sales force, which targets major global customers. Key account managers are assigned to these major customers.
Through its sales and marketing departments, BASF works closely with customers to develop specific applications and to collaborate on developing new products. BASF also sells its fine chemical
products through its global extranet platform, WorldAccount.

BASF's
competitive position depends to a large extent on its ability to compete on price, product quality and customer service. This requires comprehensive cost leadership in the whole
supply chain: production, logistics, marketing and sales.

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BASF
expects the trend toward globalization and consolidation to continue among customers of the Fine Chemicals division. The trend toward commoditization for certain fine chemicals,
such as vitamins, is continuing.

BASF
considers its main competitors in the animal nutrition area to be Roche (DSM) of Switzerland, Archer Daniels Midland Co. of the United States, Novo Nordisk A/S of Denmark, Adisseo
Group and Rhodia S.A. of France, Eisai Co. Ltd. of Japan and new entrants from China. In the human nutrition area, BASF's main competitors are Roche and Merck KGaA of Germany. In pharmaceutical
active ingredients, BASF considers Albemarle Corporation, Mallinckrodt Inc., 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, Givaudan of Switzerland, International Specialty Products, Hercules Inc., Millennium Specialty Chemicals,
IFF Inc., National Starch & Chemical Co. of the United States and Kurarai of Japan are BASF's main competitors.



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.

One
of the major markets for BASF's fine chemicals is the European Union (E.U.). 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 exist in Europe and they 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. A product is approved in the E.U. only after its safety is assessed by a committee of independent
academic scientists.

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 climates that are similar to or sometimes
even more restrictive than those described above. The regulatory environment in Japan, for example, can be
more restrictive than that of the United States or the E.U. Furthermore, many emerging markets are developing regulatory systems in line with Western standards.

OIL & GAS

Segment Overview

BASF conducts the activities of its Oil & Gas segment through its subsidiary Wintershall AG, one of the leading oil and gas companies in Germany.
Wintershall and its affiliated companies are active in two sectors:



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

|                                                     |  | 2002   |  | 2001   |  | 2000  
|---------------------------------------------------- |  | ------ |  | ------ |  | ------
|
|Sales to third parties, net of natural gas taxes     |  | €4,199 |  | €4,516 |  | €3,957
|Natural gas taxes                                    |  | 303    |  | 268    |  | 259   
|Intersegmental transfers                             |  | 363    |  | 413    |  | 320   
|Sales incl. Intersegmental transfers                 |  | 4,562  |  | 4,929  |  | 4,277 
|Royalties                                            |  | 210    |  | 312    |  | 276   
|Sales incl. intersegmental transfers, less royalties |  | 4,352  |  | 4,617  |  | 4,001 
|Income from operations                               |  | 1,210  |  | 1,308  |  | 1,310 
|Capital expenditures                                 |  | 920    |  | 229    |  | 267   

The Oil and Gas segment's sales to third parties, net of petroleum and natural gas taxes, accounted for 11.0% of BASF's total sales in 2000 and
13.9% of BASF's total sales in 2001. In 2002, the segment accounted for 13.0% of BASF's total sales.

Segment Strategy

The Oil & Gas segment seeks to increase production of oil and gas by at least 50% between 2001 and 2010. This will be accomplished by strengthening its
exploration activities, developing new fields, optimizing production in existing facilities, and seeking additional acquisitions. To ensure the company's ongoing competitiveness, Wintershall focuses
on the following core regions:



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Wintershall's
goal is to maintain a ratio of proved reserves to production of approximately 10 years and a suitable balance 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 fourth 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 are expected by expanding WINGAS's transmission and distribution activities
into new regions.

Exploration and Production of Oil and Natural Gas

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

BASF
believes that Wintershall presently has finding and development costs that are below the industry average. Unlike global 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
activities that the Oil & Gas segment presently conducts are as follows:

|Country       |  | Activities                             |  | Country         |  | Activities                            
|------------- |  | -------------------------------------- |  | --------------- |  | --------------------------------------
|Argentina     |  | Oil and gas exploration and production |  | Libya           |  | Oil and gas exploration and production
|Azerbaijan(1) |  | Oil exploration                        |  | the Netherlands |  | Oil and gas exploration and production
|Brazil(1)     |  | Oil exploration                        |  | Qatar           |  | Oil exploration                       
|Dubai         |  | Oil exploration and production         |  | Romania         |  | Gas exploration and production        
|Germany       |  | Oil and gas exploration and production |  | Russia(2)       |  | Oil exploration and production        

---



The Oil & Gas segment's most significant oil reserves are in North Africa/Middle East and Germany, with the substantial share of these reserves being
located in Libya. The most significant natural gas reserves are in Argentina and Germany.

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The
Oil & Gas segment's proved oil and gas reserves and proved developed oil and gas reserves in each of four geographic areas as of December 31, 2002, 2001 and 2000 were
as follows:

|                             |  | Germany |  | North Africa
and
Middle East(1) |  | Argentina |  | Rest of
World(1) |  | Total |  | Rest of
World
|---------------------------- |  | ------- |  | ------------------------------- |  | --------- |  | ---------------- |  | ----- |  | -------------
|
|At December 31, 2002         |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Oil (millions of barrels)    |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 93      |  | 422                             |  | 49        |  | 1                |  | 565   |  | 17           
|Proved developed reserves    |  | 76      |  | 369                             |  | 33        |  | 1                |  | 479   |  | 17           
|Gas (billions of cubic feet) |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 482     |  | 208                             |  | 1,341     |  | 328              |  | 2,359 |  |             
|Proved developed reserves    |  | 425     |  | 149                             |  | 684       |  | 105              |  | 1,363 |  |             
|At December 31, 2001         |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Oil (millions of barrels)    |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 101     |  | 442                             |  | 39        |  |                 |  | 582   |  | 19           
|Proved developed reserves    |  | 70      |  | 412                             |  | 28        |  |                 |  | 510   |  | 19           
|Gas (billions of cubic feet) |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 500     |  | 172                             |  | 1,225     |  | 134              |  | 2,031 |  |             
|Proved developed reserves    |  | 500     |  | 171                             |  | 612       |  | 57               |  | 1,340 |  |             
|At December 31, 2000         |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Oil (millions of barrels)    |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 116     |  | 479                             |  | 30        |  |                 |  | 625   |  |             
|Proved developed reserves    |  | 76      |  | 462                             |  | 22        |  |                 |  | 560   |  |             
|Gas (billions of cubic feet) |  |         |  |                                 |  |           |  |                  |  |       |  |              
|Proved reserves              |  | 509     |  | 228                             |  | 920       |  | 89               |  | 1,746 |  |             
|Proved developed reserves    |  | 503     |  | 228                             |  | 519       |  | 54               |  | 1,304 |  |             

---

At 2002 levels of production, in terms of barrel of oil equivalents, proved oil reserves would last approximately 10 years, and in terms of
cubic feet equivalents, proved gas reserves would last approximately 12 years.



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:

|                                                                 |  | 2002 |        | 2001 |   | 2000  
|---------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|Oil                                                              |  |      |        |      |   |       
|Net quantities produced (millions of barrels)                    |  |      | 60     |      |   | 60    
|Average sales price less royalties (per barrel)                  |  |      | €19.10 |      |   | €20.39
|Average production cost (lifting cost) (per barrel)              |  | €    | 3.44   |      | € | 3.60  
|Gas                                                              |  |      |        |      |   |       
|Net quantities produced (billions of cubic feet)                 |  |      | 189    |      |   | 186   
|Average sales price less royalties (per thousand cubic feet)     |  | €    | 1.92   |      | € | 2.57  
|Average production cost (lifting cost) (per thousand cubic feet) |  | €    | 0.52   |      | € | 0.54  

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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,
2002, were as follows:

|                                         |  | Germany |  | North Africa
and
Middle East(1) |  | Argentina |  | Rest of
World(1) |  | Total    |  | Rest of
World
(at equity)
|---------------------------------------- |  | ------- |  | ------------------------------- |  | --------- |  | ---------------- |  | -------- |  | -------------------------
|Oil                                      |  |         |  |                                 |  |           |  |                  |  |          |  |                          
|Total gross productive wells             |  | 527.0   |  | 280.0                           |  | 57.0      |  | 8.0              |  | 872.0    |  | 12.0                     
|Total net productive wells               |  | 244.1   |  | 64.4                            |  | 18.2      |  | 8.0              |  | 334.7    |  | 6.0                      
|Gas                                      |  |         |  |                                 |  |           |  |                  |  |          |  |                          
|Total gross productive wells             |  | 150.0   |  | 0.0                             |  | 150.0     |  | 128.0            |  | 428.0    |  | 0.0                      
|Toal net productive wells                |  | 62.3    |  | 0.0                             |  | 35.7      |  | 17.6             |  | 115.6    |  | 0.0                      
|Oil and Gas Acreages
(thousand of acres) |  |         |  |                                 |  |           |  |                  |  |          |  |                          
|Total gross developed acres              |  | 163.9   |  | 92.9                            |  | 256.2     |  | 121.2            |  | 634.2    |  | 0.9                      
|Total net developed acres                |  | 56.3    |  | 28.8                            |  | 60.4      |  | 16.2             |  | 161.7    |  | 0.4                      
|Total gross undeveloped acres            |  | 2,689.5 |  | 2,075.2                         |  | 4,592.9   |  | 5,133.1          |  | 14,490.7 |  | 5,589.1                  
|Total net undeveloped acres              |  | 1,354.1 |  | 788.8                           |  | 1,473.9   |  | 1,734.9          |  | 5,351.7  |  | 2,794.5                  

---

In 2002, Wintershall spent €999 million for exploration, acquisition and investment, compared with
€392 million in 2001. Thereof, €749 million were spent in Europe (2001: 136 million), €124 million in North Africa/Middle
East (2001: €100 million), €111 million in South America (2001: €120 million) and €15 million in
Russia/Caspian Sea (2001: €36 million).

Exploration
activities are focused on Europe, the Southern Cone region of South America, North Africa/Middle East (mainly Libya) and Russia/Caspian Sea. Either directly or through its
subsidiaries, Wintershall was involved in the drilling and completion of 16 exploratory wells which resulted in seven successful wells. As of December 31, 2002, Wintershall had begun drilling
three additional exploratory wells.

In
2002, 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 utilizes associated natural gas for local consumption. 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 Mittelplate offshore oil field in the German North Sea as well as in Dubai, Argentina 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, 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 2002, oil production increased to 13.9 million barrels of which 8.2 million barrels were produced through extended-reach wells. Each partner has a 50% interest in the project.

Approximately
45% of Wintershall's natural gas is produced in Argentina. In 2001, Wintershall 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 in 2002, the project schedule has been adjusted in accordance with expected gas demand. Wintershall also holds a 10% share in the "Cruz del Sur"

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gas pipeline project. The project was completed and became operational in 2002. With this pipeline, which runs from Punta Lara, Argentina, to Montevideo, Uruguay, Wintershall participates in the
strategic development of new gas markets in Uruguay. Southern Brazil represents another growing gas market in which Wintershall may participate, and the pipeline may be extended to this region
depending on market conditions.

In
the Netherlands Wintershall acquired Clyde Netherlands B.V. from ConocoPhillips, effective November 5, 2002. Through the acquisition Wintershall more than doubles its reserves
and future production in the Netherlands. Wintershall is now the 3rd largest gas producer in the country and operates 21 offshore platforms. 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 combines two companies whose portfolios complement
each other.

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 produces at a gas plateau rate of 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.

In
spring 1999, BASF signed a German-Russian economic 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. Such developments will have to be the subject of future agreements. Gazprom and Wintershall are developing field development concepts.

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 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 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.

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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. Covered risks include political risks, such as the risk of war,
revolution and expropriation. If any covered risk were to materialize, Wintershall would receive approximately €158 million. German government guarantees currently cover a total
investment volume by Wintershall of approximately €437 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.

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 OAO Gazprom of Russia. To
promote the joint marketing of mainly Russian, as well as British North Sea and German natural gas predominantly in Germany, Wintershall and Gazprom established two joint ventures:



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.

In
2002, WINGAS entered into new supply contracts with municipalities and industrial companies and WINGAZ is active in the forward market. In total with the rising demand of the customer
base the sales volume increased from 414 billion cubic feet to 456 billion cubic feet despite relatively mild winter. The sales volume of WINGAS, WIEH and WIEE totaled 814 billion
cubic feet compared with 730 billion cubic feet for 2001. The BASF consolidated sales volume in 2002 was 524 billion cubic feet, representing a 13.6% increase over the previous year's
sales volume of 461 billion cubic feet.

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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 approximately 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 capacity of 157 billion cubic feet.

In
2002, WINGAS purchased 193 billion cubic feet of the natural gas from WIEH, which in turn purchases all of its gas from Gazprom's subsidiary Gazexport. In 2002, WINGAS bought
116 billion cubic feet directly from Gazexport so that in total 309 billion cubic feet or 68% were purchased from Russian sources. WINGAS also bought 93 billion cubic feet from
North Sea suppliers, primarily from EDF Trading Ltd. and Conoco, 37 billion cubic feet in the main in the forward market and 15 billion cubic feet low caloric gas from
Wintershall.

The
biggest customer for WINGAS's natural gas is BASF's own Verbund site in Ludwigshafen, Germany. In 2002, the site purchased approximately 85 billion cubic feet, or
approximately 19% of WINGAS's distribution volume. Approximately 26 billion cubic feet, or 5%, was sold to other BASF companies; 37% to transmission companies; 22% to regional distributors,
municipalities and industrial companies; and 17% was sold in the forward market. Of the natural gas that WINGAS distributed in Germany in 2002, more than 80% was supplied through long-term
natural gas supply agreements with more than 60 customers.

WINGAS
is currently the fourth largest natural gas transmission and distribution company in Germany. Capital expenditures in 2002 totaled €32 million, of which
€25 million was used for additions to the existing infrastructure.

ENVIRONMENTAL MATTERS

BASF is subject to extensive, evolving and increasingly stringent national and local environmental laws and regulations concerning: the production, distribution,
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.

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These
Environmental protection and remediation laws and regulations govern primarily



Although
BASF believes that its production sites and operations are currently in material compliance 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 €697 million in 2002. 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 €186 million in 2002 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 €264 million for anticipated investigation and clean-up costs at such sites
as of December 31, 2002, and €309 million as of December 31, 2001. 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 the liabilities and revised estimates, as appropriate, based on the most current information
available.

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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 which 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 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:



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

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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 venture with OAO 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, which BASF refers to as its "Procurement Verbund."
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. Global and regional purchasers together form the lead buyer structure within purchasing.

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 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.

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 in its Procurement Verbund 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. In this way, the capital expenditures needed to develop such solutions can be allocated more effectively.

E-commerce

BASF is actively pursuing the opportunities offered by 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. For example, BASF is a founding partner in cc-chemplorer, a
marketplace for maintenance, repair and operations-related products and services for the chemical industry. BASF

73

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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.

BASF
has established 48 business units organized along industry lines. These business units are responsible for production, marketing and sales activities.

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.

Significant Subsidiaries

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

|Name of Company                               |  | Percentage
Owned (%)
|--------------------------------------------- |  | --------------------
|BASF Coatings AG, Münster-Hiltrup, Germany    |  | 100                 
|BASF Schwarzheide GmbH, Schwarzheide, Germany |  | 100                 
|Elastogran GmbH, Lemförde, Germany            |  | 100                 
|Wintershall AG, Kassel, Germany               |  | 100                 
|BASF Antwerpen N.V., Antwerp, Belgium         |  | 100                 
|BASF Española S.A., Tarragona, Spain          |  | 100                 
|BASF Corporation, Mount Olive, New Jersey     |  | 100                 
|BASF S.A., São Bernardo do Campo, Brazil      |  | 100                 
|BASF Company Ltd., Seoul/Korea                |  | 100                 

74

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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:

ProductionLocationAcreage

PlantsLudwigshafen, Germany

1,760

250Antwerp, Belgium

1,470

54Geismar, Louisiana

2,290

10Freeport, Texas

510

21Kuantan, Malaysia

150

12


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.

The
following is a list of BASF's significant production sites, all of which BASF owns, except as indicated below:

|Region/ Country |         | Production Site Location |                 | Division Activities  
|--------------- | ------- | ------------------------ | --------------- | ---------------------
|Europe          |         |                          |                 |                      
|                | Germany |                          | Ludwigshafen(1) |                      
|                |         |                          |                 | Inorganics           
|                |         |                          |                 | Intermediates        
|                |         |                          |                 | Styrenics            
|                |         |                          |                 | Performance Polymers 
|                |         |                          |                 | Performance Chemicals
|                |         |                          |                 | Functional Polymers  
|                |         |                          |                 | Fine Chemicals       
|                |         |                          |                 | Agricultural Products
|                |         | Besigheim                |                 | Performance Chemicals
|                |         | Cologne                  |                 | Performance Chemicals
|                |         | Lemförde                 |                 | Polyurethanes        
|                |         | Minden                   |                 | Fine Chemicals       
|                |         | Münster-Hiltrup          |                 | Coatings             
|                |         | Schwarzheide             |                 | Petrochemicals       
|                |         |                          |                 | Intermediates        
|                |         |                          |                 | Styrenics            
|                |         |                          |                 | Performance Chemicals

75

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| |                 |                     |                    | Performance Polymers 
| | --------------- | ------------------- | ------------------ | ---------------------
| |                 |                     |                    | Polyurethanes        
| |                 |                     |                    | Coatings             
| |                 |                     |                    | Agricultural Products
| |                 | Sinzheim            |                    | Performance Chemicals
| |                 | Stuttgart-Feuerbach |                    | Performance Chemicals
| |                 | Willstätt           |                    | Performance Chemicals
| |                 | Würzburg            |                    | Coatings             
| | Belgium         |                     | Antwerp(1)         |                      
| |                 |                     |                    | Inorganics           
| |                 |                     |                    | Intermediates        
| |                 |                     |                    | Performance Chemicals
| |                 |                     |                    | Styrenics            
| |                 |                     |                    | Polyurethanes        
| |                 |                     |                    | Performance Polymers 
| |                 |                     |                    | Functional Polymers  
| |                 | Feluy               |                    | Intermediates        
| |                 |                     |                    | Petrochemicals       
| | Denmark         |                     | Ballerup           |                      
| |                 | Grenaa              |                    | Fine Chemicals       
| | Finland         |                     | Hamina             |                      
| | France          |                     | Clermont de l'Oise |                      
| |                 | Genay               |                    | Agricultural Products
| |                 | Gravelines          |                    | Agricultural Products
| |                 | Mitry-Mory          |                    | Polyurethanes        
| | Italy           |                     | Bibbiano           |                      
| |                 | Burago              |                    | Coatings             
| |                 | Caronno Pertusella  |                    | Performance Chemicals
| |                 | Cinisello Balsamo   |                    | Performance Chemicals
| |                 | Villanova d'Asti    |                    | Polyurethanes        
| |                 | Zingonia            |                    | Polyurethanes        
| | The Netherlands |                     | Moerdijk           |                      
| | Spain           |                     | Guadalajara        |                      
| |                 | Hospitalet          |                    | Performance Chemicals
| |                 | Rubí                |                    | Polyurethanes        
| |                 | Tarragona           |                    | Petrochemicals       
| |                 |                     |                    | Styrenics            
| |                 |                     |                    | Performance Chemicals
| |                 |                     |                    | Functional Polymers  
| |                 |                     |                    | Agricultural Products
| |                 |                     |                    | Fine Chemicals       
| | Turkey          |                     | Gebze              |                      
| |                 |                     |                    | Performance Chemicals
| | United Kingdom  |                     | Alfreton           |                      

76

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|              |               | Ashbourne                   |                       | Fine Chemicals                                                       
|------------- | ------------- | --------------------------- | --------------------- | ---------------------------------------------------------------------
|              |               | Cramlington                 |                       | Fine Chemicals                                                       
|              |               |                             |                       | Performance Chemicals                                                
|              |               | Seal Sands                  |                       | Performance Polymers                                                 
|              |               | Slinfold                    |                       | Performance Chemicals                                                
|North America |               |                             |                       |                                                                      
|              | Canada        |                             | Arnprior, Ontario     |                                                                      
|              |               | Windsor, Ontario            |                       | Coatings                                                             
|              | Mexico        |                             | Altamira              |                                                                      
|              |               |                             |                       | Functional Polymers                                                  
|              |               | Lerma                       |                       | Polyurethanes                                                        
|              |               |                             |                       | Performance Chemicals                                                
|              |               | Tultitlán                   |                       | Coatings                                                             
|              | United States |                             | Aberdeen, Mississippi |                                                                      
|              |               | Anderson, South Carolina    |                       | Performance Polymers                                                 
|              |               | Beaumont, Texas             |                       | Agricultural Products                                                
|              |               | Chattanooga, Tennessee      |                       | Functional Polymers                                                  
|              |               | Clemson, South Carolina     |                       | Performance Polymers                                                 
|              |               |                             |                       | Polyurethanes                                                        
|              |               | Freeport, Texas(1)          |                       | Petrochemicals
Intermediates
Performance Polymers
Functional Polymers
|              |               | Geismar, Louisiana(1)       |                       | Petrochemicals                                                       
|              |               |                             |                       | Intermediates                                                        
|              |               |                             |                       | Polyurethanes                                                        
|              |               |                             |                       | Performance Chemicals                                                
|              |               |                             |                       | Fine Chemicals                                                       
|              |               | Hannibal, Missouri          |                       | Agricultural Products                                                
|              |               | Huntington, West Virginia   |                       | Performance Chemicals                                                
|              |               | Joliet, Illinois            |                       | Styrenics                                                            
|              |               | Monaca, Pennsylvania        |                       | Functional Polymers                                                  
|              |               | Morganton, North Carolina   |                       | Coatings                                                             
|              |               | Port Arthur, Texas          |                       | Petrochemicals                                                       
|              |               | Portsmouth, Virginia        |                       | Functional Polymers                                                  
|              |               | South Brunswick, New Jersey |                       | Styrenics                                                            
|              |               | Sparks, Georgia             |                       | Agricultural Products                                                
|              |               | Whitestone, South Carolina  |                       | Performance Chemicals                                                
|              |               |                             |                       | Fine Chemicals                                                       
|              |               | Wyandotte, Michigan         |                       | Styrenics                                                            
|              |               |                             |                       | Performance Polymers                                                 
|              |               |                             |                       | Polyurethanes                                                        
|South America |               |                             |                       |                                                                      
|              | Argentina     |                             | General Lagos Rosario |                                                                      
|              |               |                             |                       | Performance Chemicals                                                
|              |               |                             |                       | Functional Polymers                                                  
|              |               | Tortuguitas                 |                       | Coatings                                                             

77

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|                           |           |                       |                     | Fine Chemicals       
|-------------------------- | --------- | --------------------- | ------------------- | ---------------------
|                           | Brazil    |                       | Camaçari            |                      
|                           |           |                       |                     | Petrochemicals       
|                           |           | Guaratinguetá         |                     | Styrenics            
|                           |           |                       |                     | Performance Chemicals
|                           |           |                       |                     | Functional Polymers  
|                           |           |                       |                     | Agricultural Products
|                           |           |                       |                     | Fine Chemicals       
|                           |           | Resende               |                     | Agricultural Products
|                           |           | São Bernardo do Campo |                     | Coatings             
|                           |           | São José dos Campos   |                     | Styrenics            
|                           | Chile     |                       | Concon              |                      
|                           |           |                       |                     | Styrenics            
|                           |           |                       |                     | Functional Polymers  
|                           |           | Santiago              |                     | Styrenics            
|Asia, Pacific Area, Africa |           |                       |                     |                      
|                           | China     |                       | Caojing(2)          |                      
|                           |           | Nanjing(1)(2)         |                     | Styrenics            
|                           |           |                       |                     | Petrochemicals       
|                           |           |                       |                     | Intermediates        
|                           |           |                       |                     | Functional Polymers  
|                           |           | Shanghai              |                     | Performance Chemicals
|                           |           |                       |                     | Performance Polymers 
|                           |           |                       |                     | Functional Polymers  
|                           |           | Shenyang              |                     | Fine Chemicals       
|                           | India     |                       | Daheij              |                      
|                           |           | Mangalore             |                     | Performance Chemicals
|                           |           |                       |                     | Functional Polymers  
|                           |           | Thane                 |                     | Styrenics            
|                           |           |                       |                     | Performance Chemicals
|                           |           |                       |                     | Agricultural Products
|                           | Indonesia |                       | Jakarta, Cengkareng |                      
|                           |           |                       |                     | Performance Chemicals
|                           |           |                       |                     | Fine Chemicals       
|                           | Japan     |                       | Shinshiro           |                      
|                           |           | Totsuka               |                     | Coatings             
|                           |           | Yokkaichi             |                     | Intermediates        
|                           |           |                       |                     | Polyurethanes        
|                           |           |                       |                     | Functional Polymers  
|                           |           |                       |                     | Performance Chemicals
|                           |           |                       |                     | Fine Chemicals       
|                           | Malaysia  |                       | Kuantan(1)(2)       |                      
|                           |           |                       |                     | Petrochemicals       
|                           |           |                       |                     | Functional Polymers  
|                           |           | Pasir Gudang          |                     | Styrenics            
|                           |           |                       |                     | Performance Chemicals

78

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| |             |           |        | Performance Polymers 
| | ----------- | --------- | ------ | ---------------------
| |             |           |        | Functional Polymers  
| |             | Shah Alam |        | Polyurethanes        
| |             |           |        | Performance Chemicals
| | South Korea |           | Gunsan |                      
| |             | Ulsan     |        | Intermediates        
| |             |           |        | Styrenics            
| |             |           |        | Polyurethanes        
| |             | Yeosu     |        | Polyurethanes        
| |             |           |        | Intermediates        

---

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page has been left blank intentionally.)

---

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 154 consolidated subsidiaries and affiliated companies. The company has customers in more
than 160 countries and operates production sites in 39 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 formerly 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, 2002 and 2001 are described in Note 4 to the Consolidated Financial Statements included in Item
18.

As
part of its planning, BASF has developed two scenarios to address current geopolitical uncertainties:

Scenario
1: In 2003, we assume the Iraq conflict does not lead to a military confrontation (base scenario).

Scenario
2: If a war with Iraq occurs, we are assuming that the conflict will be limited in terms of duration and the territory affected. However, uncertainty in the energy markets and
among consumers would mean stagnation in global growth for the first half of 2003.

We
have prepared our detailed business plan using the base scenario. Our forecasts are also based on the assumption that interest rates will be lowered in Europe and that stock prices
will

81

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stabilize in the United States and Europe. Starting from the high price of $32 per barrel at the end of 2002, we expect oil prices to decline as 2003 progresses, again boosting purchasing power.
Under these assumptions, we expect the global economy to turn the corner in the spring of 2003 and resume moderate growth. This recovery process should intensify in 2004.

In
the following descriptions of results of operations in the segments, we make forecasts for sales and earnings in 2003. These forecasts are based on the assumption that global economic
development is not negatively impacted as a result of the Iraq conflict (base 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.



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.

In
2002, prepaid pension expenses of €456.4 million are accounted for under prepayments and deferred income. In particular, these were due to contributions to
pension funds for employee pensions in North America (NAFTA) that were made to offset losses on plan assets of the pension fund and to cover the minimum obligation, which is to be determined
separately in accordance with U.S. GAAP.

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



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. In this context, additional provisions in
the amount of €100 million were established in 2002.

It
is not currently possible to estimate the full consequences of this litigation. Corresponding provisions are established to the extent that they are considered probable and the amount
can be estimated reliably. The level of provisions is based on the outcomes of similar cases and legal opinions, taking into account the current circumstances. The actual outcome of legal proceedings
may differ considerable from these estimates. See also Note 26 to the Consolidated Financial Statements for further information with regard to litigation and claims.

82

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Tax loss carryforwards are primarily related to restructuring measures at subsidiaries in the NAFTA region in 2002 and 2001. 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 dependant 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 2002 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.



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 to be 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 crop protection business of American Home Products Corporation in 2000. The value of this
goodwill 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 2002. 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).



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.

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.

83

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Our
earnings developed positively in 2002 compared with 2001. The previous year was marked on the one hand by high charges for a comprehensive restructuring program and the
reorganization of our sales structures, and on the other hand by high extraordinary income from the sale of our pharmaceuticals activities. In an uncertain economic climate, BASF did well in 2002 and
substantially increased earnings. In spite of a somewhat difficult business climate in important customer segments, we were able to increase sales volumes substantially. The economies of scale
associated with higher capacity utilization and the cost reductions from structural measures introduced in 2001 contributed to improved earnings.

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

Sales and Earnings

|                                                    |                                                             | 2002 |          | %
Change
from
Previous
Year |       | 2001  |   | %
Change
from
Previous
Year |         | 2000   |        
|--------------------------------------------------- | ----------------------------------------------------------- | ---- | -------- | --------------------------- | ----- | ----- | - | --------------------------- | ------- | ------ | -------
|
|Sales                                               |                                                             | €    | 32,215.5 |                             | (0.9  | )     | € | 32,499.6                    |         | (9.6   | )      
|Gross profit                                        |                                                             |      | 10,400.0 |                             | 0.9   |       |   | 10,311.8                    |         | (18.7  | )      
|Gross profit as a percentage of sales (%)           |                                                             |      | 32.3     |                             | 1.9   |       |   | 31.7                        |         | (10.1  | )      
|Income from operations                              |                                                             | €    | 2,640.7  |                             | 117.0 |       | € | 1,216.9                     |         | (60.4  | )      
|Income from operations as a percentage of sales (%) |                                                             |      | 8.2      |                             | 121.6 |       |   | 3.7                         |         | (56.5  | )      
|Special items                                       |                                                             | €    | (239.5   | )                           | 77.7  |       | € | (1,076.1                    | )       | (226.1 | )      
|Income before taxes and minority interests          |                                                             |      | 2,640.9  |                             | 333.7 |       |   | 608.7                       |         | (78.5  | )      
|Net income                                          |                                                             |      | 1,504.4  |                             | (74.3 | )     |   | 5,858.2                     |         | 372.5  |        
|Net income as a percentage of sales (%)             |                                                             |      | 4.7      |                             | (73.9 | )     |   | 18.0                        |         | 429.4  |        
|Basic earnings per share                            |                                                             | €    | 2.60     |                             | (73.3 | )     | € | 9.72                        |         | 381.2  |        
|Amounts in accordance with U.S. GAAP                |                                                             |      |          |                             |       |       |   |                             |         |        |        
|                                                    | Net income                                                  |      | €        | 1,716.9                     |       | (69.8 | ) | €                           | 5,692.4 |        | 291.6  
|                                                    |  from continuing operations                                |      |          | 1,716.9                     |       |      |   |                             | (238.2  | )      |       
|                                                    |  from discontinued operations including gain from disposal |      |          |                            |       |      |   |                             | 5,892.6 |        | 3,789.5
|                                                    |  cumulative effect of implementing SFAS 133                |      |          |                            |       |      |   |                             | 38.0    |        |       
|Basic earnings per share                            |                                                             | €    | 2.96     |                             | (68.7 | )     | € | 9.45                        |         | 298.7  |        
|                                                    |  from continuing operations                                |      |          | 2.96                        |       |      |   |                             | (0.39   | )      |       
|                                                    |  from discontinued operations including gain on disposal   |      |          |                            |       |      |   |                             | 9.78    |        | 3,975.0
|                                                    |  cumulative effect of implementing SFAS 133                |      |          |                            |       |      |   |                             | 0.06    |        |       
|                                                    |  diluted earnings per share                                |      |          | 2.96                        |       | (68.7 | ) |                             | 9.45    |        | 302.1  

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

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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 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.

In
2000, special items recorded in other operating expenses and other operating income included €590 million in special charges and
€260 million in special income. Included in special charges are costs of €344 million related to the integration of the crop protection business of
American Home Products Corp. A further €100 million related to charges from restructuring activities in the Pharmaceuticals segment, which included closing the research and
development site in Nottingham, United Kingdom, and workforce reductions. Other special charges relate to the higher settlement costs for litigation brought by indirect purchasers of vitamins in the
United States. Various divestitures led to special income of €205 million and included the sale of the Novolen® polypropylene technology of Targor GmbH to an
international consortium, the sale of the Kraton® polymers business to Kraton Polymers GmbH, a subsidiary of the Deutsche Shell GmbH, the sale of the urology business in the
Pharmaceuticals segment to Abbott GmbH and the conclusion of business relating to the sale in 1999 of the refinery business in the Oil & Gas segment.



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:

2002in millions

As % of salesVolume

€
2,547

7.8Prices


(1,680
)
(5.2
)Currency exchange


(941
)
(2.9
)Acquisitions and additions to scope of consolidation


205

0.6Divestitures and deconsolidations


(415
)
(1.2
)€
(284
)
(0.9
)


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.

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.

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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.



In 2001, sales decreased €3,446 million, or 9.6%, to €32,500 million. In terms of ongoing business, i.e., excluding
pharmaceuticals, polyolefins and textile dyes, sales were €31,990 million, or 3.2% higher than in the previous year. Major contributors to this result were the Oil & Gas
and Agricultural Products & Nutrition business segments.

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The
following table sets forth the various factors affecting the change in sales:

2001in millions

As % of salesVolume

€
(110
)
(0.3
)Prices


(492
)
(1.4
)Currency exchange


(195
)
(0.5
)Acquisitions and additions to scope of consolidation


1,810

5.0Divestitures and deconsolidations


(4,459
)
(12.4
)€
(3,446
)
(9.6
)


Continued weakness in the global economy had an increasingly depressive effect on the sales volumes of our products. The majority of our operating
divisions were affected. Despite this general trend, the Inorganics division increased its sales, and crude oil and natural gas production levels were also higher than in the previous year.

For
the most part, prices for our products declined in the face of falling demand. Price levels improved in the Inorganics and Intermediates divisions, and, to a lesser extent, in some
product lines of the Coatings division.

Portfolio
changes led to a decline in sales of €2,966 million, or 8.3%. These changes involved in particular:



Sales
were positively influenced by the following:



Additions
to the scope of consolidation contributed €317 million to sales, or 0.9%. Our subsidiary in Turkey, in which all previous operations had been combined,
is included in these numbers, as are companies in Japan, China, India, Hungary, Poland and Russia.



Gross profit declined in 2001 by €2,379 million or 18.7% to €10,312 million. As a percentage of sales, gross profit
fell from 35.3% to 31.7%. The decrease reflects the continued pressure on selling prices as well as raw material costs that did not decline until the second half of the year.



Due to weak demand and high special charges, income from operations fell sharply by €1,853 million, or 60.4% to
€1,217 million. Without considering the effect of special items, income from operations decreased €1,107 million, or 32.6%, to
€2,293 million, and represented 7.1% of sales, compared with 9.5% in the previous year.



In 2001, income from ordinary activities decreased €2,218 million, or 78.5%, to €609 million. This decline was
primarily due to special items. Excluding the effect of special items, income from ordinary operations was €1,758 million. This represents a decline of
€1,266 million, or 42%, compared with the previous year, and is a reflection of weak economic conditions. The effect of this

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decline on income from operations and on the financial result was €1,107 million and €159 million, respectively.



The sale of our pharmaceuticals business to Abbott Laboratories Inc., Abbott Park, Illinois, resulted in extraordinary income of
€6,121 million. Taxes charged on this income were €145 million. A large part of the gains realized relate to the sale of participations which we were able
to dispose of as tax-exempt divestitures.

Extraordinary
income consists of:

(euros in millions)Extraordinary gains

8,794Extraordinary expenses

2,6736,121


The extraordinary gains include proceeds from the sale of the pharmaceuticals business and additional compensation for the net liquidity and net
assets transferred.

The
expense items include the book values of the pharmaceuticals business, as well as provisions for warranties assumed and risks retained from the pharmaceuticals business.

As
a result of the high extraordinary income, our income before taxes and minority interests was €6,730 million. This was €3,903 million, or
138%, more than in the previous year.



BASF achieved net income of €5,858 million. This amount consists of extraordinary income of €5,976 million net of
the related taxes and a loss of €118 million in income from current operations.

The
effective tax rate on income from ordinary operations was 125%, compared with 55% in the previous year. The high level of taxes is due to non-deductible foreign taxes on
oil producing operations and for fines imposed by the E.U. Commission related to the violation of antitrust laws in the vitamins business, which were assumed to be non-deductible. The
effective tax rate was reduced by a change in accounting principles for deferred tax assets. Based upon the draft Standard No. 10 from the German Accounting Standards Committee (GASC) on
accounting for deferred taxes, we also recorded deferred tax assets for tax loss carryforwards, to the extent realization of this potential for tax reduction through future earnings is foreseeable.
These adjustments resulted in a reduction in tax expense of €220 million.

The
capitalization of deferred tax assets for tax loss carryforwards from previous years resulted in income of €51 million, which is shown separately in the
consolidated statement of income.

Earnings
per share were €9.72 in 2001, compared with €2.02 in 2000. Of this, €9.92 related to extraordinary income.

Under
U.S. GAAP, the gain on the disposal of the pharmaceuticals business as well as the results of operations of the pharmaceuticals business of the first two months of 2001 would be
reported as discontinued operations and not as extraordinary income. Also, the effect of adopting SFAS 133, "Accounting for Derivatives," would have been shown as the cumulative effect of a
change in accounting principles. Under U.S. GAAP, our net income was €5,692 million, or €(238) million excluding extraordinary income. Per share, this is
€9.45, or a loss of €0.39 after excluding extraordinary income (see Note 4 in the Notes to the Consolidated Financial Statements).

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Chemicals

Segment data
(euros in millions)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |   | 2000  |  
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- | - | ----- | -
|Sales to third parties                                 |  | €    | 5,317 |                             | 18.3  |      | € | 4,494                       |   | (0.2  | )
|Intersegmental transfers                               |  |      | 2,598 |                             | 6.0   |      |   | 2,452                       |   | 1.8   |  
|Sales incl. intersegmental transfers                   |  |      | 7,915 |                             | 14.0  |      |   | 6,946                       |   | 0.5   |  
|Income from operations                                 |  |      | 635   |                             | 75.4  |      |   | 362                         |   | (43.4 | )
|Special items                                          |  |      | (41   | )                           |      |      |   | (63                         | ) |      |  
|Operating margin (%)                                   |  |      | 11.9  |                             |      |      |   | 8.1                         |   |      |  
|Assets                                                 |  | €    | 4,997 |                             | 3.1   |      | € | 4,847                       |   | 14.5  |  
|Return on operational assets (%)                       |  |      | 12.9  |                             |      |      |   | 8.0                         |   |      |  
|Research and development expenses                      |  | €    | 98    |                             | (10.1 | )    | € | 109                         |   | (2.7  | )
|Capital expenditures in tangible and intangible assets |  | €    | 495   |                             | (46.7 | )    | € | 929                         |   | 20.0  |  

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.



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

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local production facilities with the forthcoming completion of the butanediol plant at our Verbund site in Kuantan, Malaysia.

Assuming
that the economy starts to recover in 2003, we expect new production capacities to contribute to higher sales in 2003. A further improvement in earnings depends largely on
developments in raw material markets.



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.

For
2003 we expect sales to increase moderately. The cost of modernization measures will, however, have a negative impact on earnings.



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

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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.

Our
capital expenditures and restructuring in recent years have helped create the necessary conditions for a sustained increase in our earning power. As a result, we expect a moderate
increase in sales and earnings in 2003 despite high volatility on the raw materials markets.



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.

Given
our higher production capacities, and assuming that raw material costs rise only slightly, we expect sales in 2003 to grow above the market average and a slight improvement in
income from operations.



In the Chemicals segment, sales to third parties decreased in 2001 to €4,494 million from €4,504 million in 2000.
Growth in sales volumes in inorganic specialties and price increases in the Intermediates and Inorganics divisions were insufficient to offset completely a decline in sales in the Petrochemicals
division. The oxo alcohols/plasticizers complex at the new BASF Verbund site in Kuantan, Malaysia, also contributed to sales, as did new plants and capacity expansion programs, such as
trimethylolpropane in Ludwigshafen, Germany; hexanediol in Freeport, Texas; and ethylene oxide in Geismar, Louisiana.

Intersegmental
transfers increased 1.8% in 2001 to €2,452 million from €2,408 million in 2000.

In
2001, income from operations decreased 43.4% to €362 million from €640 million in 2000. Both high raw material costs in the first half of
2001, most notably for naphtha, and the drop in the economy in the second half of the year  which led to reduced demand in almost all customer segments  had a major impact on
income from operations. The Petrochemicals division came under particularly strong price and margin pressure, especially for products with excess capacity, such as plasticizers and solvents. Startup
costs for new plants in Port Arthur, Texas; Geismar, Louisiana; and in Kuantan, Malaysia, created additional burdens on earnings.

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Special
items related primarily to the closure of a plant in the Petrochemicals division at the site in Tarragona, Spain; restructuring of an acetylene plant in Geismar, Louisiana; and
integration into the Intermediates and Petrochemicals divisions of the site acquired in Feluy, Belgium.

Through
its capital expenditures, BASF strives for a globally balanced position. To this end, BASF is strengthening BASF's operations in Europe, optimizing its Verbund structures in
North America and establishing new Verbund sites in Asia. In 2001, BASF strengthened the Chemicals segment's core product groups  butanediol and its derivatives, and phthalic anhydride
 by acquiring the SISAS Group's chemical site in Feluy, Belgium. Through capital expenditures and acquisitions, the Chemicals segment's assets increased 14.5% in 2001 to
€4,847 million from €4,232 million in 2000.



In the Inorganics division, sales to third parties in 2001 increased 8.1% to €677 million, from €626 million in
2000. This sales growth was due primarily to higher prices but also volumes increased slightly. We increased sales and volumes over the previous year, above all in profitable inorganic specialties and
electronic grade chemicals.

In
2001, income from operations improved, although economic conditions in important customer segments gradually deteriorated during the second half of the year. By year end, the
recession in the semiconductor industry had led to a severe decline in demand for electronic grade chemicals.
In the construction and woodworking industries, economic weakness intensified competition in the glues and impregnating resins product lines.

In
2001, BASF achieved high capacity utilization rates in its plants for large-volume inorganic products, which BASF produces primarily for captive use within the BASF Group (e.g.,
sulfuric acid, nitric acid, and the electrolysis products chlorine and sodium hydroxide). Through economies of scale, we can supply the Verbund cost-effectively. Products from the
Inorganics division form an important foundation for most of BASF's value-adding chains.

In
addition to large-volume inorganic products, BASF's product range includes innovative specialties such as heterogeneous catalysts, electronic grade chemicals and powder injection
molding technology. BASF is continuing to expand these profitable areas of our business. Last year BASF increased capacity for hydroxylamine free base  a substance that is indispensable
in the production of microchips  from 4,000 metric tons per year to 7,000 metric tons per year. BASF also intensified its research efforts in the field of catalysts with the goal of
securing or achieving technology and performance leadership. Here, BASF is focusing on catalysts with high growth rates.



In the Petrochemicals division, sales to third parties in 2001 were €2,079 million, a decrease of 3.7% from 2000. In 2000, strong volume
demand and the rising price of naphtha led to significant price increases for cracker products and, as a result, to a steady increase in sales. However, in the course of 2001, this trend began to
reverse as the economy began to slow down and raw material prices declined. First-time contributions to sales came from new plants that commenced operations in 2001: the oxo
alcohols/plasticizers complex in Kuantan, Malaysia, and the steam cracker in Port Arthur, Texas. Also during 2001, unprofitable plants in Tarragona, Spain were closed.

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Income from operations in 2001 failed to meet expectations. After a strong start in the first quarter, cracker margins fell sharply in the second quarter. In addition, earnings were
burdened by startup costs for the new plant in Kuantan, Malaysia, as well as by startup costs for the steam cracker in Port Arthur, Texas, which increased as the year progressed. The plasticizers and
solvents product lines continued to suffer from excess capacity and, as a result, from strong price and margin pressures. In alkylene oxides and glycols, exceptionally high gas prices at the beginning
of 2001 had an adverse effect on earnings in the United States. In Europe, BASF benefited from a high utilization rate and expanded its ethylene oxide plant in Antwerp, Belgium during the fourth
quarter, making it the largest and most efficient in Europe.

In
2001, capital expenditures were lower than in the previous year. One major project is a propylene plant that BASF is building with its partner SONATRACH in Tarragona, Spain. Another
major project is the construction of a steam cracker at the Verbund site in Nanjing, China, where construction began in September 2001.



In the Intermediates division, sales to third parties in 2001 increased 1.0% to €1,738 million from €1,720 million
in 2000. BASF achieved this growth through higher sales prices for its products and the startup of new production capacities. Deteriorating economic conditions reduced sales
volumes  especially in the second half of the year  and low utilization rates resulted in higher unit costs.

Income
from operations was lower in 2001 than in 2000, as raw material costs remained high, especially in the first half of the year. Earnings were also burdened by the integration of
the site in Feluy, Belgium, acquired at mid-year, and startup costs for new plants (trimethylolpropane and dimethylhexanediol in Ludwigshafen, Germany; 1,6-hexanediol in
Freeport, Texas; optically active amines in Geismar, Louisiana).

Not
accounting for the acquisition in Feluy, Belgium, BASF's capital expenditures were at the same level as last year. In 2001, BASF also focused on expanding its production plants in
Ludwigshafen, Germany; Geismar, Louisiana; and Ulsan, Korea.

Plastics & Fibers

Segment data
(euros in millions)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |   | 2000 
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- | - | -----
|Sales to third parties                                 |  | €    | 8,477 |                             | 3.6   |      | € | 8,185                       |   | (25.8
|Intersegmental transfers                               |  |      | 436   |                             | 7.4   |      |   | 406                         |   | (20.4
|Sales incl. intersegmental transfers                   |  |      | 8,913 |                             | 3.7   |      |   | 8,591                       |   | (25.6
|Income from operations                                 |  |      | 582   |                             |      |      |   | (2                          | ) |     
|Special items                                          |  |      | (11   | )                           |      |      |   | (182                        | ) |     
|Operating margin (%)                                   |  |      | 6.9   |                             |      |      |   | *                           |   |     
|Assets                                                 |  | €    | 6,174 |                             | (2.7  | )    | € | 6,344                       |   | 4.2  
|Return on operational assets (%)                       |  |      | 9.3   |                             |      |      |   | *                           |   |     
|Research and development expenses                      |  | €    | 138   |                             | (5.5  | )    | € | 146                         |   | (15.1
|Capital expenditures in tangible and intangible assets |  | €    | 636   |                             | (28.6 | )    | € | 891                         |   | 40.8 

---

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The Plastics & Fibers 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. Up to
September 2000, the polyolefins business was included in the business segment's figures. This business was transferred to the associated company Basell N.V., which is not consolidated.



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.

Assuming
the economy begins to recover in 2003, we expect sales at approximately the same level as in 2002 and a slight increase in earnings in 2003.

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
a difficult business environment we expect to maintain sales and income from operations in 2003 at the previous year's level despite rising raw material costs.



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

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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 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.

In
2003, we expect increases in both sales and income from operations, provided that the economy begins to recover this year. 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 on stream 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.

For
2003, we expect the polyurethanes market to grow by about 5% in a difficult economic environment, and we intend to maintain our share of this growing market. One element will be the
startup of our TDI plant in Yeosu, Korea, in the third quarter of 2003. This plant has a maximum annual capacity of 140,000 metric tons. In the short term it will optimize our supply situation in Asia
and in the medium term it will provide the means for growing with the market. We expect to improve earnings in 2003 as a result of this growth and by continuing to optimize our cost structures.



Sales to third parties in 2001 dropped 25.8% to €8,185 million from €11,030 million in 2000.

On
the basis of ongoing business, i.e., excluding polyolefins, sales decreased 8.6% from €8,951 million in 2000 to €8,182 million in 2001.
Sales declined in all three of the segment's divisions, but to the greatest extent in the Performance Polymers division. Weakening demand and the resulting decline in sales volumes resulted in a 2.5%
decrease in sales. Declining prices contributed to a 5.2% decrease in sales, while changes in exchange rates contributed to a 0.4% decline in sales.

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The
Polyurethanes division made the greatest positive contribution to the segment's income from operations, which decreased by €904 million, resulting in a loss of
€2 million. This decrease in earnings was primarily due to reduced demand, strong margin pressures and new plant startups, in particular in North America.

Special
charges totaling €182 million also contributed to the decline in earnings. These charges related primarily to the planned closure of plants in the
Styrenics and Performance Polymers divisions in North America (NAFTA) and Europe; a write-down of a styrenics plant; and the planned closure of an obsolete toluene diisocyanate (TDI) plant
in the Polyurethanes division in Geismar, Louisiana, which will be replaced by a new plant.

In
2001, the Plastic & Fibers segment's assets increased by 4.2% to €6,344 million in 2001 from €6,086 million in 2000. Capital
expenditures, including the acquisition of a styrene plant in Korea, were in excess of depreciation charges by €212 million. Further additions resulted from changes in the scope
of consolidation.



In the Styrenics division, sales to third parties in 2001 declined 7.1% to €3,267 million from €3,517 million in
2000. Despite a difficult economic environment, sales volumes increased 5%, but selling prices and therefore margins were under downward pressure. Thus, price effects contributed 12% to the decline in
sales.

Income
from operations did not develop satisfactorily in 2001. Business operations in the NAFTA region did not meet BASF's expectations. Special restructuring measures in the NAFTA
region and in Europe burdened income from operations. The Styrenics division's specialty products, however, proved to be cyclically resilient.

In
mid-2001, the division acquired a styrene plant in Korea. In addition, we invested in an EPS plant in Brazil and in a production plant for specialized foams in Italy.
Expansion of production capacity for ethyl benzene in Antwerp, Belgium, was completed at the end of 2001.

In
2002, BASF's new ethyl benzene and styrene plant in Ludwigshafen, Germany, is expected to start operations and improve the efficiency of the value-adding chain.



In the Performance Polymers division, sales to third parties in 2001 fell 15.4% to €2,241 million from
€2,648 million in 2000. Weak demand in Asia affected fiber intermediates in particular. Engineering plastics products, on the other hand, performed well in a difficult market
environment.

The
decline in sales was due to an 11% reduction in sales volumes. In addition, downward pressure on product prices increased steadily, while raw material costs could not be reduced to
the same extent. Approximately, price effects accounted for a 5% decline in sales.

Income
from operations fell sharply, partially due to low capacity utilization rates. In 2001, the division was also burdened by special items related to various restructuring measures.



In 2001, sales to third parties in the Polyurethanes division decreased 4.3% to €2,677 million from €2,798 million
in 2000.

Sales
volumes declined 3% resulting from the difficult economic environment in 2001. Price effects accounted for 1% of the decline in sales. The first full year of operation for the MDI
II plant (diphenylmethane diisocyanate) in Geismar, Louisiana, and the development of additional distribution channels through the purchase of system houses in the United States and Turkey contributed
to a stabilization in sales.

96

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Despite
a decline compared with 2000, income from operations before special items in the Polyurethanes division was once again satisfactory. Higher raw material costs, especially for
benzene, toluene and propylene, could only be passed on to customers in higher prices for BASF's products to a limited extent. The easing in raw material costs that started in the second half of the
year was partially offset by price reductions demanded by the market.

The
largest capital expenditures in the Polyurethanes division were for a new TDI (toluene diisocyanate) plant in Geismar, Louisiana, and for the construction of an SM/PO (styrene
monomer/propylene oxide) plant in Singapore as part of BASF's Ellba Eastern Private Ltd. joint venture with Shell. Both plants were on stream in 2002, as scheduled.

Performance Products

Segment data
(euros in millions)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |   | 2000  |  
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- | - | ----- | -
|Sales to third parties                                 |  | €    | 8,014 |                             | (1.7  | )    | € | 8,154                       |   | (3.1  | )
|Intersegmental transfers                               |  |      | 326   |                             | 1.2   |      |   | 322                         |   | 2.5   |  
|Sales incl. intersegmental transfers                   |  |      | 8,340 |                             | (1.6  | )    |   | 8,476                       |   | (2.9  | )
|Income from operations                                 |  |      | 646   |                             | 552.5 |      |   | 99                          |   | (83.1 | )
|Special items                                          |  |      | (7    | )                           |      |      |   | (298                        | ) |      |  
|Operating margin (%)                                   |  |      | 8.1   |                             |      |      |   | 1.2                         |   |      |  
|Assets                                                 |  | €    | 5,218 |                             | (13.7 | )    | € | 6,048                       |   | (3.5  | )
|Return on operational assets (%)                       |  |      | 11.5  |                             |      |      |   | 1.6                         |   |      |  
|Research and development expenses                      |  | €    | 222   |                             | 12.7  |      | € | 197                         |   | (0.5  | )
|Capital expenditures in tangible and intangible assets |  | €    | 288   |                             | (31.1 | )    | € | 418                         |   | (68.6 | )

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. The previous year's segment data have been restated. Up to September 2000, the figures of the operating division include the
textile dye business of the former Colorants operating division. This business was transferred to the non-consolidated associated company DyStar.



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.

97

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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.

Assuming
that the economy starts to recover in 2003 and that our cost structures improve further as a result of the measures introduced in 2001, we expect sales in 2003 to be at
approximately the same level as in 2002 and a slight improvement in earnings.



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.

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
view of economic trends and the strengthening of the euro, we expect moderate sales growth in the entire division in 2003. We aim to achieve a slight increase in income from
operations.



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.

98

---

For
2003, we are again expecting sales to rise, assuming that the automotive industry in Europe recovers and that a slump does not occur in U.S. automobile production. We will persist in
addressing the continuing difficult economic environment by introducing further innovative technologies and by further expanding our successful system supplier business. We therefore expect a further
increase in earningsin 2003.



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

We
anticipate that in 2003 overall demand will continue to recover, and therefore expect a slight increase in sales and a further improvement in earnings.



In terms of ongoing business, i.e., excluding the textile dye business, sales to third parties in the Performance Products segment increased 0.3% in 2001 to
€8,126 million, from €8,105 million in 2000. The increase in sales from ongoing business was due to additions to the scope of consolidation. Sales volumes
and prices declined slightly. In the Coatings division, sales to third parties increased by 4.0% compared with 2000, to €2,287 million. Sales from ongoing business in the
Performance Chemicals division were €3,317 million compared with €3,395 million in 2000. In the
Functional Polymers division, sales were €2,522 million, remaining at approximately the previous year's level.

Income
from operations fell 83.1% to €99 million in 2001 from €586 million in 2000. The continued weak economic situation in North America
and Europe and the resulting decline in demand had a negative impact on earnings in all of the segment's divisions in 2001. In many divisions, reduced demand led to increased price and margin
pressures, which intensified during the first half of the year due to very high raw material costs. Special items of €298 million reduced earnings, above all in the Functional
Polymers and Performance Chemicals divisions. These relate primarily to planned site closures in Birkenhead, United Kingdom, and Arnhem, the Netherlands, as well as to the closure of production plants
in North America and Italy.

Assets
in the segment declined slightly in 2001 to €6,048 million from €6,266 million in 2000.

99

---



In terms of ongoing business, i.e., excluding the textile dye business, sales to third parties in the Performance Chemicals division declined 2.3% in 2001 to
€3,317 million from €3,395 million in 2000.

Despite
this decline, sales of products for the printing and for the mineral oil industries increased. This was offset, however, by a weaker economy, which also affected the other
businesses in the Performance Chemicals division. The 9.8% decline in sales is primarily due to structural changes, in particular relating to the transfer of the textile dye business, which reduced
sales by 7%. Price and currency effects each reduced sales by 1% each.

Due
to weak demand and ongoing intense competition in North America and Europe, income from operations was below last year's good level. Earnings in 2001 were also burdened by special
items.



In the Coatings division, sales to third parties in 2001 rose 4.0%, to €2,287 million from €2,198 million in 2000.
Europe and Asia in particular contributed to this increase. Sales volumes remained at last year's level, as declines in automotive coatings were offset by increases in industrial coatings and
decorative paints. Unfavorable currency effects were responsible for a sales decline of 3%, with the devaluation of the Brazilian real in particular affecting sales. Selling prices rose slightly
overall, but price concessions for industrial coatings were necessary in some cases. BASF is currently developing this business into the Coatings division's third key product line, next to automotive
OEM and automotive refinish coatings. The joint venture with NOF Corp. in Japan, entered into in October 2000 and consolidated in 2001, also contributed to the growth in sales.

Income
from operations was below last year's high level, due in particular to a slowdown in the automotive industry in the NAFTA region. Despite intensive marketing efforts, earnings in
industrial coatings fell short of expectations.



In the Functional Polymers division, sales to third parties in 2001 rose 0.4% to €2,522 million from the previous year's level of
€2,512 million. Due to the slowdown in the global economy, which began in the second quarter, the strong volume growth sought was not achieved.

Prices
declined slightly due to lower raw material costs  which had to be passed on to customers  and to increasing pressure from competitors.

The
division was able to expand its sales volumes in Asia, but lost sizable volumes in the NAFTA region. The global trend in sales volumes for paper chemicals and superabsorbents was
favorable.

Income
from operations was well below the level in 2000, in particular due to higher special charges. These charges related primarily to the destruction in an explosion of the division's
superabsorbents plant in Birkenhead, United Kingdom, and to provisions for the planned closure of the division's site in Arnhem, the Netherlands, and of an acrylic acid plant and the polymin plant in
Freeport, Texas.

In
Asia, a plant for the manufacture of dispersions went into operation in Shanghai, China. In South America, the division took a first step toward supplying this important market with
local production from a butyl acrylate plant in Guaratinguetá, Brazil. In Ludwigshafen, Germany, a production plant for the innovative paper chemical polyvinylamine started operations.
In Antwerp, Belgium, the division completed a world-scale plant for the manufacture of superabsorbents.

100

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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)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |   | 2000  |  
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- | - | ----- | -
|Sales to third parties                                 |  | €    | 2,954 |                             | (15.1 | )    | € | 3,478                       |   | 43.2  |  
|Intersegmental transfers                               |  |      | 21    |                             | (30.0 | )    |   | 30                          |   | (11.8 | )
|Sales incl. intersegmental transfers                   |  |      | 2,975 |                             | (15.2 | )    |   | 3,508                       |   | 42.5  |  
|Income from operations                                 |  |      | 61    |                             | 238.9 |      |   | 18                          |   |      |  
|Special items                                          |  |      | (38   | )                           |      |      |   | (182                        | ) | 46.6  |  
|Operating margin (%)                                   |  |      | 2.1   |                             |      |      |   | 0.5                         |   |      |  
|Assets                                                 |  | €    | 5,092 |                             | (20.2 | )    | € | 6,377                       |   | (3.5  | )
|Return on operational assets (%)                       |  |      | 1.1   |                             |      |      |   | 0.3                         |   |      |  
|Research and development expenses                      |  | €    | 285   |                             | (17.4 | )    | € | 345                         |   | 25.5  |  
|Capital expenditures in tangible and intangible assets |  | €    | 88    |                             | (32.3 | )    | € | 130                         |   | (96.0 | )

---



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.

101

---

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 a persistently
difficult market environment, we expect sales and earnings to rise in 2003. This expectation is based on the successful launch of new products and a stabilization of the economic situation in South
America.

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.



Sales in the Agricultural Products segment in 2001 were €3,478 million, compared with €2,428 million in 2000. This
increase of €1,050 million, or 43.2%, was due primarily to the acquisition of the crop protection business of American Home Products Corp. (AHP). A decline in prices reduced
sales by 6%.

Sales
increased in all regions. The segment expanded its market position in particular in North America and Europe, where sales were up 64.1% and 43.4%, respectively. Due to the
uncertain economic situation in South America, BASF took a cautious approach in the market to reduce credit risk which resulted in an increase in sales of only 6.1% to
€543 million.

In
2001, income from operations in the Agricultural Products segment was €18 million, compared to a loss of €443 million in 2000 This
represented an improvement of €461 million over the previous year.

Special
items reduced earnings by €182 million. Special charges related to the use of inventory stepped-up to higher market values in connection with
the AHP acquisition, as well as to the closure of a research site in North America (NAFTA) and additional restructuring.

The
segment's assets declined in 2001 to a total of €6,377 million from €6,607 million in 2000. Additions to tangible assets came from
continuing small optimization measures, from investments in the F 500® production plant in Schwarzheide, Germany, from commencing the construction of a new research building in
Limburgerhof, Germany, and from the modernization of a production plant in Brazil.

Due
to the integration of AHP's crop protection business, expenses for research and development rose 25.5% to €345 million, which represented 10% of sales.
Research and development activities are concentrated in Ludwigshafen and Limburgerhof, Germany, and at the Research Triangle Park in Raleigh, North Carolina. The Princeton research center in New
Jersey ceased activities in mid-2002, as scheduled.

102

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Fine Chemicals

Segment data
(euros in millions)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |   | 2000  |  
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- | - | ----- | -
|Sales to third parties                                 |  | €    | 1,970 |                             | (0.7  | )    | € | 1,984                       |   | 14.1  |  
|Intersegmental transfers                               |  |      | 36    |                             | 24.1  |      |   | 29                          |   | (34.1 | )
|Sales incl. intersegmental transfers                   |  |      | 2,006 |                             | (0.3  | )    |   | 2,013                       |   | 12.9  |  
|Income from operations                                 |  |      | (6    | )                           | 97.1  |      |   | (210                        | ) |      |  
|Special items                                          |  |      | (124  | )                           |      |      |   | (283                        | ) |      |  
|Operating margin (%)                                   |  |      | *     |                             |      |      |   | *                           |   |      |  
|Assets                                                 |  | €    | 1,392 |                             | (6.5  | )    | € | 1,488                       |   | 8.8   |  
|Return on operational assets (%)                       |  |      | *     |                             |      |      |   | *                           |   |      |  
|Research and development expenses                      |  | €    | 82    |                             | 5.1   |      | € | 78                          |   | 0.0   |  
|Capital expenditures in tangible and intangible assets |  | €    | 157   |                             | (21.1 | )    | € | 199                         |   | 139.8 |  

---



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.

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.

For
2003, we expect an increase in sales and earnings.



In the Fine Chemicals segment, sales to third parties in 2001 increased 14.1%, to €1,984 million from
€1,739 million in 2000. The segment increased sales volumes by 5%. Structural changes, in particular the purchase of the vitamins business of Takeda Chemical
Industries Ltd., contributed 11% to the increase in sales. Excluding the effects of these structural changes, sales in

103

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the Fine Chemicals segment were 4.8% above the previous year's level due to an increase in sales volumes. However, the increase in sales was partially offset by negative currency effects of 1% and by
a 1% decline in prices. Some vitamins are still under price pressure, but lysine prices have
improved. Pharmaceutical active ingredients, cosmetic raw materials, carotenoids, and enzymes for animal nutrition all experienced particularly strong sales growth.

In
2001, BASF recorded a loss of €210 million in income from operations in the Fine Chemicals segment compared with a loss of €5 million in
2000. The loss is due to a high level of special charges; excluding these charges, earnings would have increased compared with the previous year. Special items of
€(283) million related in particular to provisions for unexpectedly high fines imposed by the E.U. Commission for antitrust violations in the vitamins business. BASF has
appealed against the level of these fines. Additional charges in the Fine Chemicals segment related to the planned closure of unprofitable plants in North America.

In
the Fine Chemicals segment, assets increased in 2001 by 8.8% to €1,488 million from €1,368 million in 2000. Besides the purchase of
Takeda's vitamins business, additions to fixed assets related primarily to the expansion of plants for vitamin E, carotenoids, Lysmeral® and other flavors and fragrances, as well as to the
construction of a new plant for the manufacture of UV absorbers.

Health & Nutrition: Pharmaceuticals (Discontinued Operations)

Segment data
(euros in millions)

|                                                       |  | 2001 |     | %
Change
from
Previous
Year |       | 2000 |  
|------------------------------------------------------ |  | ---- | --- | --------------------------- | ----- | ---- | -
|Sales to third parties                                 |  | €    | 364 |                             | (85.6 | )    | €
|Intersegmental transfers                               |  |      | 5   |                             | (86.1 | )    |  
|Sales incl. intersegmentel transfers                   |  |      | 369 |                             | (85.6 | )    |  
|Income from operations                                 |  |      | 30  |                             | (87.7 | )    |  
|Special items                                          |  |      | 29  |                             |      |      |  
|Operating margin (%)                                   |  |      | 8   |                             |      |      |  
|Assets                                                 |  |      |    |                             |      |      | €
|Return on operational assets (%)                       |  |      |    |                             |      |      |  
|Research and development expenses                      |  | €    | 74  |                             | (84.2 | )    | €
|Capital expenditures in tangible and intangible assets |  | €    | 20  |                             | (83.5 | )    | €



After receiving authorization from the Federal Trade Commission and the European Union Commission, BASF sold its pharmaceuticals business on March 2, 2001
to Abbott Laboratories Inc.
of Abbott Park, Illinois. Pursuant to the requirements of U.S. GAAP, the pharmaceuticals activities are disclosed as discontinued operations as described in Item 18 under Note 3 to the
Consolidated Financial Statements. Effective January 1, 2001, the generic pharmaceuticals business with operations in Germany, France, Italy, the Netherlands, Switzerland and Spain was sold to
Biochemie GmbH, a subsidiary of Novartis. For additional information on BASF's pharmaceuticals activities as discontinued operations, see also Notes 3 and 4 to the Consolidated Financial Statements in
Item 18. The gain on disposition in 2001 is classified as extraordinary income in these financial statements. For further information see also Note 9 to the Consolidated Financial
Statements in Item 18.

104

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The
segment data for 2001 reflect only two months of operations as compared with 12 months of operations for 2000.

OIL & GAS

Segment data
(euros in millions)

|                                                       |  | 2002 |       | %
Change
from
Previous
Year |       | 2001 |   | %
Change
from
Previous
Year |  | 2000 
|------------------------------------------------------ |  | ---- | ----- | --------------------------- | ----- | ---- | - | --------------------------- |  | -----
|Sales to third parties                                 |  | €    | 4,199 |                             | (7.0  | )    | € | 4,516                       |  | 14.1 
|Intersegmental transfers                               |  |      | 363   |                             | (12.1 | )    |   | 413                         |  | 29.1 
|Sales incl. intersegmental transfers                   |  |      | 4,562 |                             | (7.4  | )    |   | 4,929                       |  | 15.2 
|Royalties                                              |  |      | 210   |                             | (32.7 | )    |   | 312                         |  | 13.0 
|Sales incl. intersegmental transfers, less royalties   |  |      | 4,352 |                             | (5.7  | )    |   | 4,617                       |  | 15.4 
|Income from operations                                 |  |      | 1,210 |                             | (7.5  | )    |   | 1,308                       |  | (0.2 
|Special Items                                          |  |      | 0     |                             |      |      |   | 0                           |  |     
|Operating margin (%)                                   |  |      | 28.8  |                             |      |      |   | 29.0                        |  |     
|Assets                                                 |  | €    | 3,648 |                             | 15.8  |      | € | 3,149                       |  | (11.0
|Return on operational assets (%)                       |  |      | 35.6  |                             |      |      |   | 39.1                        |  |     
|Research and development expenses                      |  | €    | 113   |                             | 18.9  |      | € | 95                          |  | 90.0 
|Capital expenditures in tangible and intangible assets |  | €    | 920   |                             | 301.7 |      | € | 229                         |  | (14.2



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.

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.

105

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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.

In
2002, crude oil prices were affected by a series of speculative influences. We expect average crude oil prices to decline in 2003. By expanding our business activities, we expect to
be able to offset to some extent the resulting negative influences on sales and earnings.



In the Oil & Gas segment, sales to third parties in 2001 rose 14.1% to €4,516 million from €3,957 million in
2000. This increase was due to positive price and currency effects contributing 8.3% and 1.3%, respectively, as well as increased sales volumes, which contributed 4.5%. Significant contributions to
sales were made by the natural gas trading operations of BASF's subsidiary WINGAS, which increased its sales to third parties by 30.5% to €2,251 million in 2001 from
€1,725 million in 2000. Higher natural gas prices were a major factor contributing to this increase. Developments in crude oil prices are reflected in sales only after a period
of delay. Therefore, sales in the first half of 2001 were still positively affected by the high crude oil prices that prevailed in the second half of 2000. Due to lower demand, natural gas sales
volumes totaled 214 billion kilowatt-hours, or 3% below the previous year's level.

In
its exploration and production activities, the Oil & Gas segment increased sales in 2001 by 1.5% to €2,254 million from
€2,221 million in 2000, even though the average price for U.K. Brent quality crude oil was $24 per barrel in 2001, or $4 per barrel lower than in 2000. The resulting negative
impact from this price decrease was more than offset by a 13% increase in crude oil and natural gas production to 93 million barrels of oil equivalent.

Intersegmental
transfers rose in 2001 to €413 million from €320 million in 2000, mainly due to higher gas prices.

At
€1,308 million, income from operations in the Oil & Gas segment was comparable in 2001 and 2000. Income from operations is before income taxes on
oil-producing operations in North Africa and the Middle East, which are recorded as income tax expenses. For further information, see Note 10 to the Consolidated Financial
Statements.

Assets
in the Oil & Gas segment decreased 11% in 2001 to €3,149 million from €3,540 million in 2000. Capital expenditures in tangible
assets related primarily to development projects for exploration and production activities in Germany, North Africa and Argentina. Compared with the previous year, exploration expenditures more than
doubled, reaching €156 million in 2001. By using the latest technologies and focusing on particularly promising regions, BASF achieves a competitive position with regard to
finding costs.

106

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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:

|Statement of cash flow                            |  | 2002 |        | 2001 |   | 2000   |  
|------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|
|Net income*                                       |  | €    | 1,504  |      | € | (118   | )
|Depreciation of fixed assets                      |  |      | 2,502  |      |   | 2,933  |  
|Changes in net current assets                     |  |      | (1,033 | )    |   | (682   | )
|Miscellaneous items                               |  |      | (660   | )    |   | 186    |  
|                                                  |  |      |        |      |   |        |  
|Cash provided by operating activities             |  | €    | 2,313  |      | € | 2,319  |  
|Additions to tangible and intangible fixed assets |  |      | (2,410 | )    |   | (2,811 | )
|Acquisitions and divestitures, net                |  |      | (262   | )    |   | 7,043  |  
|Financial investments and other items             |  |      | 508    |      |   | (112   | )
|                                                  |  |      |        |      |   |        |  
|Cash provided by investing activities             |  | €    | (2,164 | )    | € | 4,120  |  
|Proceeds from capital increases                   |  |      | (462   | )    |   | (1,124 | )
|Changes in financial indebtedness                 |  |      | 1,040  |      |   | (4,293 | )
|Dividends paid                                    |  |      | (843   | )    |   | (1,266 | )
|                                                  |  |      |        |      |   |        |  
|Cash provided by financing activities             |  | €    | (265   | )    | € | (6,683 | )
|Changes in cash assets affecting liquidity        |  |      | (116   | )    |   | (244   | )
|Initial cash assets and other changes             |  |      | 347    |      |   | 604    |  
|                                                  |  |      |        |      |   |        |  
|Cash and cash equivalents at year end             |  | €    | 231    |      | € | 360    |  
|Marketable securities                             |  |      | 132    |      |   | 383    |  
|Liquid funds                                      |  |      | 363    |      |   | 743    |  

---



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.

107

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

|                           |  | 2002 in % |  | 2001 in %
|-------------------------- |  | --------- |  | ---------
|Europe                     |  | 65        |  | 47       
|North America (NAFTA)      |  | 12        |  | 23       
|South America              |  | 3         |  | 4        
|Asia, Pacific Area, Africa |  | 20        |  | 26       

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







In
thePlastics & Fibers 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:





108

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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:



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

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 Crop Science 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 was denominated in the following currencies:

|                 |  | 2002 in % |  | 2001 in %
|---------------- |  | --------- |  | ---------
|Euros            |  | 52.9      |  | 48.9     
|U.S. dollars     |  | 35.6      |  | 28.3     
|Renminbi         |  | 1.4       |  | 5.5      
|Other currencies |  | 10.1      |  | 17.3     

109

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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.



In 2003, BASF is planning total capital expenditures of €2 billion. Major projects by segment include:







Cash provided by operating activities totaled €2,319 million, which was 22% less than in 2000. This decline was due primarily to a sharp
drop in net income  excluding extraordinary income, which is included in cash provided by investing activities. In 2001, fewer additional funds were required to finance current
assets than in the previous year. This improved cash flow by €395 million.

110

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Proceeds from the sale of the pharmaceuticals business far exceeded capital expenditures for investments and acquisitions, and resulted in positive cash flow from
investing activities of €4,120 million.

Proceeds
from divestitures totaled €7,503 million. These related to the sale of the pharmaceuticals and generics businesses.

Cash
used for acquisitions amounted to €461 million. Major acquisitions included:



Capital
expenditures on tangible and intangible fixed assets totaled €2,811 million in 2001, or €95 million less than in 2000. On a regional
basis, capital expenditures and acquisitions were as follows:



In
theChemicalssegment, capital expenditures and acquisitions in 2001 increased 20% to €929 million in 2001 from
€774 million in 2000. Major projects included:







In
thePlastics & Fiberssegment, capital expenditures and acquisitions in 2001 increased 41% to
€891 million from €633 million in 2000. The largest projects were:



111

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In
thePerformance Productssegment, capital expenditures and acquisitions declined 69% in 2001 to €418 million
from €1,332 million in 2000. Major investment projects concluded or initiated were:



In
theAgricultural Products & Nutritionbusiness segment, BASF spent €349 million on capital expenditures
and acquisitions in 2001. This was €3,115 million less than in 2000, the year in which the crop protection business of American Home Products Corp. (AHP) was acquired.

In
the Agricultural Products reporting segment, capital expenditures totaled €130 million in 2001. In addition to the completion of a new plant for the fungicide
active ingredient F 500® in Schwarzheide, Germany, and the modernization of a production plant for the production of crop protection active ingredients in Guaratinguetá,
Brazil, several replacement and optimization projects were undertaken at various sites.

In
the Fine Chemicals reporting segment, BASF spent €199 million on capital expenditures and acquisitions in 2001 compared with €83 million
in 2000. The most important investment projects included expansions of plants for vitamin E, carotenoids, Lysmeral® and other flavors and fragrances, as well as the construction of a new
plant for the manufacture of UV absorbers.

In
theOil & Gas segment, BASF invested €229 million in 2001 compared with
€267 million in 2000. The majority of these investments were for exploration and production activities.

Capital
expenditures onfinancial assets and securitiesamounted to €741 million, which was
€99 million less than in 2000. These expenditures included in particular:



112

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Expenditures
for additions to financial assets and securities were offset by a cash inflow of €629 million for proceeds from the sale of financial assets, proceeds
from the disposal of fixed assets as well as the repayment of loans and financial receivables. This resulted in a net cash outflow of €112 million.



BASF used most of the cash provided by the sale of the pharmaceuticals business to reduce financial indebtedness. As of December 31, 2001, financial
indebtedness totaled €2,835 million, and was denominated in the following currencies:



In
2001, dividend payments to the shareholders of BASF Aktiengesellschaft for fiscal year 2000 totaled €1,214 million (2000: €695 million),
or €1.30 per qualifying share (2000: €1.13) plus a special dividend of €0.70 to repay stockholders' equity charged with 45% corporation tax.

In
2001, BASF spent €1.3 billion to buy back 30.8 million ordinary shares, or 5% of its share capital, at an average price of €42.22 per
share.



Cash and cash equivalents decreased by €146 million. Marketable securities increased €19 million to
€383 million. Total liquid funds decreased to €743 million in 2001 from €870 million in 2000. Their share of total assets was 2.0%
in 2001 compared with 2.3% in 2000.

EXCHANGE RATE EXPOSURE AND RISK MANAGEMENT

BASF conducts its business in many currencies other than the euro. About 55% of BASF's 2002 and 2001 sales and about 56% of 2000 sales were to customers in
Europe, about 45% of 2002 and
2001 sales and about 44% of 2000 sales were to customers outside Europe. Moreover, about 41% of BASF's 2002 sales, about 40% of BASF's 2001 sales and about 38% of 2000 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 2002, 2001 and 2000 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 for further information. The net effect of exchange rate fluctuations on BASF's income from
operations amounted to a net loss of €132.5 million in 2002, a net loss of €62.6 million in 2001 and a net loss of €150.7 million
in 2000. 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.

113

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The variance between 2001 and 2000 was primarily due to the strengthening of the U.S. dollar and the weakening of the Japanese yen.

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. In 2000, foreign currency translation adjustments had a positive effect of €112.5 million on stockholders' equity primarily due
to the strengthening of the U.S. dollar.

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
2002, BASF's hedging transactions have been aimed primarily at minimizing exchange rate risks against the U.S. dollar, the British pound, the Japanese yen, the Singapore dollar and
the Mexican peso. See "Item 11. Quantitative and Qualitative Disclosure About Market Risk" and Note 28 to the Consolidated Financial Statements for further information.

RESEARCH AND DEVELOPMENT

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

BASF
spent €1.14 billion on research and development activities in 2002 compared with €1.17 billion in 2001 and
€1.06 billion in 2000, excluding the expenses of the discontinued pharmaceuticals business. Excluding the expenditures for Oil and Gas exploration the company spends 36% of the
research budget on developing new products, and another 22% on improving existing products. Developing new and improved processes accounts for about 32% of spending, while 10% is spent on discovering
new research methods and technologies. BASF spends 89% of its annual research budget in Germany, 4% in North America, 6% in other European countries and 1% in South America and Asia.

BASF
employs about 8000 people worldwide in various research and development activities. About 6000 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. The three main technology platforms are located in Ludwigshafen and support the company's global activities. BASF carries out product and market-related development worldwide 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

114

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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 biotechnology
research and is also involved in various biotechnology research joint ventures. BASF announced in 2000 to spend about €700 million over 10 years on research and
development activities in plant biotechnology. 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 BASF Group. Additionally BASF Venture Capital GmbH a wholly-owned subsidiary of BASF Future Business GmbH was established in April 2001. Over the next
three to four years BASF Venture Capital GmbH intends to invest €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
additionally conducts research activities through more than 1000 cooperative agreements with universities, research institutes and industrial partners in many countries worldwide
and through various research joint ventures.

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

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page has been left blank intentionally.)

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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 may simultaneously be 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. The Supervisory Board assumes the function of an audit
committee in its role as supervisor of the Board of Executive Directors.

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, 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 number of two members. As of December 31,
2002, BASF Aktiengesellschaft's Board of Executive Directors had eight members. On April 30, 2002 Helmut Becks retired. On July 18, 2002, the Supervisory Board appointed Dr. Kurt
Bock and on December 19, 2002 Dr. Andreas Kreimeyer as additional members of the Board of Executive Directors both effective January 1, 2003.

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, 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 his or her 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.

117

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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.

The
following table lists the current members of the Board of Executive Directors, their ages as of December 31, 2002, and the years in which they were first appointed to the
Board and in which their running term ends:

Dr. Jürgen F. Strube

|Age: 63 |  | First year appointed: 1985 |  | Year term expires: 2003
|------- |  | -------------------------- |  | -----------------------



|1969 |  | Joined Finance department of BASF Aktiengesellschaft                                                                                                                                      
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1970 |  | Worked at BASF Antwerpen, Belgium, and in BASF Aktiengesellschaft's Logistics division                                                                                                    
|1974 |  | Assigned to BASF Brasileira S.A., São Paulo, Brazil, responsible for the company's logistics and administrative activities, and later on for the company's chemicals and plastics business
|1980 |  | Head of Glasurit do Brasil Ltda.                                                                                                                                                          
|1982 |  | President of the Brazil regional division                                                                                                                                                 
|1985 |  | Appointed to the Board of Executive Directors                                                                                                                                             
|1990 |  | Appointed Chairman of the Board of Executive Directors                                                                                                                                    



Chairman
of the Board of Executive Directors  Legal, Taxes and Insurance, Planning and Controlling, Senior Executives and Executive Development, Communication



|Since 1990     |  | Allianz Lebensversicherungs-AG, Stuttgart, Germany         
|-------------- |  | -----------------------------------------------------------
|Since 1996     |  | Hochtief AG, Essen, Germany                                
|Since 1998     |  | Commerzbank AG, Frankfurt, Germany                         
|Since 1998     |  | Hapag-Lloyd AG, Hamburg, Germany                           
|Since 2000     |  | Linde AG, Wiesbaden, Germany                               
|Since 2000     |  | Bertelsmann AG, Gütersloh, Germany                         
|Since May 2001 |  | Bayerische Motorenwerke Aktiengesellschaft, Munich, Germany

Max Dietrich Kley

|Age: 62 |  | First year appointed: 1990 |  | Year term expires: 2003
|------- |  | -------------------------- |  | -----------------------



|1969 |  | Joined the Legal department of BASF Aktiengesellschaft                 
|---- |  | -----------------------------------------------------------------------
|1977 |  | Head of the Tax department                                             
|1982 |  | Chief Executive Officer of Gewerkschaft Auguste Victoria, Marl, Germany
|1987 |  | President of the Energy and Coal division                              
|1990 |  | Appointed to the Board of Executive Directors                          
|1999 |  | Appointed Deputy Chairman of the Board of Executive Directors          

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Deputy
Chairman and Chief Financial Officer  Finance, Oil & Gas, Purchasing, Investor Relations, Corporate Audit, Eastern Europe, West Asia, Africa regional
division



|Since 1990 |  | Bayerische Hypo- und Vereinsbank AG, Munich, Germany
|---------- |  | ----------------------------------------------------
|Since 1993 |  | Landesbank Rheinland-Pfalz, Mainz, Germany          
|Since 2000 |  | Basell N.V., Hoofddorp, the Netherlands             
|Since 2000 |  | RWE Plus AG, Essen, Germany                         
|Since 2002 |  | Gerling NCM Credit and Finance AG, Cologne, Germany 
|Since 2002 |  | Cazenove Group Plc, London, Great Britain           
|Since 2002 |  | Infineon Technologies AG, Munich, Germany (Chairman)

Dr. Kurt Bock

|Age: 44 |  | First year appointed: 2003 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------



|1985 |  | Joined BASF Aktiengesellschaft in finance department                               
|---- |  | -----------------------------------------------------------------------------------
|1987 |  | Assistant to the Chief Financial Officer                                           
|1991 |  | Director Planning and Controlling, Engineering Plastics division                   
|1992 |  | Head of Corporate Finance department, Robert Bosch GmbH, Stuttgart, Germany        
|1996 |  | Managing Director, Robert Bosch Limitada, Campinas, Brazil                         
|1998 |  | Chief Financial Officer, BASF Corporation, Mount Olive, USA                        
|2000 |  | President, Logistics and Information Services, BASF Aktiengesellschaft Ludwigshafen
|2002 |  | Appointed to the Board of Executive Directors effective January 1, 2003            



Executive
Director  as of January 1, 2003: Logistics, Information Services, additionally as of February 1, 2003: South America region and additionally
as of May 6, 2003: Finance, Purchasing, Corporate Audit



|Since 2002 |  | Elemica Holding Inc., Wilmington, USA
|---------- |  | -------------------------------------

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Dr. John Feldmann

|Age: 53 |  | First year appointed: 2000 |  | Year term expires: 2004
|------- |  | -------------------------- |  | -----------------------



|1988 |  | Joined BASF Aktiengesellschaft in product management for detergent additives                                                               
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|1990 |  | Group leader, Strategic Planning                                                                                                           
|1993 |  | Vice president, Strategic Planning department                                                                                              
|1996 |  | President, BASF South East Asia regional headquarters and president, South East Asia/Australia regional division headquartered in Singapore
|1999 |  | Head of cross-divisional negotiating teams, Ludwigshafen, Germany                                                                          
|2000 |  | Appointed to the Board of Executive Directors                                                                                              



Executive
Director  Styrenics, Performance Polymers, Polyurethanes, Polymer Research



|Since 2000 |  | Basell N.V., Hoofddorp, the Netherlands
|---------- |  | ---------------------------------------

Dr. Jürgen Hambrecht

|Age: 56 |  | First year appointed: 1997 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------



|1976 |  | Joined BASF Aktiengesellschaft's Polymers Laboratory, responsible for polystyrene, styrenic copolymers and polyphenylene ethers
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|1985 |  | Head of Research and Purchasing at BASF Lacke und Farben AG, Münster, Germany (now BASF Coatings AG)                           
|1990 |  | President, Engineering Plastics division                                                                                       
|1995 |  | President, East Asia division based in Hong Kong                                                                               
|1997 |  | Appointed to the Board of Executive Directors                                                                                  
|2002 |  | Appointed Chairman of the Board of Executive Directors effective May 6, 2003                                                   



Executive
Director  Inorganics, Petrochemicals, Intermediates, Research & Engineering Chemicals, Asia region, site in Antwerp, Belgium



|Since 2000 |  | Bilfinger + Berger Bauaktiengesellschaft, Frankfurt, Germany
|---------- |  | ------------------------------------------------------------

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Dr. Andreas Kreimeyer

|Age: 47 |  | First year appointed: 2003 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------



|1986 |  | Joined BASF Aktiengesellschaft?s Main Laboratory to work in biotechnical research
|---- |  | ---------------------------------------------------------------------------------
|1989 |  | Head of biological pilot plant, Main Laboratory                                  
|1991 |  | Group leader Fermentations, Main Laboratory                                      
|1993 |  | Assistant to the Chairman of the Board of Executive Directors                    
|1995 |  | Vice president, Regional Development at BASF South East Asia Pte. Singapore      
|1998 |  | President, Fertilizers division                                                  
|2000 |  | President Dispersions division (in 2001 renamed Functional Polymers devision)    
|2003 |  | Appointed to the Board of Executive Directors                                    



Executive
Director  as of February 1, 2003: Performance Chemicals, Functional Polymers, Asia region

Klaus Peter Löbbe

|Age: 56 |  | First year appointed: 2002 |  | Year term expires: 2006
|------- |  | -------------------------- |  | -----------------------



|1966 |  | Joined BASF Aktiengesellschaft and initially worked as trainee and product manager                                                         
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|1975 |  | Delegated to BASF Japan Ltd.                                                                                                               
|1987 |  | Head of Diols Marketing, Intermediates division                                                                                            
|1990 |  | Group vice president, Marketing, Intermediates division                                                                                    
|1993 |  | President, Industrial Chemicals division                                                                                                   
|1996 |  | President, Coatings division and Chairman of the Board of Executive Directors of BASF Coatings AG                                          
|2002 |  | Appointed to the Board of Executive Directors and Chairman and Chief Executive Officer of BASF Corporation based in Mount Olive, New Jersey



Executive
Director  Coatings, NAFTA

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Dr. Stefan Marcinowski

|Age: 49 |  | First year appointed: 1997 |  | Year term expires: 2007
|------- |  | -------------------------- |  | -----------------------



|1979 |  | Joined BASF Aktiengesellschaft's Main Laboratory to work in biotechnological research
|---- |  | -------------------------------------------------------------------------------------
|1986 |  | Assistant to the Chairman of the Board of Executive Directors                        
|1988 |  | Senior vice president, Public Relations department                                   
|1992 |  | Managing Director BASF Brasileira S.A., São Paulo, Brazil                            
|1995 |  | President, Plastic Foams & Reaction Resins division                                  
|1997 |  | Appointed to the Board of Executive Directors                                        



Executive
Director and Research Executive Director  Functional Polymers, Performance Chemicals, South America region, University Relations & Research Planning

Peter Oakley

|Age: 49 |  | First year appointed: 1998 |  | Year term expires: 2008
|------- |  | -------------------------- |  | -----------------------



|1977 |  | Joined Economics department of BASF Aktiengesellschaft                                                                                                            
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1980 |  | Financial controller within the Southeast Asia Regional division                                                                                                  
|1984 |  | Head of Finance, Administration and Logistics at BASF China Ltd., Hong Kong                                                                                       
|1991 |  | Group Vice President of the Crop Protection business in North America, based in Raleigh, North Carolina                                                           
|1995 |  | President, Crop Protection division                                                                                                                               
|1998 |  | Appointed to the Board of Executive Directors and (until March 31, 2002) Chairman and Chief Executive Officer of BASF Corporation based in Mount Olive, New Jersey



Executive
Director  Agricultural Products, Fine Chemicals, Specialty Chemicals Research, Plant Biotechnology

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Eggert Voscherau

|Age: 59 |  | First year appointed: 1996 |  | Year term expires: 2006
|------- |  | -------------------------- |  | -----------------------



|1969 |  | Joined BASF, delegation to Peru                                                                                                                                             
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1981 |  | Management position BASF Brasileira S.A., São Paulo, Brazil                                                                                                                 
|1984 |  | Vice-Presidente Executivo BASF Brasileira S.A., São Paulo, Brazil                                                                                                           
|1986 |  | President, Crop Protection division, Ludwigshafen, Germany                                                                                                                  
|1991 |  | President, North American Consumer Products division (Pharmaceuticals, Crop Protection and Fine Chemicals); in addition, from 1994 president of Latin America North division
|1996 |  | Appointed member of the Board of Executive Directors                                                                                                                        
|1997 |  | Chairman and Chief Executive Officer of BASF Corporation                                                                                                                    
|2002 |  | Appointed Deputy Chairman of the Board of Executive Directors, effective May 6, 2003                                                                                        



Executive
Director  Industrial Relations Director, Europe region, Human Resources, Logistics, Information Services, Environment, Safety & Energy, Occupational
Medicine & Health Protection, Ludwigshafen Verbund Site, BASF Schwarzheide



|Since 1999 |  | Dresdner Bank Lateinamerika AG, Hamburg, Germany                                                           
|---------- |  | -----------------------------------------------------------------------------------------------------------
|Since 2000 |  | Haftpflichtverband der Deutschen Industrie V.a.G., Hanover, Germany (German Industry Liability Association)
|Since 2002 |  | Basell N.V., Hoofddorp, the Netherlands                                                                    

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.

Aside
from Mr. Arthur L. Kelly, all current shareholder representatives on the Supervisory Board were elected in 1998. Mr. Kelly was appointed by the district court of
Ludwigshafen on December 7, 2000, as a replacement for Dr. Marcus Bierich, who died on November 25, 2000.

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

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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 2003 convened for May 6, 2003. Compensation for Board members is determined by BASF Aktiengesellschaft's Articles of Association.

The
following table lists the current members of BASF Aktiengesellschaft's Supervisory Board, their respective ages as of December 31, 2002, their principal occupation and the
year in which they were first elected or appointed to the Supervisory Board:

|Name                               |  | Age |  | Principal Occupation                                                                                                                   |  | Year
First
Elected/
Appointed
|---------------------------------- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------
|DR. BERTHOLD LEIBINGER
Chairman    |  | 72  |  | Managing Director of TRUMPF GmbH + Co KG                                                                                               |  | 1998                         
|VOLKER OBENAUER(1)
Deputy Chairman |  | 60  |  |                                                                                                                                        |  | 1988                         
|WOLFGANG DANIEL(1)                 |  | 45  |  | Deputy Chairman of the works council of the Ludwigshafen site of BASF Aktiengesellschaft                                               |  | 1996                         
|ETIENNE GRAF DAVIGNON              |  | 70  |  | Deputy Chairman of the Administrative Council of Société Générale de Belgique                                                          |  | 1993                         
|DR. FRANCOIS DIEDERICH             |  | 50  |  | Professor at Zurich Technical University                                                                                               |  | 1998                         
|DR. TESSEN VON HEYDEBRECK          |  | 57  |  | Member of the Board of Executive Directors of Deutsche Bank AG                                                                         |  | 1998                         
|DR. WOLFGANG JENTZSCH              |  | 70  |  | Retired member of the Board of Executive Directors of BASF Aktiengesellschaft                                                          |  | 1995                         
|ARTHUR L. KELLY                    |  | 65  |  | Chief Executive Officer of KEL Enterprises L.P., Chicago, Illinois                                                                     |  | 2000                         
|ROLF KLEFFMANN(1)                  |  | 53  |  | Chairman of the works council of Wintershall AG's Barnstorf oil plant                                                                  |  | 1998                         
|ULRICH KÜPPERS(1)                  |  | 47  |  | Manager of the Ludwigshafen branch of the Mining, Chemical and Energy Industries Union(Industriegewerkschaft Bergbau, Chemie, Energie) |  | 1994                         
|KONRAD MANTEUFFEL(1)               |  | 50  |  | Member of the works council of the Ludwigshafen site of BASF Aktiengesellschaft                                                        |  | 1999                         
|DR. KARLHEINZ MESSMER(1)           |  | 58  |  | Plant Manager at the Ludwigshafen site of BASF Aktiengesellschaft                                                                      |  | 1993                         
|ROBERT OSWALD(1)                   |  | 47  |  | Chairman of the works council of the Ludwigshafen site of BASF Aktiengesellschaft Chairman of the works council of BASF Group          |  | 2000                         
|EVA KRAUT(1)                       |  | 46  |  | Chairwoman of the works council of BASF IT Services GmbH                                                                               |  | 2002                         
|DR. HERMANN SCHOLL                 |  | 67  |  | Managing Director of Robert Bosch GmbH                                                                                                 |  | 1998                         

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|DR. HENNING SCHULTE-NOELLE |  | 60 |  | Chairman of the Board of Executive Directors of Allianz AG                                                                                             |  | 1992
|-------------------------- |  | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|ROBERT STUDER              |  | 64 |  | Retired Chairman of Union Bank of Switzerland                                                                                                          |  | 1993
|JÜRGEN WALTER(1)           |  | 57 |  | Member of the Central Board of Executive Directors of the Mining, Chemical and Energy Industries Union(Industriegewerkschaft Bergbau, Chemie, Energie) |  | 1988
|HELMUT WERNER              |  | 66 |  | Retired Chairman of the Board of Executive Directors of Mercedes-Benz AG                                                                               |  | 1993
|GERHARD ZIBELL(1)          |  | 52 |  | Regional Manager of the Mining, Chemical and Energy Industries Union(Industriegewerkschaft Bergbau, Chemie, Energie)Rhineland-Palatinate/Saar region   |  | 1998

---

Compensation of Directors and Officers

The aggregate amount of compensation BASF Aktiengesellschaft and its subsidiaries paid during the year ended December 31, 2002, to all members of the Board
of Executive Directors and the Supervisory Board, as a group, was €15.8 million. Of this amount, members of the Board of Executive Directors received
€13.6 million and members of the Supervisory Board received €2.2 million. These sums include accrued performance-related bonuses for 2002. Additionally,
the pro rata value of stock options granted to the members of the Board of Executive Directors in 2002 amounted to €2.7 million.

The
total compensation BASF Aktiengesellschaft and its subsidiaries paid during the year ended December 31, 2002, to former members of the Board of Executive Directors and their
beneficiaries was €5.0 million. As of December 31, provision of pensions and similar benefits to former members of the Board of Executive Directors and their
beneficiaries totaled €55.7 million. No commitments were assumed in favor of the members of the Supervisory Board or the Board of Executive Directors.

Pursuant
to its Articles of Association, BASF Aktiengesellschaft reimburses each Supervisory Board member for out-of-pocket expenses. BASF Aktiengesellschaft also
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. The chairman of the Supervisory Board
receives a payment of twice and the deputy chairman receives a payment of 1.5 times these amounts. For the year ended December 31, 2002, approximately 75% of the total compensation paid to
members of the Supervisory Board consisted of dividend-based compensation. 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.

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

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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.

Board Practices

The Supervisory Board has established a committee known in Germany as the "Personalausschuss." The members of this
committee are Dr. Berthold Leibinger, Dr. Henning Schulte-Noelle, Volker Obenauer and Jürgen Walter. This committee is primarily responsible for reviewing and approving
the terms and conditions of contracts between BASF Aktiengesellschaft and members of the Board of Executive Directors.

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, 2002, BASF employed a workforce of 89,398 people worldwide, which represented a decline of approximately 3.4% from the end of 2001
largely related to the implementation of our restructuring program. About 56.3% of the workforce is based in Germany. Expenditures for salaries and wages totaled €4,751 million
in 2002, down from €4,858 million in 2001. For further information, see Note 12 to the Consolidated Financial Statements included in Item 18.

The
following table details BASF's workforce on a regional basis as of December 31, 2002, 2001 and 2000.

|                           |                 | 2002   |        | 2001   |        | 2000   
|-------------------------- | --------------- | ------ | ------ | ------ | ------ | -------
|Europe                     |                 | 62,103 |        | 63,339 |        | 68,861 
|                           | thereof Germany |        | 50,320 |        | 50,939 |        
|North America              |                 | 13,331 |        | 14,531 |        | 17,331 
|South America              |                 | 5,097  |        | 5,749  |        | 6,913  
|Asia, Pacific Area, Africa |                 | 8,858  |        | 8,926  |        | 10,168 
|Total                      |                 | 89,389 |        | 92,545 |        | 103,273

As of December 31, 2002, BASF Aktiengesellschaft employed 38,361 people at its headquarters in Ludwigshafen, Germany, compared with 39,354
people as of December 31, 2001.

Many
of BASF's employees who are not considered management in Germany are members of labor unions. Almost all 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 regional 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, inter
alia especially with regard to certain voluntary compensation matters and benefits.

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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 April 2002
and expiresMarch 31, 2003.

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.

Agreement on headcount management at Ludwigshafen site

In September 2002, 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 form 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 (6,624 contracts signed as of December 31, 2002), increased internal
job-market flexibility  will help reduce the workforce without forced layoffs while at the same time allowing younger employees to be hired. In 2002, provisions of
€50.9 million have been set aside to cover severance payments.

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
75% 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 2002, the
BOP Share Price was €46.70 and in the years 2001, 2000 and 1999 it was €47.87, €47.80 and €41.60, respectively. 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 in 2001 and 2002 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 2002 expire on June 30, 2010.

Each
option right entitles the holder to two subscription rights. The first subscription right permits participants to a cash settlement for one BASF Share, based on the difference
between the BASF Share price on the exercise date and the BOP Share price, provided that the market price of

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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 for another BASF Share, 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 ("the EURO STOXX") and for options
granted in 2001 and 2002 the benchmark index is the Dow Jones Global Chemicals Total Return Index (the "DJ Chemicals"). The discount is equal to 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.

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

|                                            |                                                        | 2002      |         | 2001      |         | 2000     
|------------------------------------------- | ------------------------------------------------------ | --------- | ------- | --------- | ------- | ---------
|Stock options outstanding as of January 1   |                                                        | 3,092,732 |         | 2,057,003 |         | 1,172,728
|Stock options granted                       |                                                        | 837,280   |         | 1,133,204 |         | 917,016  
|                                            | thereof to members of the Board of Executive Directors |           | 107,980 |           | 137,060 |          
|Option rights lapsed(1)                     |                                                        | 67,700    |         | 97,475    |         | 32,741   
|Option rights exercised                     |                                                        | 609,868   |         |          |         |         
|Stock options outstanding as of December 31 |                                                        | 3,252,444 |         | 3,092,732 |         | 2,057,003

---

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, 83 per cent of the eligible employees currently hold
shares in the company.

|                                                               |  | 2002      |  | 2001      |  | 2000   
|-------------------------------------------------------------- |  | --------- |  | --------- |  | -------
|Number of BASF Shares held under the program as of January 1   |  | 1,130,680 |  | 745,840   |  | 220,840
|Number of BASF Shares purchased under the program              |  | 535,500   |  | 434,800   |  | 544,730
|Maximum amount of free shares granted                          |  | 380,775   |  | 217,400   |  | 272,365
|Shares expired                                                 |  | 41,720    |  | 49,960    |  | 19,730 
|Number of BASF Shares held under the program as of December 31 |  | 1,624,460 |  | 1,130,680 |  | 745,840

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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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page has been left blank intentionally.)

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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, 2002, BASF Aktiengesellschaft had an
aggregate of 571,650,910 ordinary shares outstanding. 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 10, 2001, approximately 9.4% of the BASF Shares were held by shareholders in the United States.

Allianz
Aktiengesellschaft has notified BASF that it directly or indirectly holds more than 5% but less than 10% of the BASF Shares. Information available as of December 31, 2002
indicated that Allianz Aktiengesellschaft and its subsidiaries held an aggregate of 6.3% 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, 2002 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 Executive Board.

Allianz
Aktiengesellschaft, through certain of its subsidiaries, currently provides insurance services to BASF in a number of different areas. BASF Aktiengesellschaft believes that these
services are provided on an arm's length basis.

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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page has been left blank intentionally.)

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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:

|Region                     |                 | Regional Sales |       | Produced in Region |        | Regional Exports
(Imports) |      
|-------------------------- | --------------- | -------------- | ----- | ------------------ | ------ | -------------------------- | -----
|
|Europe                     |                 | 17,697         |       | 18,987             |        | 1,290                      |      
|                           | thereof Germany |                | 6,944 |                    | 13,315 |                            | 6,371
|North America              |                 | 7,808          |       | 7,932              |        | 124                        |      
|South America              |                 | 1,660          |       | 1,347              |        | (313                       | )    
|Asia, Pacific Area, Africa |                 | 5,051          |       | 3,950              |        | (1,101                     | )    
|Total                      |                 | 32,216         |       | 32,216             |        |                            |      

Legal Proceedings

In addition to the legal proceedings and claims described below, BASF is involved in a number of legal proceedings and claims incidental to the normal conduct of
its businesses, relating to such matters as product liability, patent infringement, licensing, tax assessments, competition, past waste disposal practices and release of chemicals into the
environment. Although the outcome of these proceedings and claims cannot be predicted with certainty, BASF Aktiengesellschaft believes that, except for liabilities resulting from the antitrust claims
relating to vitamins, any resulting liabilities, net of amounts recoverable from insurance or otherwise, will not, in the aggregate, have a material adverse effect on BASF's consolidated results of
operations, financial condition and cash flows.

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, Korea, New Zealand 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, 24 of these class actions were settled with
terms calling for the vitamin manufacturers to pay in total up to $396 million. BASF Aktiengesellschaft will be obligated to pay up to $97 million of the total amount. Most of the
settlements have been finally approved by the respective state court and partially fulfilled. Suits from some third party plaintiffs who did not wish to participate in these settlements are still
pending. Further claims for damages have been filed in Canada, in a number of European countries, and in Australia.

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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.

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 world-wide 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, 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 federal subject matter jurisdiction over
claims by foreign purchasers based on purchases outside the United States. The defendants named in Empagran, including BASF Aktiengesellschaft, have filed a petition for rehearing, challenging the
Court of Appeals' decision and, if necessary, will
file a petition seeking review of the decision by the United States Supreme Court. Should the decision be upheld, against expectations, the foreign customers be certified as a "class" by the
U.S. Courts, and the damage claim be successful, this could cause considerable financial charges for the BASF Group.

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. However, payment cannot be made until a final judgment has been reached with regard
to the ongoing appeals to the settlement.

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

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, 2002.

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page has been left blank intentionally.)

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Item 9.The Offer and Listing

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.

|                        |  | Price per BASF Share |  | DAX   
|----------------------- |  | -------------------- |  | ------
|
|Quarterly high and lows |  |                      |  |       
|1998                    |  |                      |  |       
|First Quarter           |  | €41.82               |  | €30.55
|Second Quarter          |  | €44.41               |  | €39.24
|Third Quarter           |  | €47.50               |  | €31.19
|Fourth Quarter          |  | €36.25               |  | €29.81
|1999                    |  |                      |  |       
|First Quarter           |  | €34.35               |  | €30.19
|Second Quarter          |  | €42.60               |  | €34.50
|Third Quarter           |  | €45.00               |  | €39.70
|Fourth Quarter          |  | €52.20               |  | €39.50
|2000                    |  |                      |  |       
|First Quarter           |  | €51.80               |  | €42.15
|Second Quarter          |  | €49.75               |  | €40.01
|Third Quarter           |  | €45.55               |  | €39.55
|Fourth Quarter          |  | €48.45               |  | €40.15
|2001                    |  |                      |  |       
|First Quarter           |  | €50.45               |  | €42.80
|Second Quarter          |  | €49.83               |  | €43.60
|Third Quarter           |  | €47.70               |  | €31.00
|Fourth Quarter          |  | €44.10               |  | €37.21
|2002                    |  |                      |  |       
|First Quarter           |  | €47.56               |  | €40.75
|Second Quarter          |  | €49.80               |  | €44.05
|Third Quarter           |  | €47.70               |  | €35.90
|Fourth Quarter          |  | €40.79               |  | €32.90

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Monthly high and lows of the last six months*

|          |  | High   |  | Low   
|--------- |  | ------ |  | ------
|2002      |  |        |  |       
|September |  | €41.70 |  | €35.90
|October   |  | €39.03 |  | €32.90
|November  |  | €38.75 |  | €36.52
|December  |  | €40.79 |  | €35.70
|2003      |  |        |  |       
|January   |  | €39.25 |  | €31.86
|February  |  | €34.85 |  | €32.78

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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.

|          |  | High |  | Low  
|--------- |  | ---- |  | -----
|2002      |  |      |  |      
|September |  | USD  |  | 40.80
|October   |  | USD  |  | 38.00
|November  |  | USD  |  | 39.12
|December  |  | USD  |  | 40.47
|2003      |  |      |  |      
|January   |  | USD  |  | 40.90
|February  |  | USD  |  | 37.04

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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 26, 2001 and April 30, 2002, 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, or use the shares to service option rights
granted to participants of the BASF Stock Option Program. In 2002, BASF Aktiengesellschaft had bought 13,085,000 BASF Shares, or approximately 2.24% of the then outstanding BASF Shares. The Board of
Executive Directors has cancelled 11,750,500 of these repurchased BASF Shares, reducing the company's outstanding share capital. On December 17, 2002, the Board of Executive Directors also
decided to cancel the remaining 1,334,500 repurchased BASF Shares.

Material Contracts

On December 14, 2000, BASF and Abbott Laboratories Inc. of Abbott Park, Illinois, entered into an agreement for the sale of BASF's worldwide
non-generic pharmaceuticals business to Abbott Laboratories. Under the agreement, BASF transferred the shares in its subsidiaries conducting its
worldwide non-generic pharmaceuticals business, excluding the production of certain pharmaceutical active ingredients, to Abbott Laboratories. The purchase price was $6.9 billion on
a cash and debt-free basis, to be adjusted by the balance of cash and debt at closing. The agreement provides for customary representations and indemnities capped at 25% of the purchase
price. The transaction closed on March 2, 2001, after anti-trust clearance had been received from the Federal Trade Commission and the European Union Commission.

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).

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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 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.

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Taxation of Dividends

Under U.S. federal income tax law, Eligible U.S. Holders are generally required to include in their gross income, as ordinary dividend income, 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. 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. Beginning with dividends paid in 2002, the required
withholding rate applicable to BASF dividends is 20% plus 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. These withholding tax rates reflect changes made in the German tax law that are effective with respect to BASF dividends paid in 2002 and
thereafter. BASF dividends paid in prior years were subject to 25% withholding tax plus the 5.5% solidarity surcharge for a total of 26.375% withholding tax.

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. Dividends paid by BASF in prior years were subject to the German imputation system then in effect. Under that system, German resident individuals received a tax credit based on
qualifying dividends received from German corporations and U.S. residents received a related Treaty benefit reducing the German tax on such dividends to 10%. With repeal of the imputation credit for
dividends paid in 2002, the special 10% Treaty rate no longer applies.

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.

To
illustrate the foregoing, for each $100 gross amount of dividend paid by BASF in 2002 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

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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, DC 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 to the Internal Revenue Service Center, Foreign Certification Request, P.O. Box 16347, Philadelphia, PA 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.

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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.

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.

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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, New York 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, New York 10005.

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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 creditworthy 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
(40% of financial liabilities), which BASF group companies worldwide took from numerous local banks in their various home currencies. Additionally, a fixed rate euro bond is outstanding (35% 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
(9% of financial liabilities). The remaining debt consists of a number of other bonds or commercial paper (16% 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.

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Principal (Notional) Amount
Interest Rate  December 31, 2001

|                                    |  | Expected Maturity Date |  |       |  |      
|----------------------------------- |  | ---------------------- |  | ----- |  | -----
|
|
|
|Debt, including current portion     |  |                        |  |       |  |      
|U.S. dollar (USD)                   |  |                        |  |       |  |      
|Fixed rate                          |  | 291.9                  |  | 46.9  |  |     
|Weighted avg. interest rate (fixed) |  | 6.2%                   |  | 8.2%  |  |     
|Variable rate                       |  | 44.6                   |  | 75.5  |  | 21.3 
|Interest rate (variable)            |  | 3.7%                   |  | 3.5%  |  | 3.5% 
|Subtotal                            |  |                        |  |       |  |      
|Euro (EUR)                          |  |                        |  |       |  |      
|Fixed rate                          |  | 11.4                   |  | 1.0   |  | 2.6  
|Weighted avg. interest rate (fixed) |  | 4.7%                   |  | 6.7%  |  | 4.4% 
|Variable rate                       |  | 5.7                    |  | 16.2  |  | 14.2 
|Interest rate (variable)            |  | 3.5%                   |  | 5.0%  |  | 5.0% 
|Subtotal                            |  |                        |  |       |  |      
|Chinese renminbi (CNY)              |  |                        |  |       |  |      
|Fixed rate                          |  | 132.1                  |  |      |  |     
|Weighted avg. interest rate (fixed) |  | 5.1%                   |  |      |  |     
|Variable rate                       |  | 4.1                    |  | 20.6  |  |     
|Interest rate (variable)            |  | 6.0%                   |  | 5.9%  |  |     
|Subtotal                            |  |                        |  |       |  |      
|Other currencies                    |  |                        |  |       |  |      
|Fixed rate                          |  | 53.0                   |  | 12.5  |  | 14.2 
|Weighted avg. interest rate (fixed) |  | 18.0%                  |  | 7.9%  |  | 10.7%
|Variable rate                       |  | 366.6                  |  | 11.3  |  | 3.2  
|Interest rate (variable)            |  | 9.6%                   |  | 13.4% |  | 5.8% 
|Subtotal                            |  |                        |  |       |  |      
|                                    |  |                        |  |       |  |      
|Total                               |  |                        |  |       |  |      

146

---

Principal (Notional) Amount
Interest Rate  December 31, 2002

|                                    |  | Expected Maturity Date |  |       |  |        
|----------------------------------- |  | ---------------------- |  | ----- |  | -------
|
|
|
|Debt, including current portion     |  |                        |  |       |  |        
|U.S. dollar (USD)                   |  |                        |  |       |  |        
|Fixed rate                          |  | 784.7                  |  | 13.3  |  |        
|Weighted avg. interest rate (fixed) |  | 3.7%                   |  | 9.0%  |  |        
|Variable rate                       |  | 119.9                  |  | 31.4  |  | 10.5   
|Interest rate (variable)            |  | 2.6%                   |  | 2.9%  |  | 2.9%   
|Subtotal                            |  |                        |  |       |  |        
|Euro (EUR)                          |  |                        |  |       |  |        
|Fixed rate                          |  | 501.2                  |  | 0.9   |  | 1,250.7
|Weighted avg. interest rate (fixed) |  | 3.5%                   |  | 3.1%  |  | 5.7%   
|Variable rate                       |  | 45.8                   |  | 14.6  |  | 14.6   
|Interest rate (variable)            |  | 4.8%                   |  | 4.9%  |  | 4.9%   
|Subtotal                            |  |                        |  |       |  |        
|Chinese renminbi (CNY)              |  |                        |  |       |  |        
|Fixed rate                          |  | 52.0                   |  |       |  |        
|Weighted avg. interest rate (fixed) |  | 4.6%                   |  |       |  |        
|Variable rate                       |  |                        |  |       |  |        
|Interest rate (variable)            |  |                        |  |       |  |        
|Subtotal                            |  |                        |  |       |  |        
|Other currencies                    |  |                        |  |       |  |        
|Fixed rate                          |  | 81.9                   |  | 20.2  |  | 9.0    
|Weighted avg. interest rate (fixed) |  | 10.8%                  |  | 10.8% |  | 8.5%   
|Variable rate                       |  | 228.3                  |  |       |  |        
|Interest rate (variable)            |  | 4.2%                   |  |       |  |        
|Subtotal                            |  |                        |  |       |  |        
|                                    |  |                        |  |       |  |        
|Total                               |  |                        |  |       |  |        

Fixed rate euro debt due in 2005 includes the 5.75% Euro Bond issued by BASF Aktiengesellschaft in 2000 with an amount of
€1,250 million.

Other
currencies at December 31, 2002, in which BASF has issued debt are primarily the Malaysian ringgit, the Korean Won and the Brazilian Real.

147

---

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, 2001

|                                         |  | Expected Maturity Date |  |      |  |  | 
|---------------------------------------- |  | ---------------------- |  | ---- |  |  | 
|
|
|
|U.S. dollar (USD)                        |  |                        |  |      |  |  | 
|Payer swap                               |  |                        |  | 15   |  |  | 
|Weighted to average pay rate (fixed)     |  |                        |  | 6.3% |  |  | 
|Weighted average receive rate (variable) |  |                        |  | 2.9% |  |  | 

Interest Rate Swaps  December 31, 2002

|                                         |  | Expected Maturity Date |  |  |  |  | 
|---------------------------------------- |  | ---------------------- |  |  |  |  | 
|
|
|
|Euro (EUR)                               |  |                        |  |  |  |  | 
|Payer swap                               |  |                        |  |  |  |  | 
|Weighted to average pay rate (fixed)     |  |                        |  |  |  |  | 
|Weighted average receive rate (variable) |  |                        |  |  |  |  | 

The total volume of interest rate swaps increased from €15 million in 2001 to €90 million in 2002
due to an additional transaction. The total fair value of the interest rate swaps decreased from €(0.40) million to €(8.99) million.

Combined Interest Rate and Cross Currency Swaps  December 31, 2001

|                                              |  | Expected Maturity Date |  |      |  |  | 
|--------------------------------------------- |  | ---------------------- |  | ---- |  |  | 
|
|
|
|U.S. dollar (USD)/German mark (DEM)           |  |                        |  |      |  |  | 
|Amount payable on maturity (USD)              |  |                        |  |      |  |  | 
|Amount receivable on maturity (DEM)           |  |                        |  |      |  |  | 
|Weighted average pay rate (fixed, USD)        |  |                        |  |      |  |  | 
|Weighted average receive rate (fixed, DEM)    |  |                        |  |      |  |  | 
|Amount payable on maturity (USD)              |  | 154                    |  | 159  |  |  | 
|Amount receivable on maturity (DEM)           |  | 243                    |  | 227  |  |  | 
|Weighted average pay rate (fixed, USD)        |  | 7.4%                   |  | 6.7% |  |  | 
|Weighted average receive rate (variable, DEM) |  | 3.8%                   |  | 3.3% |  |  | 

148

---

|U.S. dollar (USD)/euro (EUR)                  |  |      |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|--------------------------------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----- |  | ------- | -
|Amount payable on maturity (USD)              |  | 224  |  | 490  |  | 407  |  | 103  |  | 290  |  | 629  |  | 2,143 |  |         |  
|Amount receivable on maturity (EUR)           |  | 227  |  | 510  |  | 454  |  | 113  |  | 340  |  | 681  |  | 2,325 |  | (324.07 | )
|Weighted average pay rate (fixed, USD)        |  | 7.3% |  | 6.3% |  | 6.7% |  | 7.4% |  | 6.5% |  | 7.7% |  |       |  |         |  
|Weighted average receive rate (variable, EUR) |  | 3.6% |  | 4.3% |  | 3.6% |  | 3.6% |  | 3.5% |  | 3.8% |  |       |  |         |  
|Dutch guilder (NLG)/German mark (DEM)         |  |      |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Amount payable on maturity (NLG)              |  | 3    |  |      |  |      |  |      |  |      |  |      |  | 3     |  |         |  
|Amount receivable on maturity (DEM)           |  | 3    |  |      |  |      |  |      |  |      |  |      |  | 3     |  | (0.67   | )
|Weighted average pay rate (fixed, NLG)        |  | 6.0% |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Weighted average receive rate (variable, DEM) |  | 4.5% |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Japanese yen (JPY)/euro (EUR)                 |  |      |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Amount payable on maturity (JPY)              |  |      |  | 34   |  | 2    |  |      |  |      |  |      |  | 36    |  |         |  
|Amount receivable on maturity (EUR)           |  |      |  | 28   |  | 2    |  |      |  |      |  |      |  | 30    |  | 5.89    |  
|Weighted average pay rate (fixed, JPY)        |  |      |  | 1.3% |  | 0.7% |  |      |  |      |  |      |  |       |  |         |  
|Weighted average receive rate (variable, EUR) |  |      |  | 4.0% |  | 3.9% |  |      |  |      |  |      |  |       |  |         |  
|Spanish peseta (ESP)/German mark (DEM)        |  |      |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Amount payable on maturity (ESP)              |  | 24   |  |      |  |      |  |      |  |      |  |      |  | 24    |  |         |  
|Amount receivable on maturity (DEM)           |  | 24   |  |      |  |      |  |      |  |      |  |      |  | 24    |  | (0.17   | )
|Weighted average pay rate (fixed, ESP)        |  | 5.6% |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Weighted average receive rate (variable DEM)  |  | 4.8% |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|U.S. dollar (USD)/Korean won (KRW)            |  |      |  |      |  |      |  |      |  |      |  |      |  |       |  |         |  
|Amount payable on maturity (KRW)              |  |      |  | 114  |  | 100  |  |      |  |      |  |      |  | 214   |  |         |  
|Amount receivable on maturity (USD)           |  |      |  | 114  |  | 102  |  |      |  |      |  |      |  | 216   |  | 13.04   |  
|Weighted average pay rate (fixed, KRW)        |  |      |  | 8.1% |  | 6.0% |  |      |  |      |  |      |  |       |  |         |  
|Weighted average receive rate (variable USD)  |  |      |  | 4.5% |  | 5.0% |  |      |  |      |  |      |  |       |  |         |  

---

149

---

Combined Interest Rate and Cross Currency Swaps  December 31, 2002

|                                              |  | Expected Maturity Date |  |      |  |      |    
|--------------------------------------------- |  | ---------------------- |  | ---- |  | ---- | ---
|
|
|
|U.S. dollar (USD)/euro (EUR)                  |  |                        |  |      |  |      |    
|Amount payable on maturity (USD)              |  | 96                     |  |      |  | 143  |    
|Amount receivable on maturity (EUR)           |  | 117                    |  |      |  | 150  |    
|Weighted average pay rate (variable, USD)     |  | 2.4%                   |  |      |  | 1.6% |    
|Weighted average receive rate (variable, EUR) |  | 3.7%                   |  |      |  | 3.1% |    
|Amount payable on maturity (USD)              |  | 524                    |  | 381  |  | 342  |    
|Amount receivable on maturity (EUR)           |  | 532                    |  | 407  |  | 338  | (2)
|Weighted average pay rate (fixed, USD)        |  | 6.3%                   |  | 6.7% |  | 8.1% |    
|Weighted average receive rate (variable, EUR) |  | 3.6%                   |  | 3.7% |  | 3.7% |    
|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)              |  | 26                     |  | 4    |  |      |    
|Amount receivable on maturity (EUR)           |  | 34                     |  | 4    |  |      |    
|Weighted average pay rate (fixed, JPY)        |  | 1.3%                   |  | 0.7% |  |      |    
|Weighted average receive rate (variable, EUR) |  | 4.1%                   |  | 3.6% |  |      |    
|U.S. dollar (USD)/Korean won (KRW)            |  |                        |  |      |  |      |    
|Amount payable on maturity (KRW)              |  | 114                    |  | 100  |  | 93   |    
|Amount receivable on maturity (USD)           |  | 96                     |  | 86   |  | 86   |    
|Weighted average pay rate (fixed, KRW)        |  | 8.1%                   |  | 6.0% |  | 6.0% |    
|Weighted average receive rate (variable USD)  |  | 1.5%                   |  | 2.4% |  | 3.5% |    

---

The total volume of the combined interest rate and cross currency swaps decreased from €3,081 million in 2001 to
€3,058 million as of December 31, 2002 due to expiration of transactions. The total fair value of the swaps changed from €(591) million in 2001 to
€(116) million as of December 31, 2002 mainly due to the decline in the exchange rate of the USD dollar.

150

---



|                                         |  | Expected Maturity Date |  |  |  | 
|---------------------------------------- |  | ---------------------- |  |  |  | 
|
|
|
|Equity index swap(1)                     |  | 26                     |  |  |  | 
|Weighted average pay rate (variable)     |  | 3.3%                   |  |  |  | 
|Weighted average receive rate (variable) |  | n.a.                   |  |  |  | 

---



|                                         |  | Expected Maturity Date |  |  |  |  | 
|---------------------------------------- |  | ---------------------- |  |  |  |  | 
|
|
|
|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 2002, 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 South African rand, 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 cross currency swaps.

The
tables below provide information about significant derivative financial instruments which are sensitive to changes in foreign currency exchange rates.

151

---



|                                |  | Contract Amount |  | Weighted Average
Forward
Exchange Rate |  | Fair Value |    
|------------------------------- |  | --------------- |  | -------------------------------------- |  | ---------- | ---
|
|Euro (EUR)                      |  |                 |  |                                        |  |            |    
|Sale Australian dollar (AUD)    |  | 49.5            |  | 1.77                                   |  | (1.28      | )  
|Sale Canadian dollar (CAD)      |  | 28.4            |  | 1.41                                   |  | (0.06      | )  
|Sale Danish krone (DKK)         |  | 27.3            |  | 7.45                                   |  | 0.00       | (2)
|Sale British pound (GBP)        |  | 190.9           |  | 0.62                                   |  | (2.26      | )  
|Sale Japanese yen (JPY)         |  | 213.0           |  | 107.85                                 |  | 12.61      |    
|Sale New Zealand dollar (NZD)   |  | 1.6             |  | 2.15                                   |  | (0.01      | )  
|Sale Swedish krona (SEK)        |  | 2.0             |  | 9.44                                   |  | (0.02      | )  
|Sale Turkish lira (TRL)         |  | 2.9             |  | 1,403,000.00                           |  | (0.13      | )  
|Sale Polish zlotys (PLN)        |  | 1.5             |  | 3.76                                   |  | (0.08      | )  
|Sale Singapore dollar (SGD)     |  | 55.8            |  | 2.01                                   |  | (12.91     | )  
|Sale Malaysian ringgit (MYR)    |  | 1.5             |  | 3.37                                   |  | (0.01      | )  
|Sale Thai baht (THB)            |  | 15.1            |  | 39.38                                  |  | (0.16      | )  
|Sale U.S. dollar (USD)          |  | 3,077.6         |  | 0.90                                   |  | (70.79     | )  
|Sale Swiss francs (CHF)         |  | 21.1            |  | 1.47                                   |  | (0.18      | )  
|Sale South African rand (ZAR)   |  | 17.4            |  | 8.82                                   |  | 3.05       |    
|Purchase U.S. dollar (USD)      |  | 537.0           |  | 0.93                                   |  | 12.51      |    
|Purchase Singapore dollar (SGD) |  | 21.8            |  | 1.66                                   |  | 0.38       |    
|U.S. dollar (USD)               |  |                 |  |                                        |  |            |    
|Sale Australian dollar (AUD)    |  | 0.4             |  | 0.52                                   |  | 0.01       |    
|Sale Mexican peso (MXP)         |  | 113.4           |  | 9.92                                   |  | (4.91      | )  
|Sale Singapore dollar (SGD)     |  | 7.9             |  | 1.79                                   |  | 0.23       |    
|Sale South African rand (ZAR)   |  | 6.9             |  | 10.08                                  |  | 1.21       |    
|Sale Brazilian real (BRL)       |  | 587.6           |  | 2.56                                   |  | (62.94     | )  
|Sale Taiwan dollar (TWD)        |  | 21.7            |  | 34.68                                  |  | 0.22       |    
|Sale Thai baht (THB)            |  | 9.7             |  | 44.66                                  |  | (0.05      | )  
|Sale Indian rupee (INR)         |  | 23.3            |  | 51.52                                  |  | 0.01       |    
|Sale Malaysian ringgit (MYR)    |  | 3.3             |  | 3.80                                   |  | 0.00       | (2)
|Purchase Colombian peso (COP)   |  | 2.6             |  | 2,547.15                               |  | (0.15      | )  
|Purchase Philippine peso (PhP)  |  | 1.6             |  | 52.73                                  |  | 0.02       |    
|Singapore dollar (SGD)          |  |                 |  |                                        |  |            |    
|Sale Malaysian ringgit (MYR)    |  | 0.1             |  | 2.07                                   |  | 0.00       | (2)
|Sale Japanese yen (JPY)         |  | 8.7             |  | 69.76                                  |  | 0.11       |    

---

152

---

Foreign Currency Forward Contracts  December 31, 2002(1)

|                                 |  | Contract Amount |  | Weighted Average
Forward
Exchange Rate |  | Fair Value |    
|-------------------------------- |  | --------------- |  | -------------------------------------- |  | ---------- | ---
|
|Euro (EUR)                       |  |                 |  |                                        |  |            |    
|Sale Australian dollar (AUD)     |  | 40.4            |  | 1.80                                   |  | 1.27       |    
|Sale Danish krone (DKK)          |  | 20.5            |  | 7.43                                   |  | (0.00)     | (2)
|Sale British pound (GBP)         |  | 343.1           |  | 0.64                                   |  | 6.30       |    
|Sale Japanese yen (JPY)          |  | 223.0           |  | 117.66                                 |  | 10.69      |    
|Sale New Zealand dollar (NZD)    |  | 4.1             |  | 2.01                                   |  | (0.00)     | (2)
|Sale Swedish krona (SEK)         |  | 2.0             |  | 9.24                                   |  | (0.01      | )  
|Sale Polish zlotys (PLN)         |  | 8.9             |  | 4.09                                   |  | (0.06      | )  
|Sale Singapore dollar (SGD)      |  | 55.9            |  | 2.01                                   |  | (6.82      | )  
|Sale Malaysian ringgit (MYR)     |  | 2.4             |  | 3.81                                   |  | 0.11       |    
|Sale Thai baht (THB)             |  | 0.7             |  | 43.12                                  |  | 0.04       |    
|Sale U.S. dollar (USD)           |  | 3,769.5         |  | 0.99                                   |  | 174.35     |    
|Sale South African rand (ZAR)    |  | 29.6            |  | 9.18                                   |  | (0.35      | )  
|Sale Indian rupee (INR)          |  | 0.5             |  | 48.50                                  |  | 0.02       |    
|Sale Slovak koruna (SKK)         |  | 0.8             |  | 41.91                                  |  | (0.01      | )  
|Sale Hungarian Forint (HUF)      |  | 19.8            |  | 237.17                                 |  | 0.02       |    
|Sale Czech koruna (CZK)          |  | 7.8             |  | 31.13                                  |  | 0.11       |    
|Purchase U.S. dollar (USD)       |  | 896.5           |  | 0.99                                   |  | (42.31     | )  
|Purchase Swiss francs (CHF)      |  | 16.0            |  | 1.46                                   |  | 0.06       |    
|Purchase Canadian dollar (CAD)   |  | 30.1            |  | 1.59                                   |  | (1.13      | )  
|Purchase Turkish lira (TRL)      |  | 2.0             |  | 1,827,500.00                           |  | (0.08      | )  
|Purchase Norwegian krone (NOK)   |  | 7.1             |  | 7.38                                   |  | 0.06       |    
|Purchase Japanese yen (JPY)      |  | 4.0             |  | 124.14                                 |  | (0.00)     | (2)
|Purchase Hungarian Forint (HUF)  |  | 0.7             |  | 236.45                                 |  | (0.00)     | (2)
|U.S. dollar (USD)                |  |                 |  |                                        |  |            |    
|Sale Mexican peso (MXP)          |  | 95.0            |  | 10.33                                  |  | 3.82       |    
|Sale South African rand (ZAR)    |  | 1.4             |  | 10.27                                  |  | (0.23      | )  
|Sale Brazilian real (BRL)        |  | 303.2           |  | 3.25                                   |  | 34.89      |    
|Sale Taiwan dollar (TWD)         |  | 13.7            |  | 34.76                                  |  | (0.14      | )  
|Sale Thai baht (THB)             |  | 5.9             |  | 43.41                                  |  | 0.03       |    
|Sale Indian rupee (INR)          |  | 12.8            |  | 52.84                                  |  | (0.56      | )  
|Sale Nuevo Sol (PEN)             |  | 3.0             |  | 3.61                                   |  | (0.06      | )  
|Purchase Malaysian ringgit (MYR) |  | 1.7             |  | 3.80                                   |  | 0.00       | (2)
|Purchase Philippine peso (PhP)   |  | 3.3             |  | 53.95                                  |  | 0.01       |    
|Singapore dollar (SGD)           |  |                 |  |                                        |  |            |    
|Sale Malaysian ringgit (MYR)     |  | 0.0             |  | 2.15                                   |  | 0.00       | (2)
|Malaysian ringgit (MYR)          |  |                 |  |                                        |  |            |    
|Sale Japanese yen (JPY)          |  | 1.2             |  | 0.03                                   |  | (0.03      | )  

---

The total volume of forward currency contracts increased from €5,052 million in 2001 to
€5,927 million as of December 31, 2002 due mainly to hedges of commercial paper denominated in USD. The total fair value of the outstanding forward contracts improved
from €(126) million at

153

---

December 31, 2001 to €180 million as of December 31, 2002 mainly due to the decline in the exchange rate for the US dollar.

Foreign Currency Options  December 31, 2001 (All Maturing in 2002)

|                                              |  | Contract Amount |  | Weighted Average
Option Strike Price |  | Fair Value |    
|--------------------------------------------- |  | --------------- |  | ------------------------------------ |  | ---------- | ---
|
|Japanese yen (JPY) put (buy)/euro (EUR) call  |  | 41              |  | 98.28                                |  | (0.2       | )  
|Japanese yen (JPY) call (sell)/euro (EUR) put |  | 36              |  | 109.02                               |  | 2.1        |    
|U.S. dollar (USD) put (buy)/euro (EUR) call   |  | 38              |  | 0.88                                 |  | (0.4       | )  
|U.S. dollar (USD) call (sell)/euro (EUR) put  |  | 38              |  | 0.91                                 |  | 0.0        | (1)

---

Foreign Currency Options  December 31, 2002

|                                              |  | Contract Amount |  | Weighted Average
Option Strike Price |  | Fair Value
|--------------------------------------------- |  | --------------- |  | ------------------------------------ |  | ----------
|
|Japanese yen (JPY) put (buy)/euro (EUR) call  |  |                |  |                                     |  |          
|Japanese yen (JPY) call (sell)/euro (EUR) put |  |                |  |                                     |  |          
|U.S. dollar (USD) put (buy)/euro (EUR) call   |  |                |  |                                     |  |          
|U.S. dollar (USD) call (sell)/euro (EUR) put  |  |                |  |                                     |  |          

The total volume of foreign currency options decreased from €153 million at December 31, 2001 to zero at
December 31, 2002 due to the expiration of all BASF's currency options. The total fair value of foreign currency options changed from €2 million to zero also due to the
expiration of all BASF's currency options.

154

---

Cross Currency Swaps  December 31, 2001

|                                                                    |  | Expected Maturity Date |  |          |  |          | 
|------------------------------------------------------------------- |  | ---------------------- |  | -------- |  | -------- | 
|
|
|
|Payment of U.S. dollar (USD)                                        |  |                        |  |          |  |          | 
|Notional amount                                                     |  | 154                    |  | 159      |  |          | 
|Average contract rate German mark (DEM) per U.S. dollar (USD)       |  | 1.41                   |  | 1.56     |  |          | 
|Payment of U.S. dollar (USD)                                        |  |                        |  |          |  |          | 
|Notional amount                                                     |  | 224                    |  | 490      |  | 407      | 
|Average contract rate U.S. dollar (USD) per euro (EUR)              |  | 0.89                   |  | 0.92     |  | 0.98     | 
|Payment of Dutch guilder (NLG)                                      |  |                        |  |          |  |          | 
|Notional amount                                                     |  | 3                      |  |          |  |          | 
|Average contract rate German mark (DEM) for 100 Dutch guilder (NLG) |  | 89.29                  |  |          |  |          | 
|Payment of Japanese yen (JPY)                                       |  |                        |  |          |  |          | 
|Notional amount                                                     |  |                        |  | 34       |  | 2        | 
|Average contract rate Japanese yen per euro (EUR)                   |  |                        |  | 94.60    |  | 107.75   | 
|Payment of Spanish peseta (ESP)                                     |  |                        |  |          |  |          | 
|Notional amount                                                     |  | 24                     |  |          |  |          | 
|Average contract German mark (DEM) for 100 Spanish peseta (ESP)     |  | 1.19                   |  |          |  |          | 
|Payment of Korean won (KRW)                                         |  |                        |  |          |  |          | 
|Notional amount                                                     |  |                        |  | 114      |  | 100      | 
|Average contract rate Korean won per U.S. dollar (USD)              |  |                        |  | 1,201.00 |  | 1,289.78 | 

Cross Currency Swaps  December 31, 2002

|                                                       |  | Expected Maturity Date |  |          |  |          | 
|------------------------------------------------------ |  | ---------------------- |  | -------- |  | -------- | 
|
|
|
|Payment of U.S. dollar (USD)                           |  |                        |  |          |  |          | 
|Notional amount                                        |  | 649                    |  | 407      |  | 488      | 
|Average contract rate U.S. dollar (USD) per euro (EUR) |  | 1.00                   |  | 0.98     |  | 1.04     | 
|Payment of Japanese yen (JPY)                          |  |                        |  |          |  |          | 
|Notional amount                                        |  | 34                     |  | 4        |  |          | 
|Average contract rate Japanese yen per euro (EUR)      |  | 94.60                  |  | 129.30   |  |          | 
|Payment of Korean won (KRW)                            |  |                        |  |          |  |          | 
|Notional amount                                        |  | 114                    |  | 100      |  | 93       | 
|Average contract rate Korean won per U.S. dollar (USD) |  | 1,201.00               |  | 1,289.78 |  | 1,220.00 | 

155

---

The total volume of cross currency swaps decreased from €3,081 million in 2001 to €3,058 million as
of December 31, 2002 due to expiration of transactions. The total fair value of the swaps changed from €(591) million in 2001 to €(116) million as
of December 31, 2002 mainly due to the decline in the exchange rate of the USD dollar.

Marketable Securities

As of December 31, 2002, 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 €150.2 million, which includes unrealized gains of €18.4 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 zero payment from the counterparties. The fair value of the
DAX-Libor-Swaps was €(44) million as of December 31, 2002.

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:



The
following measures are taken to avoid and manage risks in the purchase of raw materials:



156

---



The
following information related to all material contracts as of December 31, 2002

|                      |  | Contract
volumes or
Notional
amounts |  |      |  | Weighted-Average Rate |     |        |     |       
|--------------------- |  | ------------------------------------ |  | ---- |  | --------------------- | --- | ------ | --- | ------
|
|
|
|Naphtha Swaps         |  | 45,000 MT                            |  | 2003 |  |                       |     | 278.38 | (1) | 229.19
|Naphtha Call Options* |  | 480,000 MT                           |  | 2003 |  | 228.4                 | (3) |        |     |       
|Naphtha Put Options*  |  | 960,000 MT                           |  | 2003 |  | 215.9                 | (3) |        |     |       

---

157

---

Item 12.Description of Securities Other than Equity Securities

Not applicable.

158

---



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.

Item 15Controls 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 our
Chairman of the Board of Executive Directors, Dr. Jürgen F. Strube, and our Chief Financial Officer, Max Dietrich Kley. 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 were effective. 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.

Item 16.[Reserved]

159

---

(This
page has been left blank intentionally.)

---

PART III

Item 17.Financial Statements

Not applicable.

Item 18Financial 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-1 
|Consolidated Financial Statements |                                                                                                      |     
|                                  | Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000               |     
|                                  | Consolidated Balance Sheets at December 31, 2002 and 2001                                            |     
|                                  | Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000           |     
|                                  | Consolidated Statements of Stockholders' Equity for the years ended December 31, 2002, 2001 and 2000 |     
|                                  | Notes to the Consolidated Financial Statements                                                       |     

161

---

REPORT OF INDEPENDENT ACCOUNTANTS

We
have audited the accompanying consolidated balance sheets of BASF Aktiengesellschaft and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 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, 2002 and 2001 and net income
for each of the three years in the period ended December 31, 2002 to the extent summarized in Note 4 to the Consolidated Financial Statements.

Frankfurt
am Main,
February 28, 2003
Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft

|                  |  |                  
|----------------- |  | -----------------
|Kompenhans        |  | Dr. Beine        
|Wirtschaftsprüfer |  | Wirtschaftsprüfer

F-1

---



BASF GROUP        CONSOLIDATED STATEMENTS OF INCOME  (euros and dollars in millions except per share amounts)

|                                                                                                             |  |    |  | Year ended December 31, |          
|------------------------------------------------------------------------------------------------------------ |  | -- |  | ----------------------- | ---------
|
|Sales                                                                                                        |  |    |  | $                       | 34,096.2 
|Natural gas taxes                                                                                            |  |    |  |                         | (318.2   
|                                                                                                             |  |    |  |                         |          
|Sales, net of natural gas taxes                                                                              |  | 5  |  |                         | 33,778.0 
|Cost of sales                                                                                                |  |    |  |                         | (22,873.6
|                                                                                                             |  |    |  |                         |          
|Gross profit on sales                                                                                        |  |    |  |                         | 10,904.4 
|Selling expenses                                                                                             |  |    |  |                         | (4,994.9 
|General and administrative expenses                                                                          |  |    |  |                         | (734.4   
|Research and development expenses                                                                            |  |    |  |                         | (1,190.4 
|Other operating income                                                                                       |  | 6  |  |                         | 750.7    
|Other operating expenses                                                                                     |  | 7  |  |                         | (1,966.7 
|                                                                                                             |  |    |  |                         |          
|Income from operations                                                                                       |  |    |  |                         | 2,768.7  
|                                                                                                             |  |    |  |                         |          
|Expense/income from financial assets                                                                         |  |    |  |                         | 129.8    
|Write-downs of, and losses from, retirement of financial assets as well as securities held as current assets |  |    |  |                         | (32.7    
|Interest result                                                                                              |  |    |  |                         | (96.9    
|                                                                                                             |  |    |  |                         |          
|Financial result                                                                                             |  | 8  |  |                         | 0.2      
|                                                                                                             |  |    |  |                         |          
|Income from ordinary activities                                                                              |  |    |  |                         | 2,768.9  
|Extraordinary income                                                                                         |  | 9  |  |                         |         
|Income before taxes and minority interests                                                                   |  |    |  |                         | 2,768.9  
|Effect of the change in accounting principles for deferred taxes                                             |  | 2  |  |                         |         
|Income taxes                                                                                                 |  | 10 |  |                         | (1,092.7 
|                                                                                                             |  |    |  |                         |          
|Income before minority interests                                                                             |  |    |  |                         | 1,676.2  
|Minority interests                                                                                           |  | 11 |  |                         | 98.9     
|                                                                                                             |  |    |  |                         |          
|Net income                                                                                                   |  |    |  | $                       | 1,577.3  
|                                                                                                             |  |    |  |                         |          
|Earnings per share                                                                                           |  |    |  | $                       | 2.73     

---

Solely for the convenience of the reader, the 2002 financial information has been translated into U.S. dollars
using the December 31, 2002 noon buying rate of the Federal Reserve Bank of New York of $1.0485 = €1.00.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-2

---



BASF GROUP        CONSOLIDATED BALANCE SHEETS  (euros and dollars in millions)

|                                                |  |    |  | At December 31,
|----------------------------------------------- |  | -- |  | ---------------
|
|Assets                                          |  |    |  |                
|Intangible assets                               |  | 13 |  | $              
|Property, plant and equipment                   |  | 14 |  |                
|Financial assets                                |  | 15 |  |                
|                                                |  |    |  |                
|Fixed assets                                    |  |    |  |                
|                                                |  |    |  |                
|Inventories                                     |  | 16 |  |                
|Accounts receivable, trade                      |  |    |  |                
|Receivables from affiliated companies           |  |    |  |                
|Miscellaneous receivables and other assets      |  |    |  |                
|                                                |  |    |  |                
|Receivables and other assets                    |  | 17 |  |                
|                                                |  |    |  |                
|Marketable securities                           |  | 18 |  |                
|Cash and cash equivalents                       |  |    |  |                
|                                                |  |    |  |                
|Liquid funds                                    |  |    |  |                
|                                                |  |    |  |                
|Current assets                                  |  |    |  |                
|                                                |  |    |  |                
|Deferred taxes                                  |  | 10 |  |                
|Prepaid expenses                                |  | 19 |  |                
|                                                |  |    |  |                
|Total assets                                    |  |    |  |                
|                                                |  |    |  |                
|Stockholders' equity and liabilities            |  |    |  |                
|Subscribed capital                              |  | 20 |  |                
|Capital surplus                                 |  | 20 |  |                
|Retained earnings                               |  | 21 |  |                
|Currency translation adjustment                 |  |    |  |                
|Minority interests                              |  | 22 |  |                
|                                                |  |    |  |                
|Stockholders' equity                            |  |    |  |                
|                                                |  |    |  |                
|Provisions for pensions and similar obligations |  | 23 |  |                
|Provisions for taxes                            |  |    |  |                
|Other provisions                                |  | 24 |  |                
|                                                |  |    |  |                
|Provisions                                      |  |    |  |                
|                                                |  |    |  |                
|Bonds and other liabilities to capital market   |  | 25 |  |                
|Liabilities to credit institutions              |  | 25 |  |                
|Accounts payable, trade                         |  |    |  |                
|Liabilities to affiliated companies             |  |    |  |                
|Miscellaneous liabilities                       |  | 25 |  |                
|                                                |  |    |  |                
|Liabilities                                     |  |    |  |                
|                                                |  |    |  |                
|Deferred income                                 |  |    |  |                
|                                                |  |    |  |                
|Total stockholders' equity and liabilities      |  |    |  | $              
|                                                |  |    |  |                

---

Solely for the convenience of the reader, the 2002 financial information has been translated into U.S. dollars using the
December 31, 2002 noon buying rate of the Federal Reserve Bank of New York of $1.0485 = €1.00.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-3

---



BASF GROUP        CONSOLIDATED STATEMENTS OF CASH FLOWS*  (euros and dollars in millions)

|                                                                     |                                            | Year ended December 31, |         
|-------------------------------------------------------------------- | ------------------------------------------ | ----------------------- | --------
|
|Net income (excluding extraordinary income)                          |                                            | $                       | 1,577.4 
|Depreciation and amortization of fixed assets                        |                                            |                         | 2,622.9 
|Changes in pension provisions/prepaid pension assets and other items |                                            |                         | (350.2  
|Net gains from disposal of fixed assets and marketable securities    |                                            |                         | (342.0  
|Changes in inventories                                               |                                            |                         | (217.5  
|Changes in receivables                                               |                                            |                         | (11.3   
|Changes in other operating liabilities and provisions                |                                            |                         | (854.1  
|                                                                     |                                            |                         |         
|Cash provided by operating activities                                |                                            |                         | 2,425.2 
|                                                                     |                                            |                         |         
|Payments related to tangible and intangible fixed assets             |                                            |                         | (2,527.3
|Payments related to financial assets and securities                  |                                            |                         | (410.5  
|Payments related to acquisitions                                     |                                            |                         | (280.2  
|Proceeds from divestitures                                           |                                            |                         | 5.7     
|Proceeds from the disposal of fixed assets and securities            |                                            |                         | 943.4   
|                                                                     |                                            |                         |         
|Cash used in investing activities                                    |                                            |                         | (2,268.9
|                                                                     |                                            |                         |         
|Proceeds from capital increases                                      |                                            |                         | 40.2    
|Share repurchase                                                     |                                            |                         | (524.0  
|Proceeds from the addition of financial
indebtedness                 |                                            |                         | 3,279.5 
|Repayment of financial indebtedness                                  |                                            |                         | (2,189.3
|Dividends paid                                                       |                                            |                         |         
|                                                                     | to shareholders of BASF Aktiengesellschaft |                         |         
|                                                                     | to minority shareholders                   |                         |         
|                                                                     |                                            |                         |         
|Cash used in financing activities                                    |                                            |                         | (277.9  
|                                                                     |                                            |                         |         
|Net change in cash and cash equivalents                              |                                            |                         | (121.6  
|                                                                     |                                            |                         |         
|Effects on cash and cash equivalents from foreign exchange rates     |                                            |                         | (14.3   
|                                                                     | from changes in scope of consolidation     |                         |         
|Cash and cash equivalents as of beginning of year                    |                                            |                         | 377.4   
|                                                                     |                                            |                         |         
|Cash and cash equivalents as of end of year                          |                                            |                         | 241.8   
|                                                                     |                                            |                         |         
|Marketable securities                                                |                                            |                         | 138.2   
|                                                                     |                                            |                         |         
|Liquid funds as shown on the balance sheet                           |                                            | $                       | 380.0   
|                                                                     |                                            |                         |         

---

Solely for the convenience of the reader, the 2002 financial information has been translated into U.S. dollars using the
December 31, 2002 noon buying rate of the Federal Reserve Bank of New York of $1.0485 = €1.00.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-4

---



BASF GROUP        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (euros in millions)

|2002                                                                                        |  | Number of
subscribed
shares
outstanding |   | Subscribed
capital |         | Capital
surplus |   | Retained
earnings |  | Currency
translation
adjustment |          | Minority
interests |   | Total
stockholders'
equity |  
|------------------------------------------------------------------------------------------- |  | --------------------------------------- | - | ------------------ | ------- | --------------- | - | ----------------- |  | ------------------------------- | -------- | ------------------ | - | -------------------------- | -
|January 1, 2002                                                                             |  | 583,401,370                             |   | €                  | 1,493.5 |                 | € | 2,913.9           |  | €                               | 12,222.4 |                    | € | 532.3                      |  
|Share buy-back and cancellation of own shares including own shares intended to be cancelled |  | (13,085,000                             | ) |                    | (33.5   | )               |   | 33.5              |  |                                 | (499.8   | )                  |   |                           |  
|Dividends paid                                                                              |  |                                        |   |                    |        |                 |   |                  |  |                                 | (758.4   | )                  |   |                           |  
|Net income                                                                                  |  |                                        |   |                    |        |                 |   |                  |  |                                 | 1,504.4  |                    |   |                           |  
|(Decrease)/increase of foreign currency translation adjustments                             |  |                                        |   |                    |        |                 |   |                  |  |                                 |         |                    |   | (862.0                     | )
|Capital injection by minority interests                                                     |  |                                        |   |                    |        |                 |   |                  |  |                                 |         |                    |   |                            |  
|Changes in scope of consolidation and other changes                                         |  | 40                                      |   |                    |        |                 |   |                  |  |                                 | (0.4     | )                  |   |                           |  
|                                                                                            |  |                                         |   |                    |         |                 |   |                   |  |                                 |          |                    |   |                            |  
|December 31, 2002                                                                           |  | 570,316,410                             |   | €                  | 1,460.0 |                 | € | 2,947.4           |  | €                               | 12,468.2 |                    | € | 329.7                      |  
|                                                                                            |  |                                         |   |                    |         |                 |   |                   |  |                                 |          |                    |   |                            |  

|2001                                                                                                                                                              |  | Number of
subscribed
shares
outstanding |   | Subscribed
capital |         | Capital
surplus |   | Retained
earnings |  | Currency
translation
adjustment |          | Minority
interests |   | Total
stockholders'
equity |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | - | ------------------ | ------- | --------------- | - | ----------------- |  | ------------------------------- | -------- | ------------------ | - | -------------------------- | -
|January 1, 2001                                                                                                                                                   |  | 607,399,370                             |   | €                  | 1,554.9 |                 | € | 2,745.7           |  | €                               | 8,851.1  |                    | € | 661.8                      |  
|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. |  | 6,777,000                               |   |                    | 17.4    |                 |   | 89.4              |  |                                 |         |                    |   |                           |  
|Share buy-back and cancellation of own shares including own shares intended to be cancelled                                                                       |  | (30,775,000                             | ) |                    | (78.8   | )               |   | 78.8              |  |                                 | (1,299.5 | )                  |   |                           |  
|Dividends paid                                                                                                                                                    |  |                                        |   |                    |        |                 |   |                  |  |                                 | (1,214.1 | )                  |   |                           |  
|Net income                                                                                                                                                        |  |                                        |   |                    |        |                 |   |                  |  |                                 | 5,858.2  |                    |   |                           |  
|(Decrease)/increase of foreign currency translation adjustments                                                                                                   |  |                                        |   |                    |        |                 |   |                  |  |                                 |         |                    |   | (129.5                     | )
|Capital injection by minority interests                                                                                                                           |  |                                        |   |                    |        |                 |   |                  |  |                                 |         |                    |   |                           |  
|Changes in scope of consolidation and other changes                                                                                                               |  |                                        |   |                    |        |                 |   |                  |  |                                 | 26.7     |                    |   |                           |  
|                                                                                                                                                                  |  |                                         |   |                    |         |                 |   |                   |  |                                 |          |                    |   |                            |  
|December 31, 2001                                                                                                                                                 |  | 583,401,370                             |   | €                  | 1,493.5 |                 | € | 2,913.9           |  | €                               | 12,222.4 |                    | € | 532.3                      |  
|                                                                                                                                                                  |  |                                         |   |                    |         |                 |   |                   |  |                                 |          |                    |   |                            |  

|2000                                                                                                                                                              |  | Number of
subscribed
shares
outstanding |   | Subscribed
capital |         | Capital
surplus |   | Retained
earnings |  | Currency
translation
adjustment |         | Minority
interests |   | Total
stockholders'
equity | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | - | ------------------ | ------- | --------------- | - | ----------------- |  | ------------------------------- | ------- | ------------------ | - | -------------------------- | 
|January 1, 2000                                                                                                                                                   |  | 620,984,640                             |   | €                  | 1,589.7 |                 | € | 2,675.2           |  | €                               | 9,001.7 |                    | € | 549.3                      | 
|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. |  | 2,271,230                               |   |                    | 5.8     |                 |   | 29.9              |  |                                 |        |                    |   |                           | 
|Share buy-back and cancellation of own shares                                                                                                                     |  | (15,856,500                             | ) |                    | (40.6   | )               |   | 40.6              |  |                                 | (699.8  | )                  |   |                           | 
|Dividends paid                                                                                                                                                    |  |                                        |   |                    |        |                 |   |                  |  |                                 | (694.7  | )                  |   |                           | 
|Net income                                                                                                                                                        |  |                                        |   |                    |        |                 |   |                  |  |                                 | 1,239.8 |                    |   |                           | 
|(Decrease)/increase of foreign currency translation adjustments                                                                                                   |  |                                        |   |                    |        |                 |   |                  |  |                                 |        |                    |   | 112.5                      | 
|Capital injection by minority interests                                                                                                                           |  |                                        |   |                    |        |                 |   |                  |  |                                 |        |                    |   |                           | 
|Changes in scope of consolidation and other changes                                                                                                               |  |                                        |   |                    |        |                 |   |                  |  |                                 | 4.1     |                    |   |                           | 
|                                                                                                                                                                  |  |                                         |   |                    |         |                 |   |                   |  |                                 |         |                    |   |                            | 
|December 31, 2000                                                                                                                                                 |  | 607,399,370                             |   | €                  | 1,554.9 |                 | € | 2,745.7           |  | €                               | 8,851.1 |                    | € | 661.8                      | 
|                                                                                                                                                                  |  |                                         |   |                    |         |                 |   |                   |  |                                 |         |                    |   |                            | 

---

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-5

---



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, 2002, which was $1.0485 = €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 50% joint ventures 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:

2002

2001

2000Consolidated companies as of January 1

154

170

150thereof proportional consolidation

11

6

16First-time consolidations

7

27

41thereof proportional consolidation



5

Deconsolidations

6

43

21thereof proportional consolidation





10Consolidated as of December 31

155

154

170thereof proportional consolidation

11

11

6


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 joint ventures and associated companies are accounted for using the
equity method.

F-6

---

Associated companies represent those entities where the Company has a participation of at least 20% and exercises a significant influence over the operating and financial policies.

2002

2001

2000Affiliated companies

21

24

22Joint ventures

1

1

3Other associated companies

4

3

326

28

28


Major changes to the scope of consolidation, other than those relating to corporate structure, are as follows:

2002:

First-time consolidations comprise:



Deconsolidations
comprise:



2001:

First-time consolidations comprise:



Deconsolidations
comprise:



F-7

---



2000:

First-time consolidations comprise:



Deconsolidations
comprise primarily:



Changes
in the scope of consolidation, acquisitions and divestitures had the following effects on the changes in the Consolidated Financial Statements:

2002

2001

2000(euros in millions)Sales

€
(210
)
(0.6)%

€
(2,649
)
(7.4)%

€
(702
)
(2.4)%Thereof:Acquisitions


118

0.4


1,486

4.1


1,056

3.6Divestitures


(404
)
(1.2
)

(4,452
)
(12.4
)

(1,919
)
(6.5
)Changes in scope of consolidation


76

0.2


317

0.9


161

0.5Fixed assets


705.3

3.3


(522.6
)
(2.4
)

5,140.7

32.0thereof property, plant and equipment


414.5

2.9


155.4

1.1


633.5

5.1Inventories and receivables


49.2

0.3


(1,105.4
)
(6.9
)

1,357.5

10.9Liquid funds


24.1

3.2


(261.0
)
(30.0
)

4.6

0.3Assets

€
778.6

2.1%

€
(1,889.0
)
(4.9)%

€
6,502.8

21.7%Stockholders' equity


(19.5
)
(0.1
)

5,690.6

39.8


343.3

2.4Financial liabilities


285.7

10.1


(5,654.2
)
(71.6
)

5,855.6

452.4Other liabilities


512.4

3.1


(1,925.4
)
(11.8
)

303.9

2.1Stockholders' equity and liabilities

€
778.6

2.1%

€
(1,889.0
)
(4.9)%

€
6,502.8

21.7%


Significant acquisitions

On July 1, 2000, the Company acquired the worldwide crop protection business of American Home Products Corp. (AHP). This business manufactures a wide range
of herbicides, insecticides, fungicides and biotechnology products for the professional and industrial markets around the world. It operates 14 production facilities for active ingredients and
formulations worldwide.

F-8

---

For
accounting purposes, the acquisition has been treated as a purchase, and, accordingly, the results of operations of the acquired business are included in the accompanying financial
statements beginning July 1, 2000. The Company has integrated this business into its Agricultural Products segment. Goodwill after allocation of the purchase price to identifiable assets and
liabilities is amortized over 20 years on a straight-line basis.

The
following unaudited pro forma data summarize the results of operations for the year 2000, as if the above acquisition had been completed as of the beginning of this period. The pro
forma data give effect to actual operating results prior to the acquisition, adjusted to include the pro forma effect of interest expense, amortization of intangibles and income taxes. The 2000 pro
forma data include a one-time cost of €344 million related to the integration of the business. The pro forma results do not include any anticipated cost savings from
the combination of the crop protection businesses of AHP and BASF. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition
occurred as of the beginning of the periods presented or that may be obtained in the future.

2000Net sales

€
37,130.7Income from operations


3,381.7Net income


1,351.8Earnings per share (German GAAP)


2.20


The effects on a pro forma basis of 2002 and 2001 acquisitions on net sales, net income and basic and diluted earnings per share were not
material.

Announced acquisitions and divestitures

In October 2002, BASF Aktiengesellschaft and Bayer CropScience AG agreed on the acquisition of a portfolio of crop protection products and the related
production facilities in Elbeuf, France, for a consideration of approximately €1.2 billion. The portfolio generated net sales of approximately
€500 million in 2001. The transaction is subject to approval of the involved antitrust authorities.

In
January 2003, BASF and Honeywell International Inc, Morris Township, NJ, signed definitive agreements for two transactions. BASF will acquire Honeywell's engineering plastics
business, which generated net sales of approximately €400 million in 2002. BASF will divest to Honeywell its nylon fibers business with net sales of approximately
€380 million in 2002. This asset swap involves a cash payment of $170 million by BASF and of $80 million by Honeywell within one year of the transaction's close.
Both transactions are subject to regulatory approval.

Proportional consolidation

The Company accounts for its investments in 11 joint ventures (2001: 11, 2000: 6) using the proportional consolidation method, as permitted under German
GAAP. Under U.S. GAAP, all investments in joint ventures 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.

F-9

---

Condensed
financial information relating to the Company's pro rata interest in joint ventures accounted for using the proportional consolidation method is as follows:

Year ended December 31,Statement of income information2001

2000

1999(euros in millions)Sales

€
1,719.5

€
1,809.4

€
2,732.3Gross profit


169.0


165.4


314.6Income from operations


92.3


82.9


164.5Income before taxes and minority interests


108.6


101.7


199.6Net income


87.6


81.5


137.7


As of December 31,Balance sheet information2002

2001(euros in millions)Fixed assets

€
950.5

€
851.0thereof property, plants, and equipment


857.5


755.3Inventories and receivables


451.6


614.2Liquid funds


26.4


64.8Total assets

€
1,428.5

€
1,530.0Stockholders' equity

€
508.6

€
459.4Provisions


139.1


179.4Financial liabilities


59.8


59.1Other liabilities


721.0


832.1Total liabilities and stockholders' equity

€
1,428.5

€
1,530.0


Year ended December 31,Cash flow information2002

2001

2000(euros in millions)Cash provided by operating activities

€
125.6

€
180.9

€
68.7Cash used in investing activities


(155.0
)

(382.5
)

(13.9
)Cash used in (provided by) financing activities


2.8


168.0


(50.5
)Net change in cash and cash equivalents

€
(26.6
)
€
(33.6
)
€
5.8


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, Basell Group (BASF's share: 50%), DyStar Group (BASF's share:
30%), Svalöf Weibull

F-10

---

Group (BASF's share: 40%) and, from 2002 onward, the Solvin Group (BASF's share: 25%) is as follows:

Year ended December 31,Statement of income information2002

2001

2000(euros in millions)Sales

€
7,944.9

€
7,708.0

€
2,820.0Gross profit


1,283.8


688.7


428.0Income from operations


197.7


(222.7
)

(101.7
)Income before taxes and minority interests


96.8


(315.9
)

178.0Net income


67.6


(218.1
)

(135.9
)BASF's share of net income


19.8


(108.2
)

(59.9
)


As of December 31,Balance sheet information2002

2001(euros in millions)Fixed assets

€
5,812.3

€
5,900.1thereof property, plants, and equipment


3,843.5


3,789.7Inventories and receivables


2,506.3


2,380.3Liquid funds


251.2


226.9Total assets

€
8,569.8

€
8,507.3Stockholders' equity

€
3,933.8

€
3,800.6Provisions


956.6


865.4Financial liabilities


2,088.2


2,265.5Other liabilities


1,591.2


1,575.8Total liabilities and stockholders' equity

€
8,569.8

€
8,507.3BASF's investment

€
1,816.7

€
1,799.6


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, 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.

F-11

---

Eliminations:Transactions between consolidated companies are eliminated in full, and those for joint
ventures on a pro rata basis. Inter-company profits resulting from sales between consolidated companies are eliminated unless they originate from the construction of plants under customary market
conditions and are of minor significance. With regard to the companies accounted for under the equity method, inter-company profits resulting from sales on customary market conditions are not
eliminated because the amounts are insignificant or because determining them would involve a disproportionate amount of effort.

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 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 12 years for 2002 and 11 years for 2001 based on the following expected
useful lives:

Estimated lives2002

2001(years)Goodwill

5 - 20

5 - 20Product rights and licenses

3 - 10

3 - 10Marketing, supply and similar rights

4 - 20

4 - 20Know-how and patents

3 - 15

5 - 15Concessions, explorations rights and similar rights

3 - 25

3 - 25Software

1 -  5

2 -  5Other rights and values

5 - 30

5 - 25


Goodwill is assigned to reporting units and tested annually for impairment from 2002 onward 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 amount, 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 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 4g).

The
Company evaluates the other intangible assets whenever significant events or changes in circumstances occur which might impair recovery of recorded asset costs.

F-12

---

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. Movable depreciable
fixed assets that are functionally integrated are treated as a single asset item.

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 2001 are mostly depreciated by the declining balance method, with a change to straight-line depreciation
when this results in higher depreciation amounts (see Note 2).

The
weighted average periods of depreciation are as follows for 2002 and 2001:

Estimated lives2002

2001(years)Buildings and structural installations

22

23Industrial plant and machinery

11

10Long-distance natural gas pipelines

25

25Working and office equipment and other facilities

7

10


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.

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

F-13

---

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, pension funds,
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.

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 mainly comprise 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. Beginning in 2001, deferred taxes have been recorded for tax
loss carryforwards (see Note 2). 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 corporation 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, expected to be incurred within the first three months of the following year. The
amount provided is based on reasonable commercial judgment.

F-14

---

Environmental
expenditures that relate to an existing condition caused by past operations and prescribed by current legal requirements that do not have future economic benefit are
expensed. 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 recultivation associated with oil and gas operations, especially the filling of wells and clearance of oilfields, or the operation of
landfill sites are built up in installments 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 partial retirement programs, the present
value of promised top-up payments are set aside in full 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 partial retirement 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' incentive share program "plus" is described in detail in Note 27.

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 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 which
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 28.

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 is the functional currency of BASF subsidiaries and joint ventures in North America, Japan, Korea,
China, Brazil, and Singapore. Translation therefore takes place using the balance sheet method. Balance sheet items are translated to euros at year-end rates except equity accounts

F-15

---

at historical rates. Expenses and income are translated at monthly average rates 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 outside the eurozone. 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.

Reclassifications:Certain reclassifications have been made to the prior periods to conform to the
2002 presentation.

2.    Change in accounting principles

The accounting and valuation principles were changed in 2001 as follows:

Additions
of movable assets to property, plant and equipment 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-16

---

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

2001

2000(euros in millions)Sales

€
364

€
2,526Income from operations


30


243Income before taxes


31


260Net income/income from discontinued operations


19


156


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). According to U.S. GAAP, this gain would be adjusted for
U.S. GAAP valuation differences and reported as part of income from discontinued operations.

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.

F-17

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

Reconciliation of net income to U.S. GAAP

|                                                                                                             |  |     |  | Year ended December 31, |        
|------------------------------------------------------------------------------------------------------------ |  | --- |  | ----------------------- | -------
|
|
|Net income as reported in the Consolidated Financial Statements of income under German GAAP                  |  |     |  | $                       | 1,577.3
|Adjustments required to conform with U.S. GAAP:                                                              |  |     |  |                         |        
|Capitalization of interest                                                                                   |  | (a) |  |                         | (6.7   
|Capitalization of software developed for internal use                                                        |  | (b) |  |                         | 32.0   
|Valuation of pension funds                                                                                   |  | (c) |  |                         | 74.7   
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates |  | (d) |  |                         | (150.9 
|Valuation of securities at market values                                                                     |  | (e) |  |                         |       
|Valuation adjustments relating to companies accounted for under the equity method                            |  | (f) |  |                         | 13.5   
|Reversal of goodwill amortization and write-offs due to permanent impairment                                 |  | (g) |  |                         | 221.2  
|Other adjustments                                                                                            |  | (h) |  |                         | (0.5   
|Deferred taxes and recognition of tax credit for dividend payments                                           |  | (i) |  |                         | 50.4   
|Minority interests                                                                                           |  | (j) |  |                         | (10.9  
|                                                                                                             |  |     |  |                         |        
|Net income in accordance with U.S. GAAP                                                                      |  |     |  | $                       | 1,800.1
|                                                                                                             |  |     |  |                         |        

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. For computing diluted earnings per share, interest
expense on convertible bonds, net of taxes, has been added to net income.

The
BASF employee participation program "plus" has been included in the computation of diluted earnings per share. Due to a resolution by the Board of Executive Directors in 2002, the
gain from the exercise of options from the BASF stock option program (BOP) for senior management had no dilutive effect, because the gain from the exercise of options is paid in cash.

F-18

---

Options
outstanding are potential common stock but were not included in the computation of earnings per share in 2002 and 2001 as their effect was anti-dilutive.

|                                        |                                                                  | Year ended December 31,
|--------------------------------------- | ---------------------------------------------------------------- | -----------------------
|
|
|Net income in accordance with U.S. GAAP |                                                                  | $                      
|                                        |                                                                  |                        
|thereof:                                |                                                                  |                        
|                                        | Income (loss) from continuing operations                         |                        
|                                        | Income from discontinued operations including gain from disposal |                        
|                                        | Cumulative effect of implementing SFAS 133 as of Jan. 1, 2001    |                        

|Number of shares (thousands)                                          |                                                                 | 2002    |   | 2001    |   | 2000   
|--------------------------------------------------------------------- | --------------------------------------------------------------- | ------- | - | ------- | - | -------
|Weighted average shares outstanding                                   |                                                                 | 579,118 |   | 602,586 |   | 612,806
|Dilutive Effects:                                                     |                                                                 |         |   |         |   |        
|                                                                      | Incremental shares from assumed conversion of convertible bonds |         |  |         |  |        
|Weighted average shares outstanding, adjusted for dilutive securities |                                                                 | 579,118 |   | 602,586 |   | 621,581

|                                                      |                                                                  | Year ended December 31,
|----------------------------------------------------- | ---------------------------------------------------------------- | -----------------------
|
|
|Basic earnings per share in accordance with U.S. GAAP |                                                                  | $                      
|                                                      | (Loss) income from continuing operations                         |                        
|                                                      | Income from discontinued operations including gain from disposal |                        
|                                                      | Cumulative effect of implementing SFAS 133 as of Jan. 1, 2001    |                        
|                                                      | Diluted earnings per share in accordance with U.S. GAAP          |                        

F-19

---

Reconciliation of stockholders' equity to U.S. GAAP

|                                                                                                             |  |     |  | Year ended December 31, |         
|------------------------------------------------------------------------------------------------------------ |  | --- |  | ----------------------- | --------
|
|
|Stockholders' equity as reported in the Consolidated Balance Sheets under German GAAP                        |  |     |  | $                       | 17,763.9
|Minority interests                                                                                           |  |     |  |                         | (415.5  
|                                                                                                             |  |     |  |                         |         
|Stockholders' equity excluding minority interests                                                            |  |     |  |                         | 17,348.4
|Adjustments required to conform with U.S. GAAP:                                                              |  |     |  |                         |         
|Capitalization of interest                                                                                   |  | (a) |  |                         | 569.1   
|Capitalization of software developed for internal use                                                        |  | (b) |  |                         | 202.2   
|Valuation of pension funds                                                                                   |  | (c) |  |                         | 958.3   
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates |  | (d) |  |                         | (120.7  
|Valuation of securities at market values                                                                     |  | (e) |  |                         | 105.5   
|Valuation adjustments relating to companies accounted for under the equity method                            |  | (f) |  |                         | 145.0   
|Reversal of goodwill amortization and write- offs due to permanent impairment                                |  | (g) |  |                         | 217.5   
|Other adjustments                                                                                            |  | (h) |  |                         | 113.1   
|Deferred taxes and recognition of tax credit for dividend payments                                           |  | (i) |  |                         | (722.2  
|Minority interests                                                                                           |  | (j) |  |                         | (27.3   
|                                                                                                             |  |     |  |                         |         
|Stockholders' equity in accordance with U.S. GAAP                                                            |  |     |  | $                       | 18,788.9
|                                                                                                             |  |     |  |                         |         

(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 beginning in 1999 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)    Valuation of pension funds: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.

F-20

---

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 pension 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 according to U.S. GAAP that is not recorded in the Consolidated Financial Statements under German GAAP.

Net
periodic pension cost according to 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:

|                                                |  | 2002 |         | 2001
|----------------------------------------------- |  | ---- | ------- | ----
|
|Plan assets as of December 31,                  |  | €    | 3,527.9 |     
|Projected benefit obligation as of December 31, |  |      | 3,413.1 |     
|                                                |  |      |         |     
|Funded status                                   |  |      | 114.8   |     
|Unrecognized actuarial losses                   |  |      | 593.3   |     
|                                                |  |      |         |     
|Prepaid pension asset                           |  | €    | 708.1   |     
|                                                |  |      |         |     

The valuation of certain pension plans of foreign subsidiaries, according to 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, €205.9 million in 2002 and €209.0 million in
2001 were included in the reconciliation to U.S. GAAP.

(d)    Accounting for derivatives at fair value and valuation of long-term foreign currency items:Beginning in 2001, derivative contracts are to be accounted for at fair values as required by SFAS 133 and 138. 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, 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.

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 lower extent than applied in these financial
statements.

(e)    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 non-permanent 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

F-21

---

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.

(f)    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.

(g)    Reversal of goodwill amortization and write-offs due to permanent impairment:Goodwill is
amortized over its useful life in accordance with German GAAP. The new U.S. GAAP standard
SFAS 142 "Goodwill and other Intangible Assets," which was enacted in June 2001 and has to be applied for the first time in 2002 only requires write-offs in case of expected
permanent impairment of value. The goodwill amortizations included in these financial statements have to be reversed and added back to net income. Write-offs due to impairment were not
necessary.

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 income taxes. Earnings per share would have increased by €0.40 in 2001. The increase in 2000 would have been €290.9;
accounting for deferred taxes of €88.4 million, earnings per share would have increased by €0.47.

(h)    Other adjustments:This item primarily includes the reversal of maintenance provisions and reclassification
of provisions for stock compensation. German GAAP requires companies to accrue provisions as of the end of the year for the 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
€6.4 million in 2002, €(5.6) million in 2001, and €(1.4) in 2000; the amounts in the reconciliation of stockholders' equity were
€33.7 million in 2002 and €27.3 million in 2001.

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. Under U.S. GAAP, 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 a reduction in net income in accordance with U.S. GAAP 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 still recorded as additions to stockholders' equity.

Overall,
the issuance of option rights resulted in an increase in stockholders' equity of €11.2 million in 2002 and €30.2 million in 2001.

(i)    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

F-22

---

Financial Statements and the carrying amount for tax purposes. Resulting adjustments for deferred taxes primarily relate to the following:

|                                                                                                             |  |     |  | Stockholders' equity |        | Net income |  
|------------------------------------------------------------------------------------------------------------ |  | --- |  | -------------------- | ------ | ---------- | -
|
|
|Capitalization of interest                                                                                   |  | (a) |  | €                    | (196.6 | )          | €
|Capitalization of software developed for internal use                                                        |  | (b) |  |                      | (73.0  | )          |  
|Valuation of pension funds                                                                                   |  | (c) |  |                      | (333.0 | )          |  
|Accounting for derivatives at fair value and valuation of long-term foreign currency items at year end rates |  | (d) |  |                      | 30.1   |            |  
|Valuation of securities at market values                                                                     |  | (e) |  |                      |       |            |  
|Valuation adjustments relating to companies accounted for under the equity method                            |  | (f) |  |                      |       |            |  
|Reversal of goodwill amortization and write-offs due to permanent impairment                                 |  | (g) |  |                      | (59.7  | )          |  
|Other adjustments                                                                                            |  | (h) |  |                      | 67.6   |            |  
|Recognition of tax credit for dividend payments                                                              |  | (i) |  |                      | (124.2 | )          |  
|                                                                                                             |  |     |  |                      |        |            |  
|                                                                                                             |  |     |  | €                    | (688.8 | )          | €
|                                                                                                             |  |     |  |                      |        |            |  

Other adjustments include in 2001 expenses from the elimination of deferred taxes on tax loss carryforwards, which are recorded in the financial
statement since 2001.

The
change of the deferred taxes for foreign currency translation adjustments is recognized in other comprehensive income.

In
accordance with German GAAP, the tax credit related to the distribution of retained earnings previously taxed at higher rates is accounted for as a reduction of income tax expense in
the financial year for which the distribution has been recommended. The revised corporation tax system in Germany starting in 2001 recognizes such credits as a reduction of income taxes payable in the
year the dividend is paid.

According
to 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. In 2001,
this led to a deferral of the recognition of the reduction of taxes of €126.4 million to the
dividend payment in 2002. In 2002, the impact on net income of €2.2 million includes the realization of the tax credits for 2001 and the deferral of the reduction of taxes for
the proposed dividend for the year 2002 to 2003.

(j)    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

F-23

---

non-consolidated subsidiaries for 2002, 2001 and 2000, 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 unconsolidated companies on net sales, net income, assets and liabilities would have been immaterial.

New U.S. GAAP accounting standards not yet adopted

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143
addresses financial accounting and reporting for obligations and costs associated with the retirement of tangible long-lived assets and has to be adopted in the fiscal year 2003 for the
first time. 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 production as
additional costs 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.

In
June 2002 the FASB issued SFAS 146 "Accounting for Costs Associated with Exit and Disposal Activities", which has to be adopted for the first time in the fiscal year
2003. The expected costs associated with the exit or disposal of business activities can only be accrued when a liability against a third party exists. This includes severance payments for employees,
the cancellation of contracts, the shut-down of production facilities and the relocation of employees.

BASF
is verifying the effects of the adoption of SFAS 143 and SFAS 146 on the net sales, net income, assets and liabilities of the BASF Group.

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.

F-24

---

Comprehensive income

|                                                                            |                | Year ended December 31, |         
|--------------------------------------------------------------------------- | -------------- | ----------------------- | --------
|
|
|Net income in accordance with U.S. GAAP (before other comprehensive income) |                | €                       | 1,716.9 
|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                               |                |                         | (1,090.7
|                                                                            |                |                         |         
|Comprehensive income, net of tax                                            |                | €                       | 626.2   
|                                                                            |                |                         |         

Statement of stockholders' equity

|                                                                                          |                | Year ended December 31, |         
|----------------------------------------------------------------------------------------- | -------------- | ----------------------- | --------
|
|
|Stockholders' equity according to U.S. GAAP before accumulated other comprehensive income |                | €                       | 18,226.7
|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 pension                                                  |                |                         |         
|                                                                                          | Gross          |                         |         
|                                                                                          | Deferred taxes |                         |         
|                                                                                          |                |                         |         
|Accumulated other comprehensive income:                                                   |                |                         | (306.9  
|                                                                                          |                |                         |         
|Total stockholders' equity according to U.S. GAAP including comprehensive income          |                | €                       | 17,919.8
|                                                                                          |                |                         |         

F-25

---

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,
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 figures for 2000 have been restated.

The
business segment Chemicals contains the operating divisions Inorganics, Petrochemicals and Intermediates.

The
business segment Plastics & Fibers includes the operating divisions Styrenics, Performance Polymers and Polyurethanes.

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 and 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 research of €197 million in 2002 (2001:
€202 million; 2000: €168 million). "Other" also includes net losses from foreign currency transactions of €(143) million in 2002,
€(35) million in 2001 and €(42) million in 2000, which are related to financial indebtedness and foreign currency derivitives, and are not allocatable 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-26

---

BASF GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                                                     |            |   |       |      |   |       |     | Agricultural Products & Nutrition |       |      |   |       |       |   |      
|---------------------------------------------------- | ---------- | - | ----- | ---- | - | ----- | --- | --------------------------------- | ----- | ---- | - | ----- | ----- | - | -----
|
|
|Net sales                                            |            | € | 5,317 |      | € | 8,477 |     | €                                 | 8,014 |      | € | 4,924 |       | € | 2,954
|                                                     | Change (%) |   |       | 18.3 |   |       | 3.6 |                                   |       | (1.7 | ) |       | (15.5 | ) |      
|Intersegmental transfers                             |            |   | 2,598 |      |   | 436   |     |                                   | 326   |      |   | 44    |       |   | 21   
|                                                     |            |   |       |      |   |       |     |                                   |       |      |   |       |       |   |      
|Sales including transfers                            |            |   | 7,915 |      |   | 8,913 |     |                                   | 8,340 |      |   | 4,968 |       |   | 2,975
|Income from operations                               |            |   | 635   |      |   | 582   |     |                                   | 646   |      |   | 55    |       |   | 61   
|                                                     | Change (%) |   |       | 75.4 |   |       |    |                                   |       |     |   |       |       |   |      
|Assets                                               |            |   | 4,997 |      |   | 6,174 |     |                                   | 5,218 |      |   | 6,484 |       |   | 5,092
|Return on operational assets (%)                     |            |   | 12.9  |      |   | 9.3   |     |                                   | 11.5  |      |   | 0.8   |       |   | 1.1  
|Research and development expense                     |            |   | 98    |      |   | 138   |     |                                   | 222   |      |   | 367   |       |   | 285  
|Additions to tangible and intangible fixed assets    |            |   | 495   |      |   | 636   |     |                                   | 288   |      |   | 245   |       |   | 88   
|Depreciation of tangible and intangible fixed assets |            |   | 507   |      |   | 532   |     |                                   | 488   |      |   | 538   |       |   | 395  

F-27

---

BASF GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                                                     |            |   |       |       |   |       |       |   |       | Agricultural Products & Nutrition |   |       |       |   |       |      |  
|---------------------------------------------------- | ---------- | - | ----- | ----- | - | ----- | ----- | - | ----- | --------------------------------- | - | ----- | ----- | - | ----- | ---- | -
|
|
|Net sales                                            |            | € | 4,494 |       | € | 8,185 |       | € | 8,154 |                                   | € | 5,826 |       | € | 3,478 |      | €
|                                                     | Change (%) |   |       | (0.2  | ) |       | (25.8 | ) |       | (3.1                              | ) |       | (13.0 | ) |       | 43.2 |  
|Intersegmental transfers                             |            |   | 2,452 |       |   | 406   |       |   | 322   |                                   |   | 62    |       |   | 30    |      |  
|                                                     |            |   |       |       |   |       |       |   |       |                                   |   |       |       |   |       |      |  
|Sales including transfers                            |            |   | 6,946 |       |   | 8,591 |       |   | 8,476 |                                   |   | 5,888 |       |   | 3,508 |      |  
|Income from operations                               |            |   | 362   |       |   | (2    | )     |   | 99    |                                   |   | (162  | )     |   | 18    |      |  
|                                                     | Change (%) |   |       | (43.4 | ) |       |      |   |       | (83.1                             | ) |       | 21.0  |   |       |     |  
|Assets                                               |            |   | 4,847 |       |   | 6,344 |       |   | 6,048 |                                   |   | 7,865 |       |   | 6,377 |      |  
|Return on operational assets (%)                     |            |   | 8.0   |       |   |      |       |   | 1.6   |                                   |   |      |       |   | 0.3   |      |  
|Research and development expenses                    |            |   | 109   |       |   | 146   |       |   | 197   |                                   |   | 497   |       |   | 345   |      |  
|Additions to tangible and intangible fixed assets    |            |   | 929   |       |   | 891   |       |   | 418   |                                   |   | 349   |       |   | 130   |      |  
|Depreciation of tangible and intangible fixed assets |            |   | 457   |       |   | 679   |       |   | 661   |                                   |   | 715   |       |   | 496   |      |  

---

*    until
the end of February 2001

F-28

---

BASF GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                                                     |            |   |       |      |   |        |      | Agricultural Products & Nutrition |       |       |   |        |      |  
|---------------------------------------------------- | ---------- | - | ----- | ---- | - | ------ | ---- | --------------------------------- | ----- | ----- | - | ------ | ---- | -
|
|
|Net sales                                            |            | € | 4,504 |      | € | 11,030 |      | €                                 | 8,418 |       | € | 6,693  |      | €
|                                                     | Change (%) |   |       | 36.9 |   |        | 27.8 |                                   |       | 11.5  |   |        | 20.0 |  
|Intersegmental transfers                             |            |   | 2,408 |      |   | 510    |      |                                   | 314   |       |   | 83     |      |  
|                                                     |            |   |       |      |   |        |      |                                   |       |       |   |        |      |  
|Sales including transfers                            |            |   | 6,912 |      |   | 11,540 |      |                                   | 8,732 |       |   | 6,776  |      |  
|Income from operations                               |            |   | 640   |      |   | 902    |      |                                   | 586   |       |   | (205   | )    |  
|                                                     | Change (%) |   |       | 1.7  |   |        | 37.5 |                                   |       | (17.2 | ) |        | 65.4 |  
|Assets                                               |            |   | 4,232 |      |   | 6,086  |      |                                   | 6,266 |       |   | 10,203 |      |  
|Return on operational assets (%)                     |            |   | 16.8  |      |   | 13.9   |      |                                   | 10.4  |       |   |       |      |  
|Research and development expense                     |            |   | 112   |      |   | 172    |      |                                   | 198   |       |   | 821    |      |  
|Additions to tangible and intangible fixed assets    |            |   | 774   |      |   | 633    |      |                                   | 1,332 |       |   | 3,464  |      |  
|Depreciation of tangible and intangible fixed assets |            |   | 455   |      |   | 692    |      |                                   | 554   |       |   | 845    |      |  

F-29

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

Geographical segment data

|                                                     |  | Europe |        | Thereof
Germany |   | North
America
(NAFTA) |   | South
America |        | Asia, Pacific
Area, Africa |   | Total |  
|---------------------------------------------------- |  | ------ | ------ | --------------- | - | --------------------- | - | ------------- | ------ | -------------------------- | - | ----- | -
|
|2002                                                 |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Location of customers                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  | €      | 17,697 |                 | € | 6,944                 |   | €             | 7,808  |                            | € | 1,660 |  
|Change (%)                                           |  |        | (1.6   | )               |   | (3.7                  | ) |               | 2.0    |                            |   | (24.1 | )
|Share (%)                                            |  |        | 55     |                 |   | 22                    |   |               | 24     |                            |   | 5     |  
|Location of companies                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  |        | 18,987 |                 |   | 13,315                |   |               | 7,932  |                            |   | 1,347 |  
|Sales including transfers                            |  |        | 21,471 |                 |   | 15,588                |   |               | 8,465  |                            |   | 1,449 |  
|Income from operations                               |  |        | 2,357  |                 |   | 1,690                 |   |               | 23     |                            |   | 58    |  
|Assets                                               |  |        | 19,665 |                 |   | 13,438                |   |               | 9,299  |                            |   | 1,316 |  
|Additions to tangible and intangible fixed assets    |  |        | 1,997  |                 |   | 1,008                 |   |               | 373    |                            |   | 88    |  
|Depreciation of tangible and intangible fixed assets |  |        | 1,317  |                 |   | 855                   |   |               | 812    |                            |   | 80    |  
|2001                                                 |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Location of customers                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  | €      | 17,984 |                 | € | 7,212                 |   | €             | 7,654  |                            | € | 2,188 |  
|Change (%)                                           |  |        | (10.5  | )               |   | (8.7                  | ) |               | (9.1   | )                          |   | (12.5 | )
|Share (%)                                            |  |        | 55     |                 |   | 22                    |   |               | 24     |                            |   | 7     |  
|Location of companies                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  |        | 19,399 |                 |   | 13,417                |   |               | 7,772  |                            |   | 1,842 |  
|Sales including transfers                            |  |        | 21,652 |                 |   | 15,512                |   |               | 8,440  |                            |   | 1,927 |  
|Income from operations                               |  |        | 1,926  |                 |   | 1,347                 |   |               | (678   | )                          |   | (3    | )
|Assets                                               |  |        | 19,296 |                 |   | 13,318                |   |               | 10,616 |                            |   | 2,201 |  
|Additions to tangible and intangible fixed assets    |  |        | 1,539  |                 |   | 933                   |   |               | 759    |                            |   | 144   |  
|Depreciation of tangible and intangible fixed assets |  |        | 1,445  |                 |   | 935                   |   |               | 1,149  |                            |   | 85    |  
|2000                                                 |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Location of customers                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  | €      | 20,103 |                 | € | 7,897                 |   | €             | 8,419  |                            | € | 2,500 |  
|Change (%)                                           |  |        | 18.3   |                 |   | 13.9                  |   |               | 24.3   |                            |   | 35.7  |  
|Share (%)                                            |  |        | 56     |                 |   | 22                    |   |               | 23     |                            |   | 7     |  
|Location of companies                                |  |        |        |                 |   |                       |   |               |        |                            |   |       |  
|Sales                                                |  |        | 22,203 |                 |   | 14,457                |   |               | 8,441  |                            |   | 2,127 |  
|Sales including transfers                            |  |        | 24,444 |                 |   | 16,549                |   |               | 8,929  |                            |   | 2,232 |  
|Income from operations                               |  |        | 2,577  |                 |   | 1,864                 |   |               | 99     |                            |   | 233   |  
|Assets                                               |  |        | 20,612 |                 |   | 13,836                |   |               | 11,364 |                            |   | 2,479 |  
|Additions to tangible and intangible fixed assets    |  |        | 2,674  |                 |   | 1,298                 |   |               | 3,294  |                            |   | 431   |  
|Depreciation of tangible and intangible fixed assets |  |        | 1,653  |                 |   | 1,100                 |   |               | 899    |                            |   | 105   |  

F-30

---

6.    Other operating income

|                                                        |  | 2002 |       | 2001 |   | 2000 
|------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|
|Release and adjustment of provisions                    |  | €    | 107.2 |      | € | 164.4
|Income from miscellaneous revenue-generating activities |  |      | 114.5 |      |   | 115.9
|Gains from foreign currency transactions                |  |      | 41.8  |      |   | 173.7
|Gains from foreign currency conversion                  |  |      | 152.6 |      |   | 78.9 
|Gains from disposal of assets                           |  |      | 22.6  |      |   | 91.7 
|Other                                                   |  |      | 277.3 |      |   | 256.9
|                                                        |  |      |       |      |   |      
|                                                        |  | €    | 716.0 |      | € | 881.5
|                                                        |  |      |       |      |   |      

Release and adjustments of provisionsrelate principally to environmental protection and
remediation provisions, sales and purchase provisions, shutdown and restructuring provisions, litigation and claims provisions, maintenance provision, provisions for risks from tax audit 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 2002 are 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. Gains in 2000 arose primarily from the sale of the Novolen® polypropylene technology of Targor GmbH and
the Kraton® polymer business of Elenac GmbH.

Otherincludes write offs of valuation allowances on receivables, miscellaneous sales and various other sundry items.

F-31

---

7.    Other operating expenses

|                                                                                                                                                       |  | 2002 |         | 2001 |   | 2000   
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|
|Integration measures, reorganization and shutdowns                                                                                                     |  | €    | 276.6   |      | € | 1,006.6
|Environmental protection and safety measures, costs of demolition of fixed assets and costs related to the preparation of capital expenditure projects |  |      | 269.1   |      |   | 260.8  
|Costs from miscellaneous revenue-generating activities                                                                                                 |  |      | 112.1   |      |   | 122.5  
|Losses from foreign currency transactions                                                                                                              |  |      | 258.7   |      |   | 282.2  
|Losses from foreign currency conversion                                                                                                                |  |      | 68.2    |      |   | 33.0   
|Goodwill amortization                                                                                                                                  |  |      | 211.8   |      |   | 252.0  
|Losses from disposal of assets                                                                                                                         |  |      | 25.7    |      |   | 30.8   
|Other                                                                                                                                                  |  |      | 653.5   |      |   | 938.5  
|                                                                                                                                                       |  |      |         |      |   |        
|                                                                                                                                                       |  | €    | 1,875.7 |      | € | 2,926.4
|                                                                                                                                                       |  |      |         |      |   |        

Integration measures, reorganization and shutdownsin 2002 are mainly related to the closure of
the ethylene oxide and glycol plants in the NAFTA region, efficiency improvement measures associated with the Site Concept at the Ludwigshafen production site and several measures in the Agricultural
Products and Nutrition Segment.

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.

In
2000, charges of €344.2 million related in particular to the integration of the crop protection business of AHP, which was acquired in 2000. The charges
comprise severance payments resulting from workforce reductions, the write-off of research in process included in goodwill, and, additional charges resulting from the sale of inventory
whose base had been stepped-up as part of the purchase price allocation. Further expenses were related to the restructuring of the Pharmaceuticals segment.

Environmental protection measuresof €10.3 million in 2002, €20.7 million in 2001 and
€13.2 million in 2000 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 charges relating in particular to amortization of intangible assets as well as various other items. In 2002, provisions of
€100 million for damage claims associated with antitrust violations in the vitamins business were included.

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

---

In
2000, expenses for litigations and claims relate primarily to sanctions and compensation payments associated with the vitamins antitrust proceedings in the United States and various
other countries along with payments resulting from lawsuits involving the drug Synthroid®.

8.    Financial result

|                                                                                                            |                                   | Year ended December 31 |       
|----------------------------------------------------------------------------------------------------------- | --------------------------------- | ---------------------- | ------
|
|
|Income from participating interests and similar income                                                      |                                   | €                      | 131.8 
|                                                                                                            | thereof from affiliated companies |                        |       
|Income from profit transfer agreements                                                                      |                                   |                        | 10.3  
|Losses from loss transfer agreements                                                                        |                                   |                        | (8.1  
|Losses from companies accounted for under the equity method                                                 |                                   |                        | (10.2 
|                                                                                                            |                                   |                        |       
|Net income (loss) from financial assets                                                                     |                                   |                        | 123.8 
|                                                                                                            |                                   |                        |       
|Write-down of, and losses from, retirement of financial assets as well as securities held as current assets |                                   |                        | (31.2 
|                                                                                                            |                                   |                        |       
|Income from other securities and financial assets                                                           |                                   |                        | 17.2  
|                                                                                                            | thereof from affiliated companies |                        |       
|Other interest, income from sale of marketable securities and similar income                                |                                   |                        | 274.0 
|                                                                                                            | thereof from affiliated companies |                        |       
|Interest and similar expenses                                                                               |                                   |                        | (383.6
|                                                                                                            | thereof to affiliated companies   |                        |       
|                                                                                                            |                                   |                        |       
|Interest result                                                                                             |                                   |                        | (92.4 
|                                                                                                            |                                   |                        |       
|Financial result                                                                                            |                                   | €                      | 0.2   
|                                                                                                            |                                   |                        |       

In 2002, income from participating interests and similar income includes 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 €87.7 million in 2002 (2001: €67.6 million, 2000:
€27.8 million) as well as income from the release of negative goodwill of €2.0 million in 2001 as well as in 2000 are included in income (losses) from
companies accounted for under the equity method.

The
income (losses) from companies accounted for under the equity method includes 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.

Other
interest, income from the sale of marketable securities and similar income includes gains from the sale of securities and swaps of €243 million in 2002
(2001: €0 million, 2000: €129 million). In 2002, charges from the valuation of DAX-Libor Swaps at lower market values of
€48 million have been netted with interest income. As of the balance sheet date, the present value of the future interest payments based on Libor is higher than the higher value
of the DAX call option rights.

F-33

---

9.    Extraordinary income

2001(euros in millions)Extraordinary revenues

€
8,793.9Extraordinary expenses


2,673.1Extraordinary income

€
6,120.8


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

|                                                                                     |                                              | 2002 |         | 2001 |   | 2000    |      
|------------------------------------------------------------------------------------ | -------------------------------------------- | ---- | ------- | ---- | - | ------- | -----
|
|German corporation tax                                                               |                                              | €    | 389.8   |      | € | 449.1   |      
|German trade income tax                                                              |                                              |      | 65.9    |      |   | 104.9   |      
|Foreign income tax                                                                   |                                              |      | 261.5   |      |   | 242.7   |      
|Income taxes on oil-producing operations non-compensable with German corporation tax |                                              |      | 427.1   |      |   | 487.1   |      
|Refunds/loss carry back                                                              |                                              |      | (53.8   | )    |   | (32.7   | )    
|                                                                                     |                                              |      |         |      |   |         |      
|Current taxes                                                                        |                                              |      | 1,090.5 |      |   | 1,251.1 |      
|Deferred taxes                                                                       |                                              |      | (48.3   | )    |   | (296.6  | )    
|                                                                                     |                                              |      |         |      |   |         |      
|Income taxes                                                                         |                                              | €    | 1,042.2 |      | € | 954.5   |      
|                                                                                     |                                              |      |         |      |   |         |      
|Other taxes                                                                          |                                              |      | 168.4   |      |   | 174.6   |      
|                                                                                     |                                              |      |         |      |   |         |      
|Tax expense                                                                          |                                              | €    | 1,210.6 |      | € | 1,129.1 |      
|                                                                                     | thereof income taxes on extraordinary income |      |         |     |   |         | 145.0
|                                                                                     |                                              |      |         |      |   |         |      

Other taxes includes real estate taxes and other comparable taxes; they are shown under the appropriate expense items of the statement of income.

The
regional breakdown of income before taxes from ordinary activities was as follows:

2002

2001

2000(euros in millions)Germany

€
1,858.2

€
970.1

€
1,736.4Foreign


782.7


(361.4
)

1,091.0€
2,640.9

€
608.7

€
2,827.4


From the beginning of 2001, a federal German corporation tax of 25% plus a 5.5% solidarity surcharge is levied on corporate income. This tax
charge is final; the imputation system has been terminated.

F-34

---

In
2000, retained corporate income in Germany was subject to a federal corporation income tax of 40%. Additionally, a solidarity surcharge of 5.5% was levied on the federal German
corporation tax. Upon distribution of a dividend the federal German corporation tax rate was reduced to 30%.

In
addition to corporation tax, earnings generated in Germany are subject to a trade income tax that varies depending on the municipality where the industrial activities take place.
After accounting for trade income tax, which is a deductible operating expense, BASF has a weighted average tax rate
of 15.3%. Because German trade income tax is deductible, it also reduces the assessment basis for corporation 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 30% in 2002, 34% in 2001 and 28% in 2000. The reduction of German corporation tax resulted in an €132 million charge in 2000 shown below in
"Other."

Income
from foreign sources which is distributed in the form of a dividend to the parent company is generally exempt from additional German corporation taxes through double taxation
treaties. 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 corporation 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.

F-35

---

Reconciliation from the statutory tax rate in Germany to the effective tax rate:

|                                                                                                                       |  | 2002 |         | 2001 |       | 2000 |  
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | ----- | ---- | -
|
|
|German corporation tax (excluding extraordinary income in 2001)                                                        |  | €    | 660.2   |      | 25.0% |      | €
|Solidarity surcharge                                                                                                   |  |      | 20.5    |      | 0.8   |      |  
|Credit for dividend distribution                                                                                       |  |      | (124.2  | )    | (4.7  | )    |  
|German trade income tax net of corporation tax                                                                         |  |      | 49.5    |      | 1.9   |      |  
|Foreign tax-rate differential                                                                                          |  |      | 37.1    |      | 1.4   |      |  
|Non-taxable income                                                                                                     |  |      | (190.8  | )    | (7.2  | )    |  
|Non-deductible expenses, including amortization of goodwill                                                            |  |      | 130.6   |      | 4.9   |      |  
|Loss from companies accounted for under the equity method                                                              |  |      | 2.6     |      | 0.1   |      |  
|Refund of taxes                                                                                                        |  |      | (53.8   | )    | (2.0  | )    |  
|Income taxes on oil-producing operations non-compensable with German corporation tax                                   |  |      | 427.2   |      | 16.2  |      |  
|Other                                                                                                                  |  |      | 83.3    |      | 3.1   |      |  
|                                                                                                                       |  |      |         |      |       |      |  
|Income taxes/effective tax rate                                                                                        |  | €    | 1,042.2 |      | 39.5% |      | €
|                                                                                                                       |  |      |         |      |       |      |  
|Cumulative effect of capitalization of deferred tax assets for tax loss carryforwards of prior years                   |  |      |        |      |      |      |  
|Income taxes, including the cumulative effect of the change in accounting for deferred taxes on tax loss carryforwards |  |      | 1,042.2 |      | 39.5  |      |  

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-36

---

Deferred
tax assets or liabilities relate to the following items:

|                                                |  | 2002 |         | 2001 |  
|----------------------------------------------- |  | ---- | ------- | ---- | -
|
|Intangible assets                               |  | €    | (29.1   | )    | €
|Property, plant and equipment                   |  |      | (311.3  | )    |  
|Financial assets                                |  |      | (20.1   | )    |  
|Inventories and accounts receivable             |  |      | 52.7    |      |  
|Provisions for pensions and similar obligations |  |      | 78.7    |      |  
|Other provisions and liabilities                |  |      | 581.4   |      |  
|Loss carryforwards                              |  |      | 647.1   |      |  
|Securities and others                           |  |      | 260.5   |      |  
|Valuation allowances                            |  |      | (55.7   | )    |  
|                                                |  |      |         |      |  
|Total                                           |  | €    | 1,204.2 |      | €
|                                                |  |      |         |      |  
|thereof short-term                              |  |      | 493.2   |      |  
|                                                |  |      |         |      |  
|Deferred tax liabilities                        |  |      |         |      |  
|Property, plant and equipment                   |  |      | 323.7   |      |  
|Intangible assets                               |  |      | 73.7    |      |  
|Other                                           |  |      | 40.0    |      |  
|                                                |  |      |         |      |  
|Total                                           |  | €    | 437.4   |      | €
|                                                |  |      |         |      |  
|thereof short-term                              |  |      | 29.4    |      |  
|                                                |  |      |         |      |  

Deferred tax liabilities are included in "provisions for taxes" in the Consolidated Balance Sheets. The regional distribution of tax loss
carryforwards is as follows:

|                       |  | 2002 |         | 2001
|---------------------- |  | ---- | ------- | ----
|
|Tax loss carryforwards |  |      |         |     
|German subsidiaries    |  | €    | 5.5     |     
|Foreign subsidiaries   |  |      | 2,085.4 |     
|                       |  |      |         |     
|                       |  | €    | 2,090.9 |     
|                       |  |      |         |     

German tax losses may currently be carried forward indefinitely. Foreign loss carryforwards exist primarily within the NAFTA region. These may be
carried forward until 2022.

Valuation
allowances were made to deferred taxes in the amount of €138.5 million in 2002 and €83.4 million in 2001. Of the total amount,
€97.8 million in 2002 and €76.3 million in 2001 were due to tax loss carryforwards.

11.    Minority interests

|                              |  | 2002 |       | 2001 |   | 2000 
|----------------------------- |  | ---- | ----- | ---- | - | -----
|
|Minority interests in profits |  | €    | 125.0 |      | € | 91.7 
|Minority interests in losses  |  |      | 30.7  |      |   | 124.3
|                              |  |      |       |      |   |      
|                              |  | €    | 94.3  |      | € | (32.6
|                              |  |      |       |      |   |      

F-37

---

Minority interests in profits in 2002 and 2001 relate primarily to the Group companies engaged in trading and distribution of natural gas.
Minority interests in losses in 2002 are mainly related to BASF SONATRACH PropanChem S.A., Tarragona, Spain.

Minority
interests in losses in 2001 and 2000 relate mainly to BASF PETRONAS Chemicals Sdn. Bhd., Petaling Jaya, Malaysia and BASF FINA Petrochemicals Ltd., Port Arthur, Texas. In
2000, minority interests in profits related furthermore to Knoll Pharmaceuticals Ltd., India, and Yangzi-BASF Styrenics Company Ltd., Nanjing, China.

See
Note 22 for a detailed analysis of consolidated subsidiaries with minority shareholdings.

12.    Other information

Personnel costs

|                                                                       |                      | 2002 |         | 2001  |   | 2000   
|---------------------------------------------------------------------- | -------------------- | ---- | ------- | ----- | - | -------
|
|Wages and salaries                                                     |                      | €    | 4,751.3 |       | € | 4,857.8
|Social security contributions and expenses for pensions and assistance |                      |      | 1,223.6 |       |   | 1,170.2
|                                                                       | thereof for pensions |      |         | 424.2 |   |        
|                                                                       |                      |      |         |       |   |        
|                                                                       |                      | €    | 5,974.9 |       | € | 6,028.0
|                                                                       |                      |      |         |       |   |        

German Group companies incurred costs for employee representatives to comply with statutory regulations of €11.3 million in
2002 (2001: €9.9 million, 2000: €10.4 million).

Average number of employees

|                           |                                     | Fully consolidated companies |        | Proportionally
consolidated companies
|-------------------------- | ----------------------------------- | ---------------------------- | ------ | -------------------------------------
|
|Europe                     |                                     | 62,461                       |        | 64,068                               
|                           | thereof Germany                     |                              | 50,504 |                                      
|North America (NAFTA)      |                                     | 13,661                       |        | 15,007                               
|South America              |                                     | 5,391                        |        | 6,088                                
|Asia, Pacific Area, Africa |                                     | 8,389                        |        | 8,660                                
|                           |                                     |                              |        |                                      
|BASF Group                 |                                     | 89,902                       |        | 93,823                               
|                           |                                     |                              |        |                                      
|                           | thereof with trainee contracts      |                              | 2,752  |                                      
|                           | thereof with limited-term contracts |                              | 1,838  |                                      

The above number of employees of proportionally consolidated companies are given in full; if they are taken into account at 50%, the average
number of personnel for the Company was 90,899 in 2002, 94,744 in 2001 and 105,784 in 2000.

F-38

---

Compensation for the Board of Executive Directors and Supervisory Board of BASF Aktiengesellschaft

|                                                                                                        |  | 2002 |      | 2001 |   | 2000
|------------------------------------------------------------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|Supervisory Board emoluments                                                                            |  | €    | 2.2  |      | € | 2.0 
|Board of Executive Directors emoluments                                                                 |  |      | 13.6 |      |   | 9.3 
|Pension for former members of the Board of Executive Directors and their surviving dependents           |  |      | 5.0  |      |   | 4.8 
|Pension provisions for former member of the Board of Executive Directors and their surviving dependents |  |      | 55.7 |      |   | 57.3
|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    |  |      |     |      |   |    

In 2002, the aggregate amount for compensation paid to the members of the Board of Executive Directors was €13.6 million.
Of this amount, €4.4 million was accounted for by fixed annual payment and €9.2 million by variable performance-related bonuses. The main 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
2002, the members of the Board of Executive Directors were also granted 107,980 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 434,798 options. In 2002, the issue of options resulted in additional personnel costs totaling
€2.7 million. Of this amount, €0.3 million was related to options issued in 2002 and €2.4 million to options issued in 1999 through
2001. These options are accrued as personnel costs over the vesting period.

In
2002, the exercising of options granted in 1999 resulted in cash payments totaling €1.7 million to members of the Board of Executive Directors and
€1.1 million to previous members or their surviving dependants. The cash payment does not influence personnel costs associated with the issuing of options. See Note 27
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."

Additional information on statements of cash flows

Cash generated from operating activities was derived after interest payments of €281.8 million in 2002,
€428.9 million in 2001 and €472.2 million in 2000. Income taxes paid totaled €411.3 million in 2002,
€528.2 million in 2001 and €839.0 million in 2000.

F-39

---

13.    Intangible assets

|                                       |  | Concessions,
trademarks and
similar rights
and values |         | Goodwill |   | Advance
payments |   | Total |      
|-------------------------------------- |  | ----------------------------------------------------- | ------- | -------- | - | ---------------- | - | ----- | -----
|
|Acquisition costs                      |  |                                                       |         |          |   |                  |   |       |      
|Balance as of January 1, 2002          |  | €                                                     | 2,403.3 |          | € | 3,269.0          |   | €     | 8.1  
|Change in scope of consolidation       |  |                                                       |        |          |   | 0.3              |   |       |     
|Additions                              |  |                                                       | 288.3   |          |   | 83.8             |   |       | 5.5  
|Disposals                              |  |                                                       | 91.2    |          |   | 8.4              |   |       |     
|Transfers*                             |  |                                                       | (141.6  | )        |   | (395.0           | ) |       | 0.2  
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Balance as of December 31, 2002        |  |                                                       | 2,458.8 |          |   | 2,949.7          |   |       | 13.8 
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Amortization                           |  |                                                       |         |          |   |                  |   |       |      
|Balance as of January 1, 2002          |  |                                                       | 971.7   |          |   | 764.8            |   |       | 1.2  
|Change in scope of consolidation       |  |                                                       |        |          |   | 0.2              |   |       |     
|Additions                              |  |                                                       | 240.6   |          |   | 211.8            |   |       |     
|Disposals                              |  |                                                       | 87.0    |          |   | 4.8              |   |       |     
|Transfers*                             |  |                                                       | (45.4   | )        |   | (95.4            | ) |       |     
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Balance as of December 31, 2002        |  |                                                       | 1,079.9 |          |   | 876.6            |   |       | 1.2  
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Net book value as of December 31, 2002 |  | €                                                     | 1,378.9 |          | € | 2,073.1          |   | €     | 12.6 
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Acquisition costs                      |  |                                                       |         |          |   |                  |   |       |      
|Balance as of January 1, 2001          |  | €                                                     | 3,247.5 |          | € | 3,419.1          |   | €     | 27.8 
|Change in scope of consolidation       |  |                                                       | 33.2    |          |   | 45.6             |   |       |     
|Additions                              |  |                                                       | 216.6   |          |   | 53.0             |   |       | 6.1  
|Disposals                              |  |                                                       | 1,184.8 |          |   | 326.8            |   |       | 4.3  
|Transfers*                             |  |                                                       | 90.8    |          |   | 78.1             |   |       | (21.5
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Balance as of December 31, 2001        |  |                                                       | 2,403.3 |          |   | 3,269.0          |   |       | 8.1  
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Amortization                           |  |                                                       |         |          |   |                  |   |       |      
|Balance as of January 1, 2001          |  |                                                       | 1,364.4 |          |   | 790.5            |   |       | 1.3  
|Change in scope of consolidation       |  |                                                       | 1.9     |          |   | 4.3              |   |       |     
|Additions                              |  |                                                       | 365.0   |          |   | 252.0            |   |       |     
|Disposals                              |  |                                                       | 793.9   |          |   | 295.0            |   |       |     
|Transfers*                             |  |                                                       | 34.3    |          |   | 13.0             |   |       | (0.1 
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Balance as of December 31, 2001        |  |                                                       | 971.7   |          |   | 764.8            |   |       | 1.2  
|                                       |  |                                                       |         |          |   |                  |   |       |      
|Net book value as of December 31, 2001 |  | €                                                     | 1,431.6 |          | € | 2,504.2          |   | €     | 6.9  
|                                       |  |                                                       |         |          |   |                  |   |       |      

---

Additions in 2002 primarily include concessions for oil and gas production in the Dutch North Sea from the acquisition of Clyde Netherlands B.V.
and Clyde Petroleum Exploratie B.V., the Hague, the Netherlands. Additions in 2001 include the purchase of the vitamins business of Takeda Chemical Industries Ltd., Japan.

F-40

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

Disposals and transfers in 2001 are mainly due to the sale of the pharmaceuticals business. Write-downs in 2001 were mainly made for expected permanent value
impairments of €86.3 million of production technology and supply rights related to a superabsorbents plant in Birkenhead, United Kingdom. This plant was heavily damaged in an
explosion and the replacement plant built at the Antwerp site is based on a different technology.

14.  Property, plant and equipment

|                                       |  | Land, land rights and buildings including buildings on land owned by others |         | Machinery and
technical
equipment |   | Miscellaneous
equipment
and fixtures |   | Advance
payments and
construction in
progress |         | Total |  
|-------------------------------------- |  | --------------------------------------------------------------------------- | ------- | --------------------------------- | - | ------------------------------------ | - | --------------------------------------------- | ------- | ----- | -
|
|Acquisition costs                      |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of January 1, 2002          |  | €                                                                           | 6,706.0 |                                   | € | 28,568.1                             |   | €                                             | 2,922.5 |       | €
|Change in scope of consolidation       |  |                                                                             | 21.4    |                                   |   | 13.8                                 |   |                                               | 2.6     |       |  
|Additions                              |  |                                                                             | 96.5    |                                   |   | 780.3                                |   |                                               | 144.8   |       |  
|Disposals                              |  |                                                                             | 109.9   |                                   |   | 500.3                                |   |                                               | 244.3   |       |  
|Transfers*                             |  |                                                                             | (225.7  | )                                 |   | 369.8                                |   |                                               | (45.6   | )     |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of December 31, 2002        |  |                                                                             | 6,488.3 |                                   |   | 29,231.7                             |   |                                               | 2,780.0 |       |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Depreciation                           |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of January 1, 2002          |  |                                                                             | 3,848.9 |                                   |   | 20,692.7                             |   |                                               | 2,343.2 |       |  
|Change in scope of consolidation       |  |                                                                             | 0.6     |                                   |   | 8.1                                  |   |                                               | 1.7     |       |  
|Additions                              |  |                                                                             | 210.1   |                                   |   | 1,587.2                              |   |                                               | 211.2   |       |  
|Disposals                              |  |                                                                             | 75.7    |                                   |   | 477.4                                |   |                                               | 229.1   |       |  
|Transfers*                             |  |                                                                             | (169.7  | )                                 |   | (1,027.9                             | ) |                                               | (75.7   | )     |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of December 31, 2002        |  |                                                                             | 3,814.2 |                                   |   | 20,782.7                             |   |                                               | 2,251.3 |       |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Net book value as of December 31, 2002 |  | €                                                                           | 2,674.1 |                                   | € | 8,449.0                              |   | €                                             | 528.7   |       | €
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Acquisition costs                      |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of January 1, 2001          |  | €                                                                           | 6,736.9 |                                   | € | 26,688.0                             |   | €                                             | 3,441.8 |       | €
|Change in scope of consolidation       |  |                                                                             | 215.1   |                                   |   | 132.3                                |   |                                               | 29.6    |       |  
|Additions                              |  |                                                                             | 158.8   |                                   |   | 781.5                                |   |                                               | 130.6   |       |  
|Disposals                              |  |                                                                             | 591.7   |                                   |   | 837.5                                |   |                                               | 687.6   |       |  
|Transfers*                             |  |                                                                             | 186.9   |                                   |   | 1,803.8                              |   |                                               | 8.1     |       |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of December 31, 2001        |  |                                                                             | 6,706.0 |                                   |   | 28,568.1                             |   |                                               | 2,922.5 |       |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Depreciation                           |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of January 1, 2001          |  |                                                                             | 3,828.9 |                                   |   | 19,435.4                             |   |                                               | 2,687.9 |       |  
|Change in scope of consolidation       |  |                                                                             | 90.7    |                                   |   | 73.3                                 |   |                                               | 19.4    |       |  
|Additions                              |  |                                                                             | 241.8   |                                   |   | 1,792.6                              |   |                                               | 247.0   |       |  
|Disposals                              |  |                                                                             | 318.1   |                                   |   | 666.7                                |   |                                               | 546.5   |       |  
|Transfers*                             |  |                                                                             | 5.6     |                                   |   | 58.1                                 |   |                                               | (64.6   | )     |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Balance as of December 31, 2001        |  |                                                                             | 3,848.9 |                                   |   | 20,692.7                             |   |                                               | 2,343.2 |       |  
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  
|Net book value as of December 31, 2001 |  | €                                                                           | 2,857.1 |                                   | € | 7,875.4                              |   | €                                             | 579.3   |       | €
|                                       |  |                                                                             |         |                                   |   |                                      |   |                                               |         |       |  

---

Impairment losses in 2002 in the amount of €51.4 million were due to dry holes at Wintershall AG. Impairment losses in 2001
of €179.3 million relate to a superabsorbents plant in Birkenhead, United Kingdom, which was heavily damaged in an explosion as well as to a site in Arnhem, the

F-41

---

Netherlands, and various sites in North America whose closure has been decided as a consequence of their unsatisfactory earnings potentials.

15.  Financial assets

|Developments in 2002
Participations and securities held as fixed
assets |  | Shares in
affiliated
companies |       | Shares in
associated
companies |   | Shares in
participating
interests |   | Securities
held as
fixed assets |       | Participations
and securities
held as fixed
assets
(subtotal) |  
|----------------------------------------------------------------------- |  | ------------------------------ | ----- | ------------------------------ | - | --------------------------------- | - | ------------------------------- | ----- | ------------------------------------------------------------- | -
|
|Acquisition costs                                                       |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of January 1, 2002                                           |  | €                              | 605.1 |                                | € | 1,870.7                           |   | €                               | 232.7 |                                                               | €
|Change in scope of consolidation                                        |  |                                | 12.2  |                                |   |                                  |   |                                 |      |                                                               |  
|Additions                                                               |  |                                | 80.0  |                                |   | 23.4                              |   |                                 | 39.0  |                                                               |  
|Disposals                                                               |  |                                | 29.3  |                                |   | 1.8                               |   |                                 | 1.7   |                                                               |  
|Transfers*                                                              |  |                                | 16.0  |                                |   | (43.5                             | ) |                                 | 9.2   |                                                               |  
|                                                                        |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of December 31, 2002                                         |  |                                | 684.0 |                                |   | 1,848.8                           |   |                                 | 279.2 |                                                               |  
|                                                                        |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Accumulated depreciation                                                |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of January 1, 2002                                           |  |                                | 31.8  |                                |   | 1.0                               |   |                                 | 1.4   |                                                               |  
|Change in scope of consolidation                                        |  |                                | 6.8   |                                |   |                                  |   |                                 |      |                                                               |  
|Additions                                                               |  |                                | 8.0   |                                |   |                                  |   |                                 | 0.1   |                                                               |  
|Disposals                                                               |  |                                |      |                                |   |                                  |   |                                 | 1.4   |                                                               |  
|Transfers*                                                              |  |                                | 1.3   |                                |   |                                  |   |                                 |      |                                                               |  
|                                                                        |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of December 31, 2002                                         |  |                                | 47.9  |                                |   | 1.0                               |   |                                 | 0.1   |                                                               |  
|                                                                        |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  
|Net book value as of December 31, 2002                                  |  | €                              | 636.1 |                                | € | 1,847.8                           |   | €                               | 279.1 |                                                               | €
|                                                                        |  |                                |       |                                |   |                                   |   |                                 |       |                                                               |  

---

F-42

---

|Developments in 2002
Loans and other investments |  | Loans to
affiliated
companies |       | Loans to
associated
companies
and
participating
interests |   | Other loans
and
investments |   | Loans and
other
investments
(subtotal) |        | Total
financial
assets |  
|------------------------------------------------ |  | ----------------------------- | ----- | --------------------------------------------------------- | - | --------------------------- | - | -------------------------------------- | ------ | ---------------------- | -
|
|Acquisition costs                                |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Balance as of January 1, 2002                    |  | €                             | 119.7 |                                                           | € | 359.1                       |   | €                                      | 186.4  |                        | €
|Change in scope of consolidation                 |  |                               |      |                                                           |   |                            |   |                                        |       |                        |  
|Additions                                        |  |                               | 17.4  |                                                           |   | 37.0                        |   |                                        | 36.2   |                        |  
|Disposals                                        |  |                               | 8.3   |                                                           |   | 71.4                        |   |                                        | 16.1   |                        |  
|Transfers*                                       |  |                               | (3.2  | )                                                         |   | (23.0                       | ) |                                        | (127.3 | )                      |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Balance as of December 31, 2002                  |  |                               | 125.6 |                                                           |   | 301.7                       |   |                                        | 79.2   |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Accumulated depreciation                         |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Balance as of January 1, 2002                    |  |                               | 0.2   |                                                           |   | 0.8                         |   |                                        | 3.3    |                        |  
|Change in scope of consolidation                 |  |                               |      |                                                           |   |                            |   |                                        |       |                        |  
|Additions                                        |  |                               | 14.0  |                                                           |   | 13.9                        |   |                                        | 0.8    |                        |  
|Disposals                                        |  |                               |      |                                                           |   |                            |   |                                        | 1.1    |                        |  
|Transfers*                                       |  |                               |      |                                                           |   |                            |   |                                        | 0.1    |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Balance as of December 31, 2002                  |  |                               | 14.2  |                                                           |   | 14.7                        |   |                                        | 3.1    |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  
|Net book value as of December 31, 2002           |  | €                             | 111.4 |                                                           | € | 287.0                       |   | €                                      | 76.1   |                        | €
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |        |                        |  

---

F-43

---

|Developments in 2001
Participations and securities held as fixed
assets |  | Shares in
affiliated
companies |        | Shares in
associated
companies |   | Shares in
participating
interests |   | Securities
held as
fixed assets |       | Participations
and securities
held as fixed
assets
(subtotal) |  
|----------------------------------------------------------------------- |  | ------------------------------ | ------ | ------------------------------ | - | --------------------------------- | - | ------------------------------- | ----- | ------------------------------------------------------------- | -
|
|Acquisition costs                                                       |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of January 1, 2001                                           |  | €                              | 678.4  |                                | € | 2,127.4                           |   | €                               | 220.7 |                                                               | €
|Change in scope of consolidation                                        |  |                                | (326.0 | )                              |   | (51.8                             | ) |                                 |      |                                                               |  
|Additions                                                               |  |                                | 345.1  |                                |   | 77.7                              |   |                                 | 9.6   |                                                               |  
|Disposals                                                               |  |                                | 85.8   |                                |   | 40.1                              |   |                                 | 1.8   |                                                               |  
|Transfers*                                                              |  |                                | (6.6   | )                              |   | (242.5                            | ) |                                 | 4.2   |                                                               |  
|                                                                        |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of December 31, 2001                                         |  |                                | 605.1  |                                |   | 1,870.7                           |   |                                 | 232.7 |                                                               |  
|                                                                        |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Accumulated depreciation                                                |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of January 1, 2001                                           |  |                                | 20.7   |                                |   | 1.0                               |   |                                 | 1.4   |                                                               |  
|Change in scope of consolidation                                        |  |                                | (0.9   | )                              |   |                                  |   |                                 |      |                                                               |  
|Additions                                                               |  |                                | 19.7   |                                |   |                                  |   |                                 |      |                                                               |  
|Disposals                                                               |  |                                | 3.1    |                                |   |                                  |   |                                 |      |                                                               |  
|Transfers*                                                              |  |                                | (4.6   | )                              |   |                                  |   |                                 |      |                                                               |  
|                                                                        |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Balance as of December 31, 2001                                         |  |                                | 31.8   |                                |   | 1.0                               |   |                                 | 1.4   |                                                               |  
|                                                                        |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  
|Net book value as of December 31, 2001                                  |  | €                              | 573.3  |                                | € | 1,869.7                           |   | €                               | 231.3 |                                                               | €
|                                                                        |  |                                |        |                                |   |                                   |   |                                 |       |                                                               |  

---

F-44

---

|Developments in 2001
Loans and other investments |  | Loans to
affiliated
companies |       | Loans to
associated
companies
and
participating
interests |   | Other loans
and
investments |   | Loans and
other
investments
(subtotal) |       | Total
financial
assets |  
|------------------------------------------------ |  | ----------------------------- | ----- | --------------------------------------------------------- | - | --------------------------- | - | -------------------------------------- | ----- | ---------------------- | -
|
|Acquisition costs                                |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Balance as of January 1, 2001                    |  | €                             | 25.1  |                                                           | € | 349.8                       |   | €                                      | 178.3 |                        | €
|Change in scope of consolidation                 |  |                               | (13.6 | )                                                         |   | (60.0                       | ) |                                        | 0.8   |                        |  
|Additions                                        |  |                               | 100.8 |                                                           |   | 173.5                       |   |                                        | 30.4  |                        |  
|Disposals                                        |  |                               | 5.3   |                                                           |   | 102.0                       |   |                                        | 27.9  |                        |  
|Transfers*                                       |  |                               | 12.7  |                                                           |   | (2.2                        | ) |                                        | 4.8   |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Balance as of December 31, 2001                  |  |                               | 119.7 |                                                           |   | 359.1                       |   |                                        | 186.4 |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Accumulated depreciation                         |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Balance as of January 1, 2001                    |  |                               | 0.2   |                                                           |   |                            |   |                                        | 4.3   |                        |  
|Change in scope of consolidation                 |  |                               |      |                                                           |   |                            |   |                                        |      |                        |  
|Additions                                        |  |                               |      |                                                           |   |                            |   |                                        | 0.7   |                        |  
|Disposals                                        |  |                               |      |                                                           |   |                            |   |                                        | 1.7   |                        |  
|Transfers*                                       |  |                               |      |                                                           |   | 0.8                         |   |                                        |      |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Balance as of December 31, 2001                  |  |                               | 0.2   |                                                           |   | 0.8                         |   |                                        | 3.3   |                        |  
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  
|Net book value as of December 31, 2001           |  | €                             | 119.5 |                                                           | € | 358.3                       |   | €                                      | 183.1 |                        | €
|                                                 |  |                               |       |                                                           |   |                             |   |                                        |       |                        |  

---

In 2002, additions to "Shares in affiliated companies" primarily include the acquisition of Aethylen Rohrleitungsgesellschaft mbH & Co. KG,
Marl, Germany. Retirements were related to the merger of the non-consolidated BASF Polyurethanes Elastomers Ltd. and BASF Japan Ltd., Tokyo, Japan.

In
2001, additions to "Shares in affiliated companies" resulted from a capital increase of €200 million at BASF Future Business GmbH to develop new business areas.
Changes in the scope of consolidation resulted from the inclusion of the joint ventures BASF NOF Coatings Company Ltd., Tokyo, Japan; BASF SONATRACH PropanChem S.A., Tarragona, Spain; ELLBA
Eastern Pte Ltd., Singapore; and BASF-YPC Company, Nanjing, China.

F-45

---

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:

|                                       |  | 2002 |       | 2001
|-------------------------------------- |  | ---- | ----- | ----
|
|
|Fixed-term interest bearing securities |  | €    | 1.2   |     
|Mutual funds                           |  |      | 6.9   |     
|Other shareholdings and securities     |  |      | 282.4 |     
|                                       |  |      |       |     
|                                       |  | €    | 290.5 |     
|                                       |  |      |       |     

The disposal of available-for-sale securities generated neither proceeds nor gains in 2002 and 2001. In 2000 the disposal
of available-for-sale securities led to proceeds of €7.0 million and a gain of €0.1 million.

16.  Inventories

|                                                |  | 2002 |         | 2001
|----------------------------------------------- |  | ---- | ------- | ----
|
|Raw materials and factory supplies              |  | €    | 992.5   |     
|Work-in-process, finished goods and merchandise |  |      | 3,706.0 |     
|Construction in progress                        |  |      | 87.6    |     
|Advance payments                                |  |      | 12.3    |     
|                                                |  |      |         |     
|                                                |  | €    | 4,798.4 |     
|                                                |  |      |         |     

"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 are mainly determined by the
last-in-first-out (LIFO) method. Factory supplies are carried
predominantly at average cost. Inventories of €3,036.9 million or 63% of total inventories in 2002 and €3,130.2 million or 63% of total inventories in
2001 are 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
€65 million in 2002 and €72 million in 2001.

F-46

---

17.  Receivables and other assets

|                                                                        |  | 2002 |         | 2001
|----------------------------------------------------------------------- |  | ---- | ------- | ----
|
|
|Accounts receivable, trade                                              |  | €    | 5,316.0 |     
|Receivables from affiliated companies                                   |  |      | 544.4   |     
|Receivables from associated companies and other participating interests |  |      | 277.1   |     
|Other assets                                                            |  |      | 1,509.8 |     
|                                                                        |  |      |         |     
|Miscellaneous receivables and other assets                              |  |      | 1,786.9 |     
|                                                                        |  |      |         |     
|                                                                        |  | €    | 7,647.3 |     
|                                                                        |  |      |         |     

Composition of other assets

|                                              |  | 2002 |         | 2001
|--------------------------------------------- |  | ---- | ------- | ----
|
|Tax refund claims                             |  | €    | 463.4   |     
|Loans and interest receivables                |  |      | 281.3   |     
|Deferrals from financial derivatives          |  |      | 313.7   |     
|Receivables from the sale of non-trade assets |  |      | 59.0    |     
|Employee receivables                          |  |      | 31.6    |     
|Rents and deposits                            |  |      | 39.2    |     
|Insurance claims                              |  |      | 12.8    |     
|Other                                         |  |      | 308.8   |     
|                                              |  |      |         |     
|                                              |  | €    | 1,509.8 |     
|                                              |  |      |         |     

Prepaid expenses accounted for €131.3 million in 2002 and €131.1 million in 2001.

F-47

---

Valuation allowances for doubtful accounts

|                           |  |   |       | Affecting income |   | Not affecting income |  |  
|-------------------------- |  | - | ----- | ---------------- | - | -------------------- |  | -
|
|
|
|Accounts receivable, trade |  | € | 491.9 |                  | € | 173.7                |  | €
|Miscellaneous receivables  |  |   | 67.4  |                  |   | 13.1                 |  |  
|                           |  |   |       |                  |   |                      |  |  
|                           |  | € | 559.3 |                  | € | 186.8                |  | €
|                           |  |   |       |                  |   |                      |  |  

|                                           |  |   |       | Affecting income |   | Not affecting income |  |  
|------------------------------------------ |  | - | ----- | ---------------- | - | -------------------- |  | -
|
|
|
|Accounts receivables, trade                |  | € | 404.1 |                  | € | 228.7                |  | €
|Miscellaneous receivables and other assets |  |   | 81.6  |                  |   | 9.7                  |  |  
|                                           |  |   |       |                  |   |                      |  |  
|                                           |  | € | 485.7 |                  | € | 238.4                |  | €
|                                           |  |   |       |                  |   |                      |  |  

|                           |  |   |       | Affecting income |   | Not affecting income |  |  
|-------------------------- |  | - | ----- | ---------------- | - | -------------------- |  | -
|
|
|
|Accounts receivable, trade |  | € | 368.2 |                  | € | 108.3                |  | €
|Miscellaneous receivables  |  |   | 74.1  |                  |   | 27.6                 |  |  
|                           |  |   |       |                  |   |                      |  |  
|                           |  | € | 442.3 |                  | € | 135.9                |  | €

Additions and releases not affecting income relate primarily to changes in scope of consolidation, to translation adjustments and
write-offs of receivables previously written down.

18.  Marketable securities

|                                       |  | 2002 |       | 2001
|-------------------------------------- |  | ---- | ----- | ----
|
|
|Fixed-term interest bearing securities |  | €    | 12.8  |     
|Shares                                 |  |      | 117.6 |     
|Mutual funds                           |  |      | 0.4   |     
|Other securities                       |  |      | 1.0   |     
|                                       |  |      |       |     
|                                       |  | €    | 131.8 |     
|                                       |  |      |       |     

The disposal of available-for-sale securities in 2002 generated proceed of €492.3 million and a
tax-free gain of €243 million. There was no disposal of available-for-sale securities in 2001. In 2000, the disposal of
available-for-sale securities led to proceeds of €480.6 million and gains of €118.1 million.

F-48

---

Maturities of fixed-term securities

|                      |  | 2002 |       | 2001
|--------------------- |  | ---- | ----- | ----
|
|
|Less than 1 year      |  | €    | 7.6   |     
|Between 1 and 5 years |  |      | 5.2   |     
|                      |  |      |       |     
|                      |  |      | €12.8 |     
|                      |  |      |       |     

19.  Prepaid expenses

|                       |  | 2002 |       | 2001
|---------------------- |  | ---- | ----- | ----
|
|
|Discounts              |  | €    | 4.4   |     
|Prepaid pension assets |  |      | 479.5 |     
|Miscellaneous          |  |      | 131.4 |     
|                       |  |      |       |     
|                       |  | €    | 615.3 |     

The discount from the issuance of the 5.75% Euro Bond 2000/2005 of BASF Aktiengesellschaft are capitalized and amortized as interest expense over
the term of the underlying obligations. The discount related to the 3% U.S. Dollar Option Bond 1986/2001 of BASF Finance Europe N.V. was fully amortized in 2001.

Prepaid
pension assets resulted primarily from contributions to pension funds in North America (NAFTA), which were made to compensate for the losses of pension funds in stocks and
accordingly to cover the additional minimum liability, which has to be calculated under the rules of SFAS 87.

The
pension plan assets as assessed in accordance with German GAAP fully cover the minimum pension liability in accordance with German GAAP. The contributions to the pension fund are
therefore expenses for future periods and are accounted for as prepaid expenses.

Other
prepaid expenses are related to prepayments of operating costs of €36.7 million in 2002 and €84.8 million in 2001 as well as prepaid
insurance premiums of €10.4 million in 2002 and €8.9 million in 2001.

F-49

---

20.  Capital and reserves

|                                                                                                                                                                                                                                  |  | Conditional capital |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | -
|
|
|January 1                                                                                                                                                                                                                         |  | €432.4              |  
|Cancellation of conditional capital in order to exercise warrents 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                                                                                                                                                                  |  | (3.2                | )
|Issuance of new shares from the conditional capital through the exercise of warrants attached to the 1986/2001 3% U.S. Dollar Option Bond of BASF Finance Europe N.V.                                                             |  |                    |  
|Cancellation of warrants from the Option Bond 1986/2001                                                                                                                                                                           |  |                    |  
|Issuance of new stock as conditional capital through the exercise of conversion rights of former Wintershall stockholders below €0.1 million                                                                                      |  |                    |  
|                                                                                                                                                                                                                                  |  |                     |  
|December 31                                                                                                                                                                                                                       |  | €429.2              |  
|                                                                                                                                                                                                                                  |  |                     |  

|                      |  | Authorized capital
|--------------------- |  | ------------------
|
|
|January 1/December 31 |  | €500.0            
|                      |  |                   

|                                                            |  | Subscribed capital
|----------------------------------------------------------- |  | ------------------
|
|
|Outstanding shares as of December 31, 2002                  |  | 571,650,910       
|Repurchased shares intended to be cancelled                 |  | (1,334,500        
|                                                            |  |                   
|Outstanding shares as disclosed in the financial statements |  | 570,316,410       

A total of 13,085,000 shares were repurchased in 2002, of which 11,750,500 shares were cancelled in 2002. The Board of Executive Directors decided
in 2002 to cancel the remaining 1,334,500 shares, which was not formally completed as of December 31, 2002. The subscribed capital is shown net of these shares.

F-50

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

Share repurchase

The Board of Executive Directors received approval at the Annual Meeting on April 30, 2002, to repurchase BASF's shares to a maximum amount of 10% of
subscribed capital until October 1, 2003. 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. Furthermore, repurchased shares may be sold to participants in the Stock Option Program
2001/2005, to fulfill the participants' investment requirements in BASF shares according to the clauses of the Stock Option Program in order to meet conditions for the granting of options.

Based
on the respective authorizations, a total of 13,085,000 shares, or 2.2% of the issued shares have been acquired in 2002. The average purchase price was €38.20 per
share. Of these shares a total of 11,750,500 shares were cancelled by December 31, 2002. The remaining 1,334,500 shares of BASF Aktiengesellschaft were acquired for the purpose of cancellation.
Therefore, the subscribed capital is shown net of these shares at December 31, 2002. During 2001, BASF purchased and cancelled a total of 30,775,000 shares, or 5.0% of issued shares, at an
average price of €42.22 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 €6.8 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.

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.

F-51

---

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 issuance of BASF shares at par value.

21.    Retained earnings

|                                            |  | 2002 |          | 2001 |   | 2000    
|------------------------------------------- |  | ---- | -------- | ---- | - | --------
|
|Legal reserves                              |  | €    | 224.6    |      | € | 206.6   
|Other retained earnings and profit retained |  |      | 12,243.6 |      |   | 12,015.8
|                                            |  |      |          |      |   |         
|                                            |  | €    | 12,468.2 |      | € | 12,222.4

The changes in scope of consolidation reduced the legal reserves by less than €0.1 million in 2002, by
€49.9 million in 2001 and by €0.7 million in 2000. Transfers from "Other retained earnings and profit retained" increased legal reserves by
€18.0 million in 2002, by €16.3 million in 2001 and by €7.1 million in 2000.

22.    Minority interests

|                                                           |  |                                                            |  | Minority interest amount
|---------------------------------------------------------- |  | ---------------------------------------------------------- |  | ------------------------
|
|WINGAS GmbH, Kassel, Germany                               |  | Gazprom, Moscow, Russia                                    |  | 35.0                    
|Yangzi-BASF Styrenics Co. Ltd., Nanjing, China             |  | Yangzi Petrochem. Corp. Ltd., Nanjing, China               |  | 40.0                    
|BASF India Ltd., Mumbai, India                             |  | Publicly traded shares                                     |  | 47.3                    
|BASF PETRONAS Chemicals Sdn. Bhd., Petaling Jaya, Malaysia |  | PETRONAS (Petroliam Nasional Bhd.), Kuala Lumpur, Malaysia |  | 40.0                    
|BASF SONATRACH Propanchem S.A., Tarragona, Spain           |  | SONATRACH, Algiers, Algeria                                |  | 49.0                    
|BASF FINA Petrochemicals Ltd., Port Arthur, Texas, USA     |  | TotalFinaElf S.A., Paris, France                           |  | 40.0                    
|Others                                                     |  |                                                            |  |                         
|                                                           |  |                                                            |  |                         
|                                                           |  |                                                            |  |                         
|                                                           |  |                                                            |  |                         

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

F-52

---

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 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
valuation according to the "projected unit credit method" as defined by SFAS 87 is based on the following average rates:

|                                         |  | Germany |   | Foreign |  
|---------------------------------------- |  | ------- | - | ------- | -
|
|Interest rate                            |  | 5.75    | % | 6.00    | %
|Projected increase of wages and salaries |  | 2.50    | % | 2.75    | %
|Projected pension increase               |  | 1.50    | % | 1.75    | %
|Expected return on plan assets           |  | 6.50    | % | 6.50    | %

Development of the projected benefit obligation:

|                                               |  | 2002 |         | 2001 |  
|---------------------------------------------- |  | ---- | ------- | ---- | -
|
|Projected benefit obligation as of January 1   |  | €    | 5,979.9 |      | €
|Service cost                                   |  |      | 144.8   |      |  
|Interest cost                                  |  |      | 376.3   |      |  
|Benefits paid                                  |  |      | (394.2  | )    |  
|Participants' contributions                    |  |      | 2.2     |      |  
|Change in actuarial assumptions                |  |      | 146.8   |      |  
|Settlements and other changes                  |  |      | 71.9    |      |  
|Exchange rate changes                          |  |      | (367.8  | )    |  
|                                               |  |      |         |      |  
|Projected benefit obligation as of December 31 |  | €    | 5,959.9 |      | €
|                                               |  |      |         |      |  

F-53

---

Development of the plan assets:

|                                                       |  | 2002 |         | 2001 |  
|------------------------------------------------------ |  | ---- | ------- | ---- | -
|
|Plan assets as of January 1                            |  | €    | 2,443.2 |      | €
|Actual return on plan assets                           |  |      | (244.2  | )    |  
|Employer contributions                                 |  |      | 487.8   |      |  
|Participants' contributions                            |  |      | 2.2     |      |  
|Benefits paid                                          |  |      | (170.8  | )    |  
|Exchange rate changes                                  |  |      | (305.5  | )    |  
|Other changes                                          |  |      | (2.0    | )    |  
|                                                       |  |      |         |      |  
|Plan assets as of December 31                          |  |      | 2,210.7 |      |  
|Non-capitalized pre-financing of foreign pension plans |  |      | (196.1  | )    |  
|                                                       |  |      |         |      |  
|Plan assets as of December 31 excluding pre-financing  |  | €    | 2,014.6 |      | €
|                                                       |  |      |         |      |  

The valuation of the pension fund assets of foreign pension funds under SFAS 87 showed the pre-financing shown above.

Development
of funded status and provisions for pensions:

|                                                                                    |  | 2002 |         | 2001 |  
|----------------------------------------------------------------------------------- |  | ---- | ------- | ---- | -
|
|Projected benefit obligation as of December 31                                      |  | €    | 5,959.9 |      | €
|Less pension fund assets as of December 31, excluding non-capitalized pre-financing |  |      | 2,014.6 |      |  
|                                                                                    |  |      |         |      |  
|Funded status                                                                       |  |      | 3,945.3 |      |  
|Unrecognized amounts                                                                |  |      | (874.8  | )    |  
|Prepaid pension cost                                                                |  |      | 479.5   |      |  
|                                                                                    |  |      |         |      |  
|Provisions for pensions                                                             |  |      | 3,550.0 |      |  
|Provisions for similar obligations                                                  |  |      | 360.0   |      |  
|                                                                                    |  |      |         |      |  
|Provisions for pensions and similar obligations                                     |  | €    | 3,910.0 |      | €
|                                                                                    |  |      |         |      |  

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 5 years.

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 6.875%.

F-54

---

Composition
of the net periodic pension cost:

|                                        |  | 2002 |        | 2001 |   | 2000   |  
|--------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|
|Service cost                            |  | €    | 144.8  |      | € | 133.3  |  
|Interest cost                           |  |      | 376.3  |      |   | 379.3  |  
|Expected return on plan assets          |  |      | (223.2 | )    |   | (233.5 | )
|Amortization of prior service cost      |  |      | 17.5   |      |   | 10.0   |  
|Amortization of unrecognized amounts    |  |      | 10.1   |      |   | (0.1   | )
|Settlement gains                        |  |      | (24.5  | )    |   | (32.1  | )
|                                        |  |      |        |      |   |        |  
|Expenses for defined benefit plans      |  |      | 301.0  |      |   | 256.9  |  
|Expenses for defined contribution plans |  |      | 89.7   |      |   | 81.9   |  
|Expenses for similar obligations        |  |      | 33.5   |      |   | 33.4   |  
|                                        |  |      |        |      |   |        |  
|Net periodic pension cost               |  | €    | 424.2  |      | € | 372.2  |  
|                                        |  |      |        |      |   |        |  

24.    Other provisions

|                                                         |  | 2002 |         | 2001
|-------------------------------------------------------- |  | ---- | ------- | ----
|
|
|Oil and gas production                                   |  | €    | 478.8   |     
|Environmental protection and remediation costs           |  |      | 264.0   |     
|Personnel costs                                          |  |      | 1,284.2 |     
|Sales and purchase risks                                 |  |      | 651.3   |     
|Integration, shutdown and restructuring costs            |  |      | 245.3   |     
|Legal, damage claims, guarantees and related commitments |  |      | 679.4   |     
|Maintenance and repair costs                             |  |      | 148.8   |     
|Outstanding billings from suppliers                      |  |      | 76.4    |     
|Other                                                    |  |      | 283.1   |     
|                                                         |  |      |         |     
|                                                         |  | €    | 4,111.3 |     
|                                                         |  |      |         |     

Oil and gas production:Accrued costs for filling of wells and the removal of
production equipment after the end of production are accumulated by installments during the expected production period.

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, remaining 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. 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

F-55

---

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.

The
movement in shutdown and restructuring provisions is as follows:

|                             |  | Amount accrued
as of January 1,
2002 |       | Amount paid in
2002 |   | Other changes
2002 |   | Amount accrued
as of December 31,
2002
|---------------------------- |  | ------------------------------------ | ----- | ------------------- | - | ------------------ | - | --------------------------------------
|
|Severance                    |  | €                                    | 237.3 |                     | € | (105.4             | ) | €                                     
|Plant closure and demolition |  |                                      | 121.0 |                     |   | (58.6              | ) |                                       
|Other                        |  |                                      | 63.1  |                     |   | (24.0              | ) |                                       
|                             |  |                                      |       |                     |   |                    |   |                                       
|                             |  | €                                    | 421.4 |                     | € | (188.0             | ) | €                                     
|                             |  |                                      |       |                     |   |                    |   |                                       

|                             |  | Amount accrued
as of January 1,
2001 |       | Amount paid in
2001 |   | Other changes
2001 |   | Amount accrued
as of December 31,
2001
|---------------------------- |  | ------------------------------------ | ----- | ------------------- | - | ------------------ | - | --------------------------------------
|
|Severance                    |  | €                                    | 193.3 |                     | € | (49.6              | ) | €                                     
|Plant closure and demolition |  |                                      | 61.3  |                     |   | (50.4              | ) |                                       
|Other                        |  |                                      | 30.4  |                     |   | (9.6               | ) |                                       
|                             |  |                                      |       |                     |   |                    |   |                                       
|                             |  | €                                    | 285.0 |                     | € | (109.6             | ) | €                                     
|                             |  |                                      |       |                     |   |                    |   |                                       

|                             |  | Amount accrued
as of January 1,
2000 |       | Amount paid in
2000 |   | Other changes
2000 |   | Amount accrued
as of December 31,
2000
|---------------------------- |  | ------------------------------------ | ----- | ------------------- | - | ------------------ | - | --------------------------------------
|
|Severance                    |  | €                                    | 111.3 |                     | € | (144.7             | ) | €                                     
|Plant closure and demolition |  |                                      | 52.6  |                     |   | (14.5              | ) |                                       
|Other                        |  |                                      | 17.0  |                     |   | (65.7              | ) |                                       
|                             |  |                                      |       |                     |   |                    |   |                                       
|                             |  | €                                    | 180.9 |                     | € | (224.9             | ) | €                                     
|                             |  |                                      |       |                     |   |                    |   |                                       

Additions in 2002 consisted primarily of personal measures at the Ludwigshafen site, as well as restructuring measures in the Agricultural
Products division. Amounts paid in 2002 are related to the realization of restructuring measures initiated in 2001.

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

F-56

---

America, the United Kingdom, the Netherlands and Italy. Further charges arose from the restructuring of the Company's sales and marketing organization.

In
2000, provisions for severance costs for employees resulted from the integration of the crop protection business acquired from American Home Products Corp. (AHP) and from the
workforce reduction in the Pharmaceuticals segment. Provisions of €403.7 million were accrued for these measures, thereof €243 million for severance cost
of employees of the acquired crop protection business of AHP without a charge to profits.

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 for antitrust proceedings. The significant proceedings are described in
Note 26.

Payments
were made in 2002 for compensation claims of vitamin customers in the U.S. after finalization of a settlement and for a fine of €296.2 million imposed by
the E.U. Commission for violations of antitrust laws in the vitamin business, which occurred some years ago. An additional $100 million was added to the provision for the settlement of vitamin
litigation due to
the ongoing settlement of indirect vitamin customers' claims in the U.S. and the unsettled litigation in some other 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 E.U. 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 anticipated charges
due to unperformed maintenance procedures as well as for legally mandated inspections of large-scale plants within prescribed intervals.

25.    Liabilities

Financial liabilities

|                                                  |  | 2002     |  | 2001    
|------------------------------------------------- |  | -------- |  | --------
|
|5.75% € Bond 2000/2005 of BASF Aktiengesellschaft |  | €1,250.0 |  | €1,250.0
|Other bonds                                       |  | 349.7    |  | 311.9   
|Commercial paper                                  |  | 582.0    |  | 30.6    
|                                                  |  |          |  |         
|Bonds and other liabilities to the capital market |  | 2,181.7  |  | 1,592.5 
|Liabilities to credit institutions                |  | 1,428.7  |  | 1,242.5 
|                                                  |  |          |  |         
|Financial liabilities                             |  | €3,610.4 |  | €2,835.0
|                                                  |  |          |  |         

F-57

---

Financial liabilities are denominated predominantly in the following currencies and have the following average interest rates for
short-term liabilities:

|                 |  | 2002 |         | 2001 |   | 2002    |  | 2001
|---------------- |  | ---- | ------- | ---- | - | ------- |  | ----
|
|U.S. dollars     |  | €    | 1,285.5 |      | € | 803.1   |  | 7.1 
|Euros            |  |      | 1,909.9 |      |   | 1,385.5 |  | 3.7 
|Chinese renminbi |  |      | 52.0    |      |   | 156.8   |  | 4.6 
|Other            |  |      | 363.0   |      |   | 489.6   |  | 5.8 
|                 |  |      |         |      |   |         |  |     
|                 |  | €    | 3,610.4 |      | € | 2,835.0 |  | Ø5.1
|                 |  |      |         |      |   |         |  |     

Financial liabilities have the following maturities as of December 31, 2002:

(euros in millions)2003

€1,813.82004

80.42005

1,284.72006

37.52007

15.82008 and thereafter

378.2€3,610.4


The 5.75% € 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 in 2002 was 2.1% and in 2001 was 2.3%.

Commercial
paper comprises BASF Aktiengesellschaft's commercial paper program as well as corresponding borrowings in India.

Liabilities to credit institutions

Liabilities to credit institutions relate to a large number of different credit institutions in various countries. Liabilities to credit institutions denominated
in Chinese renminbi result from the local financing of capital expenditures in China.

The
Company had committed and unused credit lines of €2,380 million with variable interest rates as of December 31, 2002 and of €2,800 as of
December 31, 2001. In addition, the Company had €323 million uncommitted credit lines free of charges, and €410 million on December 31,
2001.

F-58

---

Miscellaneous liabilities

|                                                          |  | 2002 |         | 2001
|--------------------------------------------------------- |  | ---- | ------- | ----
|
|
|Advances received on account of orders                    |  | €    | 30.8    |     
|Liabilities on bills                                      |  |      | 31.7    |     
|Liabilities to companies in which participations are held |  |      | 181.8   |     
|Tax liabilities                                           |  |      | 287.3   |     
|Liabilities relating to social security                   |  |      | 134.7   |     
|Liabilities of joint ventures to partners                 |  |      | 415.8   |     
|Other miscellaneous liabilities                           |  |      | 1,192.2 |     
|                                                          |  |      |         |     
|Total                                                     |  |      | 2,274.3 |     
|Deferred income                                           |  |      | 369.8   |     
|                                                          |  |      |         |     
|Total miscellaneous liabilities and deferred income       |  | €    | 2,644.1 |     
|                                                          |  |      |         |     

Liabilities to companies in which participations are held include the non-consolidated share of consolidated liabilities to joint
ventures accounted for using the proportional consolidation method of €129.4 million as of December 31, 2002 and €254.4 million as of
December 31, 2001. Further liabilities relating to associated companies accounted for under the equity or cost method were €52.4 million as of December 31, 2002
and €42.9 million as of December 31, 2001.

Maturities of liabilities

|                                                          |  | 2002 |         | 2001
|--------------------------------------------------------- |  | ---- | ------- | ----
|
|
|Bonds and other liabilities to the capital market         |  | €    | 582.0   |     
|Liabilities to credit institutions                        |  |      | 1,231.7 |     
|Accounts payable, trade                                   |  |      | 2,330.2 |     
|Liabilities to affiliated companies                       |  |      | 496.8   |     
|Advances received on account of orders                    |  |      | 30.8    |     
|Liabilities on bills                                      |  |      | 31.7    |     
|Liabilities to companies in which participations are held |  |      | 165.9   |     
|Other miscellaneous liabilities                           |  |      | 1,185.9 |     
|                                                          |  |      |         |     
|                                                          |  | €    | 6,055.0 |     

Secured liabilities

2002

2001(euros in millions)Liabilities to credit institutions

€
21.6

€
9.4Miscellaneous liabilities


2.5


1.0€
24.1

€
10.4


F-59

---

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.

Contingent liabilities

Contingent liabilities as listed below, have not been accrued as the risk of loss is not considered probable.

2002

2001(euros in millions)Bills of exchange

€
27.0

€
60.4thereof to affiliated companies


0.2


0.6Guarantees


122.2


282.6Warranties


58.8


48.4Granting collateral on behalf of third-party liabilities


11.0


15.6€
219.0

€
407.0


Other financial obligations

|                                                        |                             | 2002 |         | 2001 
|------------------------------------------------------- | --------------------------- | ---- | ------- | -----
|
|Remaining cost of construction in progress              |                             | €    | 2,987.0 |      
|                                                        | thereof purchase commitment |      |         | 644.3
|Commitments from long-term rental and leasing contracts |                             |      | 862.6   |      
|Capital contribution and loan commitments               |                             |      | 170.3   |      
|Repurchase commitments                                  |                             |      |        |      
|                                                        |                             |      |         |      
|                                                        |                             | €    | 4,019.9 |      
|                                                        |                             |      |         |      

BASF has in 2002 payment commitments to BASF Chemicals Company Ltd., 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. Repurchase commitments are related to accounts receivables.

Obligations
from long-term rental and lease contracts are due as follows:

(euros in millions)2003

€185.22004

140.42005

101.82006

74.72007

60.42008 and thereafter

300.1€862.6


F-60

---

Purchase commitments for raw materials and natural gas from long-term contracts

The Company has entered into long-term purchase contracts for natural gas for its natural gas trading business, 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, 2002, are as follows:

(euros in millions)2003

€
5,9862004


2,7242005


2,1842006


2,0052007


1,9702008 and thereafter


10,887€
25,756


26.    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 the respective countries. On November 21, 2001, the European Commission imposed a fine of €296.2 million against BASF
Aktiengesellschaft. BASF has appealed against this decision. Proceedings are still running in Brazil, Korea, New Zealand, and Australia.

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

Class
action lawsuits on behalf of indirect vitamin purchasers were levied in 28 U.S. states. In October 2000, 24 of these were settled, with terms calling for the vitamin
manufacturers to pay in total $396 million. BASF Aktiengesellschaft's share of this is up to $97 million. All settlements have been granted preliminary approval, and partially fulfilled.
Suits from some third party plaintiffs who did not wish to participate in this settlement remain open. Further claims for damages have been filed in Canada, Germany and in Australia.

The
Company has additionally established provisions for the costs that it can currently anticipate. The Company cannot rule out additional charges, but does not believe that they will
have a substantial impact on the profitability of the Company.

BASF
Aktiengesellschaft has been named as a defendant in Empagran S.A. et al. versus F. Hoffmann-La Roche Ltd., et al., a federal class action filed in the U.S.
District Court for the District of

F-61

---

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. In a 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, 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 federal subject matter jurisdiction over claims by foreign
purchasers based on purchases outside the United States. The defendants named in Empagran, including BASF Aktiengesellschaft, have filed a petition for rehearing, challenging the Court of Appeals'
decision and, if necessary, will file a petition seeking review of the decision by the United States Supreme Court. Should the decision be upheld, against expectations, the foreign customers be
certified as a "class" by the U.S. Courts, and the damage claim be successful, this could cause considerable financial charges for the BASF Group.

Synthroid® related claims

This proceeding concerned class action lawsuits against Knoll Pharmaceutical Company (KPC) of BASF's Pharmaceutical business, divested in 2001. The lawsuits
challenged Knoll's delaying the publication of a study comparing Synthroid® to certain branded and generic products.

This
proceeding concerned class action lawsuits against Knoll Pharmaceutical Company (KPC) of BASF's Pharmaceutical business, divested in 2001. The lawsuits challenged Knoll's delaying
the publication of a study comparing Synthroid® to certain branded and generic products. For various reasons, including the unclear position of third-party payors, 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. However, payment cannot be made
until a final judgment has been reached with regard to ongoing appeals against the settlement.

Various
class actions in the United States were brought against KPC and BASF Corporation (and in two cases BASF Aktiengesellschaft) as well as Abbott Inc. and Glaxo Wellcome 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® (U.S. trade name of the anti-obesity drug sibutramine). The legal proceedings are still at a very early stage. The two
actions against BASF Aktiengesellschaft have been dropped or dismissed. BASF Corporation processed and still processes the drug for KPC by way of toll manufacture. In addition, BASF Corporation has no
relationship with the product. The fact, that BASF Corporation owned shares in KPC, is not a sufficient basis for damages. The overall material risk can be considered as low.

F-62

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

Additional proceedings

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

27.    BASF stock option program and BASF "plus" incentive share program

BASF stock option program (BOP):In 2002, 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 €46.70 on May 2, 2002 (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
options were granted on July 1, 2002 and can be exercised between July 1, 2004 and June 30, 2010. 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 2001 were structured in a similar way to the BOP 2002 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 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 2001) or three years (BOP 1999 and 2000).

F-63

---

The
amount of BASF shares held or acquired is determined by the market price on the first business day after the Annual Meeting (base price):

BOP 2001

€47.87BOP 2000

€47.80BOP 1999

€41.60


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 DJ Chemicals Index, which is an even 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.

|                                    |  | BASF stock option program
|----------------------------------- |  | -------------------------
|
|
|Fair value                          |  | €                        
|Dividend yield of BASF shares       |  |                          
|Risk free interest rate             |  |                          
|Volatility of BASF shares           |  |                          
|Volatility of Index**               |  |                          
|Correlation BASF quotation: Index** |  |                          

---

|Options outstanding                             |                                             | 2002 |           | 2001   |  | 2000     
|----------------------------------------------- | ------------------------------------------- | ---- | --------- | ------ |  | ---------
|Number of options outstanding as of January 1   |                                             |      | 3,092,732 |        |  | 2,057,003
|Number of options granted                       |                                             |      | 837,280   |        |  | 1,133,204
|Number of options lapsed*                       |                                             |      | 67,700    |        |  | 97,475   
|                                                | Weighted average base price                 |      |           | €45.86 |  |          
|Number of options exercised                     |                                             |      | 609,868   |        |  |         
|                                                |                                             |      |           |        |  |          
|Number of options outstanding as of December 31 |                                             |      | 3,252,444 |        |  | 3,092,732
|                                                |                                             |      |           |        |  |          
|                                                | Weighted average base price                 |      | €         | 46.67  |  | €        
|                                                | Weighted average remaining maturity (years) |      |           | 5.33   |  |          

---

In accordance with a resolution by the Board of Executive Directors in 2002 options will be settled in cash instead of delivering shares. Options
outstanding as of December 31 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
€16.7 million was charged to income in 2002.

The
compensation cost of €30.2 million in 2001 and €15.9 million in 2000 was determined by valuing the number of outstanding options with
the fair value of the options at the grant date. This total compensation cost was charged to income over the vesting period in which the related employees' services are rendered.

F-64

---

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.

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 under the program             |  | 2002      |  | 2001      |  | 2000   
|--------------------------------------------------- |  | --------- |  | --------- |  | -------
|As of January 1                                     |  | 1,130,680 |  | 745,840   |  | 220,840
|Number of shares added to the individual investment |  | 535,500   |  | 434,800   |  | 544,730
|Number of subscription rights lapsed                |  | 41,720    |  | 49,960    |  | 19,730 
|                                                    |  |           |  |           |  |        
|As of December 31                                   |  | 1,624,460 |  | 1,130,680 |  | 745,840

The Company accrues 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 €5.7 million was recorded in 2002, €4.4 million in 2001, and €2.7 million in 2000.

In
addition, all employees with permanent contracts were offered five free BASF shares that must be held for 10 years. 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.

28.    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

F-65

---

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.

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 South African rand, the Brazilian real, the Japanese yen, the Mexican
peso, and the Singapore dollar. Interest derivatives or combined interest/currency derivatives were concluded to hedge loans granted to group companies.

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 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:

|                                              |  | December 31, 2002 |  | December 31, 2001
|--------------------------------------------- |  | ----------------- |  | -----------------
|
|
|Assets                                        |  |                   |  |                  
|Financial assets (details, see Note 15)       |  | €3,248.9          |  | €3,338.2         
|Accounts receivable, trade and other assets   |  | 7,647.3           |  | 7,633.6          
|Marketable securities (details, see Note 18)  |  | 131.8             |  | 150.2            
|Cash and cash equivalents                     |  | 230.6             |  | 230.6            
|Liabilities                                   |  |                   |  |                  
|Financial liabilities                         |  | €3,610.4          |  | €3,716.7         
|Accounts payable, trade and other liabilities |  | 5,166.1           |  | 5,175.4          

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.

F-66

---

Breakdown of derivative financial instruments:

|                                            |  | Nominal amounts December 31 |         | Fair values December 31 |  
|------------------------------------------- |  | --------------------------- | ------- | ----------------------- | -
|
|
|Forward exchange contracts                  |  | €                           | 5,926.7 |                         | €
|Currency options                            |  |                             |        |                         |  
|                                            |  |                             |         |                         |  
|Foreign currency derivatives                |  | €                           | 5,926.7 |                         | €
|                                            |  |                             |         |                         |  
|Interest rate swaps                         |  | €                           | 90.3    |                         | €
|Interest rate/cross currency swaps          |  |                             | 3,058.2 |                         |  
|                                            |  |                             |         |                         |  
|Interest rate derivatives                   |  | €                           | 3,148.5 |                         | €
|                                            |  |                             |         |                         |  
|Commodity derivatives and other derivatives |  | €                           | 820.4   |                         | €

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 €2.7 million in 2002 and
€11.1 million in 2001. All 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

F-67

---

indicative 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.

|2002                  |                                                     | Germany |     | North Africa/
Middle East |   | Argentina |       | Rest of
World |     | Total |   | Investments at equity, Rest of World
|--------------------- | --------------------------------------------------- | ------- | --- | ------------------------- | - | --------- | ----- | ------------- | --- | ----- | - | ------------------------------------
|
|Results of operations |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Sales to consolidated companies                     |         | €   | 11                        |   | €         |      |               | €   |      |   | €                                   
|                      | Sales to third parties                              |         |     | 391                       |   |           | 1,093 |               |     | 182   |   |                                     
|                      | Royalties                                           |         |     | 41                        |   |           | 210   |               |     | 19    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total sales           |                                                     |         | 361 |                           |   | 883       |       |               | 163 |       |   | 102                                 
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Production costs                                    |         |     | 85                        |   |           | 142   |               |     | 48    |   |                                     
|                      | Exploration expenses                                |         |     | 20                        |   |           | 47    |               |     | 0     |   |                                     
|                      | Depreciation, depletion, amortization and valuation |         |     | 50                        |   |           | 61    |               |     | 15    |   |                                     
|                      | Other                                               |         |     | (5                        | ) |           | (6    | )             |     | (19   | ) |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total costs           |                                                     |         | 150 |                           |   | 244       |       |               | 44  |       |   | 112                                 
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result before taxes   |                                                     |         | 211 |                           |   | 639       |       |               | 119 |       |   | (10                                 
|                      | Income taxes                                        |         |     | 80                        |   |           | 576   |               |     | 18    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result after taxes    |                                                     | €       | 131 |                           | € | 63        |       | €             | 101 |       | € | (8                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     

|2001                  |                                                     | Germany |     | North Africa/
Middle East |   | Argentina |       | Rest of
World |     | Total |   | Investments
at equity,
Rest of World
|--------------------- | --------------------------------------------------- | ------- | --- | ------------------------- | - | --------- | ----- | ------------- | --- | ----- | - | ------------------------------------
|
|Results of operations |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Sales to consolidated companies                     |         | €   | 21                        |   | €         |      |               | €   |      |   | €                                   
|                      | Sales to third parties                              |         |     | 422                       |   |           | 1,195 |               |     | 280   |   |                                     
|                      | Royalties                                           |         |     | 54                        |   |           | 229   |               |     | 30    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total sales           |                                                     |         | 389 |                           |   | 966       |       |               | 250 |       |   | 90                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Production costs                                    |         |     | 72                        |   |           | 139   |               |     | 84    |   |                                     
|                      | Exploration expenses                                |         |     | 22                        |   |           | 23    |               |     | 13    |   |                                     
|                      | Depreciation, depletion, amortization and valuation |         |     | 54                        |   |           | 63    |               |     | 25    |   |                                     
|                      | Other                                               |         |     |                          |   |           | 9     |               |     |      |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total costs           |                                                     |         | 148 |                           |   | 234       |       |               | 122 |       |   | 62                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result before taxes   |                                                     |         | 241 |                           |   | 732       |       |               | 128 |       |   | 28                                  
|                      | Income taxes                                        |         |     | 135                       |   |           | 659   |               |     | 23    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result after taxes    |                                                     | €       | 106 |                           | € | 73        |       | €             | 105 |       | € | 11                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     

F-68

---

|2000                  |                                                     | Germany |     | North Africa/
Middle East |   | Argentina |       | Rest of
World |     | Total |   | Investments
at equity,
Rest of World
|--------------------- | --------------------------------------------------- | ------- | --- | ------------------------- | - | --------- | ----- | ------------- | --- | ----- | - | ------------------------------------
|
|Results of operations |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Sales to consolidated companies                     |         | €   | 8                         |   | €         |      |               | €   |      |   | €                                   
|                      | Sales to third parties                              |         |     | 325                       |   |           | 1,306 |               |     | 278   |   |                                     
|                      | Royalties                                           |         |     | 26                        |   |           | 220   |               |     | 29    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total sales           |                                                     |         | 307 |                           |   | 1,086     |       |               | 249 |       |   | 34                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|                      | Production costs                                    |         |     | 64                        |   |           | 127   |               |     | 73    |   |                                     
|                      | Exploration expenses                                |         |     | 11                        |   |           | 18    |               |     | 5     |   |                                     
|                      | Depreciation, depletion, amortization and valuation |         |     | 50                        |   |           | 55    |               |     | 26    |   |                                     
|                      | Other                                               |         |     |                          |   |           |      |               |     |      |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Total costs           |                                                     |         | 125 |                           |   | 200       |       |               | 104 |       |   | 22                                  
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result before taxes   |                                                     |         | 182 |                           |   | 886       |       |               | 145 |       |   | 12                                  
|                      | Income taxes                                        |         |     | 102                       |   |           | 783   |               |     | 26    |   |                                     
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     
|Result after taxes    |                                                     | €       | 80  |                           | € | 103       |       | €             | 119 |       | € | 6                                   
|                      |                                                     |         |     |                           |   |           |       |               |     |       |   |                                     

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).

|2002                   |          | Germany |    | North Africa/
Middle East |   | Argentina |   | Rest of
World |    | Total |   | Investments
at equity,
Rest of World
|---------------------- | -------- | ------- | -- | ------------------------- | - | --------- | - | ------------- | -- | ----- | - | ------------------------------------
|
|Costs incurred         |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Property acquisitions: |          |         |    |                           |   |           |   |               |    |       |   |                                     
|                       | Proved   |         | €  |                          |   | €         |  |               | €  |      |   | €                                   
|                       | Unproved |         |    |                          |   |           |  |               |    |      |   |                                     
|Exploration            |          |         | 10 |                           |   | 60        |   |               | 5  |       |   | 60                                  
|Development            |          |         | 53 |                           |   | 63        |   |               | 50 |       |   | 19                                  
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Total costs            |          | €       | 63 |                           | € | 123       |   | €             | 55 |       | € | 642                                 
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     

F-69

---

|2001                   |          | Germany |    | North Africa/
Middle East |   | Argentina |   | Rest of
World |    | Total |   | Investments
at equity,
Rest of World
|---------------------- | -------- | ------- | -- | ------------------------- | - | --------- | - | ------------- | -- | ----- | - | ------------------------------------
|
|Costs incurred         |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Property acquisitions: |          |         |    |                           |   |           |   |               |    |       |   |                                     
|                       | Proved   |         | €  |                          |   | €         |  |               | €  |      |   | €                                   
|                       | Unproved |         |    |                          |   |           |  |               |    |      |   |                                     
|Exploration            |          |         | 28 |                           |   | 35        |   |               | 13 |       |   | 28                                  
|Development            |          |         | 51 |                           |   | 34        |   |               | 49 |       |   | 5                                   
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Total costs            |          | €       | 79 |                           | € | 69        |   | €             | 62 |       | € | 35                                  
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     

|2000                   |          | Germany |    | North Africa/
Middle East |   | Argentina |   | Rest of
World |    | Total |   | Investments
at equity,
Rest of World
|---------------------- | -------- | ------- | -- | ------------------------- | - | --------- | - | ------------- | -- | ----- | - | ------------------------------------
|
|Costs incurred         |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Property acquisitions: |          |         |    |                           |   |           |   |               |    |       |   |                                     
|                       | Proved   |         | €  |                          |   | €         |  |               | €  |      |   | €                                   
|                       | Unproved |         |    |                          |   |           |  |               |    |      |   |                                     
|Exploration            |          |         | 12 |                           |   | 27        |   |               | 5  |       |   | 6                                   
|Development            |          |         | 59 |                           |   | 20        |   |               | 22 |       |   | 26                                  
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     
|Total costs            |          | €       | 71 |                           | € | 47        |   | €             | 27 |       | € | 51                                  
|                       |          |         |    |                           |   |           |   |               |    |       |   |                                     

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.

|2002                                                                        |                     | Germany |     | North Africa/
Middle East |   | Argentina |     | Rest of
World |     | Total |   | Investments
at equity,
Rest of World
|--------------------------------------------------------------------------- | ------------------- | ------- | --- | ------------------------- | - | --------- | --- | ------------- | --- | ----- | - | ------------------------------------
|
|Capitalized Costs                                                           |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Gross costs:                                                                |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         | €   | 369                       |   | €         | 639 |               | €   | 583   |   | €                                   
|                                                                            | Unproved properties |         |     | 13                        |   |           | 4   |               |     |      |   |                                     
|                                                                            | Other equipment     |         |     | 450                       |   |           | 201 |               |     |      |   |                                     
|Accumulated depreciation, depletion, amortization and valuation allowances: |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         |     | 288                       |   |           | 445 |               |     | 395   |   |                                     
|                                                                            | Unproved properties |         |     | 0                         |   |           | 3   |               |     |      |   |                                     
|                                                                            | Other equipment     |         |     | 359                       |   |           | 178 |               |     |      |   |                                     
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Total net costs                                                             |                     | €       | 185 |                           | € | 218       |     | €             | 188 |       | € | 623                                 
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     

F-70

---

|2001                                                                        |                     | Germany |     | North Africa/
Middle East |   | Argentina |     | Rest of
World |     | Total |   | Investments
at equity,
Rest of World
|--------------------------------------------------------------------------- | ------------------- | ------- | --- | ------------------------- | - | --------- | --- | ------------- | --- | ----- | - | ------------------------------------
|
|Capitalized Costs                                                           |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Gross costs:                                                                |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         | €   | 349                       |   | €         | 575 |               | €   | 528   |   | €                                   
|                                                                            | Unproved properties |         |     | 23                        |   |           | 10  |               |     |      |   |                                     
|                                                                            | Other equipment     |         |     | 427                       |   |           | 178 |               |     |      |   |                                     
|Accumulated depreciation, depletion, amortization and valuation allowances: |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         |     | 279                       |   |           | 402 |               |     | 381   |   |                                     
|                                                                            | Unproved properties |         |     | 0                         |   |           | 10  |               |     |      |   |                                     
|                                                                            | Other equipment     |         |     | 342                       |   |           | 173 |               |     |      |   |                                     
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Total net costs                                                             |                     | €       | 178 |                           | € | 178       |     | €             | 147 |       | € | 57                                  
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     

|2000                                                                        |                     | Germany |     | North Africa/
Middle East |   | Argentina |     | Rest of
World |     | Total |   | Investments
at equity,
Rest of World
|--------------------------------------------------------------------------- | ------------------- | ------- | --- | ------------------------- | - | --------- | --- | ------------- | --- | ----- | - | ------------------------------------
|
|Capitalized Costs                                                           |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Gross costs:                                                                |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         | €   | 339                       |   | €         | 540 |               | €   | 651   |   | €                                   
|                                                                            | Unproved properties |         |     | 16                        |   |           |    |               |     | 1     |   |                                     
|                                                                            | Other equipment     |         |     | 406                       |   |           | 181 |               |     |      |   |                                     
|Accumulated depreciation, depletion, amortization and valuation allowances: |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|                                                                            | Proved properties   |         |     | 281                       |   |           | 346 |               |     | 482   |   |                                     
|                                                                            | Unproved properties |         |     |                          |   |           |    |               |     |      |   |                                     
|                                                                            | Other equipment     |         |     | 320                       |   |           | 168 |               |     |      |   |                                     
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     
|Total net costs                                                             |                     | €       | 160 |                           | € | 207       |     | €             | 170 |       | € | 62                                  
|                                                                            |                     |         |     |                           |   |           |     |               |     |       |   |                                     

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

F-71

---

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 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, 2000, 2001
and 2002 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 2000, 2001 and 2002 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.

|2002                                                         |                             |     |    | Germany |    | North Africa/
Middle East |     | Argentina |     | Rest of
World |     | TotalInvestments
at equity,
Rest of World
|------------------------------------------------------------ | --------------------------- | --- | -- | ------- | -- | ------------------------- | --- | --------- | --- | ------------- | --- | -----------------------------------------
|Estimated proved oil reserves (millions of barrels)          |                             |     |    |         |    |                           |     |           |     |               |     |                                          
|Proved developed and undeveloped reserves, beginning of year |                             | 101 |    | 442     |    | 39                        |     |          |     | 582           |     | 19                                       
|                                                             | Revisions and other changes |     | 1  |         | 18 |                           | 17  |           |    |               | 36  |                                          
|                                                             | Extensions and discoveries  |     |   |         | 6  |                           |    |           |    |               | 6   |                                          
|                                                             | Improved recovery           |     |   |         |   |                           |    |           |    |               |    |                                          
|                                                             | Purchase of reserves        |     |   |         |   |                           |    |           | 1   |               | 1   |                                          
|                                                             | Sale of reserves            |     |   |         |   |                           |    |           |    |               |    |                                          
|                                                             | Production                  |     | 10 |         | 44 |                           | 6   |           | 0   |               | 60  |                                          
|                                                             |                             |     |    |         |    |                           |     |           |     |               |     |                                          
|End of year                                                  |                             | 92  |    | 422     |    | 50                        |     | 1         |     | 565           |     | 17                                       
|Proved developed reserves, beginning of year                 |                             | 70  |    | 412     |    | 28                        |     |          |     | 510           |     | 19                                       
|End of year                                                  |                             | 76  |    | 369     |    | 33                        |     | 1         |     | 479           |     | 17                                       
|Estimated proved gas reserves (BSCF)                         |                             |     |    |         |    |                           |     |           |     |               |     |                                          
|Proved developed and undeveloped reserves, beginning of year |                             | 500 |    | 172     |    | 1,225                     |     | 134       |     | 2,031         |     |                                         
|                                                             | Revisions and other changes |     | 38 |         | 50 |                           | 189 |           | 0   |               | 277 |                                          
|                                                             | Extensions and discoveries  |     |   |         | 4  |                           | 12  |           | 34  |               | 50  |                                          
|                                                             | Improved recovery           |     |   |         |   |                           |    |           |    |               |    |                                          
|                                                             | Purchase of reserves        |     |   |         |   |                           |    |           | 190 |               | 190 |                                          
|                                                             | Sale of reserves            |     |   |         |   |                           |    |           |    |               |    |                                          
|                                                             | Production                  |     | 56 |         | 18 |                           | 85  |           | 30  |               | 189 |                                          
|                                                             |                             |     |    |         |    |                           |     |           |     |               |     |                                          
|End of year                                                  |                             | 482 |    | 208     |    | 1,341                     |     | 328       |     | 2,359         |     |                                         
|Proved developed reserves, beginning of year                 |                             | 500 |    | 171     |    | 612                       |     | 57        |     | 1,340         |     |                                         
|End of year                                                  |                             | 425 |    | 149     |    | 684                       |     | 105       |     | 1,363         |     |                                         

F-72

---



BASF GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

|2001                                                         |                             | Germany |    | North Africa/
Middle East |     | Argentina |     | Rest of
World |    | Total |     | Investments
at equity,
Rest of World
|------------------------------------------------------------ | --------------------------- | ------- | -- | ------------------------- | --- | --------- | --- | ------------- | -- | ----- | --- | ------------------------------------
|Estimated proved oil reserves (millions of barrels)          |                             |         |    |                           |     |           |     |               |    |       |     |                                     
|Proved developed and undeveloped reserves, beginning of year |                             | 116     |    | 479                       |     | 30        |     |              |    | 625   |     |                                    
|                                                             | Revisions and other changes |         | (6 | )                         | 9   |           | 7   |               |   |       | 10  |                                     
|                                                             | Extensions and discoveries  |         |   |                           |    |           | 7   |               |   |       | 7   |                                     
|                                                             | Improved recovery           |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Purchase of reserves        |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Sale of reserves            |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Production                  |         | 9  |                           | 46  |           | 5   |               |   |       | 60  |                                     
|                                                             |                             |         |    |                           |     |           |     |               |    |       |     |                                     
|End of year                                                  |                             | 101     |    | 442                       |     | 39        |     |              |    | 582   |     | 19                                  
|Proved developed reserves, beginning of year                 |                             | 76      |    | 462                       |     | 22        |     |              |    | 560   |     |                                    
|End of year                                                  |                             | 70      |    | 412                       |     | 28        |     |              |    | 510   |     | 19                                  
|Estimated proved gas reserves (BSCF)                         |                             |         |    |                           |     |           |     |               |    |       |     |                                     
|Proved developed and undeveloped reserves, beginning of year |                             | 509     |    | 228                       |     | 920       |     | 89            |    | 1,746 |     |                                    
|                                                             | Revisions and other changes |         | 49 |                           | (36 | )         | 91  |               |   |       | 104 |                                     
|                                                             | Extensions and discoveries  |         |   |                           |    |           | 296 |               | 69 |       | 365 |                                     
|                                                             | Improved recovery           |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Purchase of reserves        |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Sale of reserves            |         |   |                           |    |           |    |               |   |       |    |                                     
|                                                             | Production                  |         | 58 |                           | 20  |           | 82  |               | 24 |       | 184 |                                     
|                                                             |                             |         |    |                           |     |           |     |               |    |       |     |                                     
|End of year                                                  |                             | 500     |    | 172                       |     | 1,225     |     | 134           |    | 2,031 |     |                                    
|Proved developed reserves, beginning of year                 |                             | 503     |    | 228                       |     | 519       |     | 54            |    | 1,304 |     |                                    
|End of year                                                  |                             | 500     |    | 171                       |     | 612       |     | 57            |    | 1,340 |     |                                    

F-73

---

|2000                                                         |                             | Germany |     | North Africa/
Middle East |     | Argentina |     | Rest of
World |    | Total |     | Investments
at equity,
Rest of World
|------------------------------------------------------------ | --------------------------- | ------- | --- | ------------------------- | --- | --------- | --- | ------------- | -- | ----- | --- | ------------------------------------
|Estimated proved oil reserves (millions of barrels)          |                             |         |     |                           |     |           |     |               |    |       |     |                                     
|Proved developed and undeveloped reserves, beginning of year |                             | 86      |     | 509                       |     | 26        |     |              |    | 621   |     |                                    
|                                                             | Revisions and other changes |         | 37  |                           | 1   |           | 9   |               |   |       | 47  |                                     
|                                                             | Extensions and discoveries  |         |    |                           | 16  |           |    |               |   |       | 16  |                                     
|                                                             | Improved recovery           |         |    |                           |    |           |    |               |   |       |    |                                     
|                                                             | Purchase of reserves        |         |    |                           |    |           |    |               |   |       |    |                                     
|                                                             | Sale of reserves            |         |    |                           | 3   |           |    |               |   |       | 3   |                                     
|                                                             | Production                  |         | 7   |                           | 44  |           | 5   |               |   |       | 56  |                                     
|                                                             |                             |         |     |                           |     |           |     |               |    |       |     |                                     
|End of year                                                  |                             | 116     |     | 479                       |     | 30        |     |              |    | 625   |     |                                    
|Proved developed reserves, beginning of year                 |                             | 66      |     | 465                       |     | 18        |     |              |    | 549   |     |                                    
|End of year                                                  |                             | 76      |     | 462                       |     | 22        |     |              |    | 560   |     |                                    
|Estimated proved gas reserves (BSCF)                         |                             |         |     |                           |     |           |     |               |    |       |     |                                     
|Proved developed and undeveloped reserves, beginning of year |                             | 432     |     | 247                       |     | 788       |     | 119           |    | 1,586 |     |                                    
|                                                             | Revisions and other changes |         | 120 |                           | (13 | )         | 213 |               | (1 | )     | 319 |                                     
|                                                             | Extensions and discoveries  |         |    |                           |    |           |    |               |   |       |    |                                     
|                                                             | Improved recovery           |         |    |                           |    |           |    |               |   |       |    |                                     
|                                                             | Purchase of reserves        |         |    |                           |    |           |    |               | 16 |       | 16  |                                     
|                                                             | Sale of reserves            |         |    |                           |    |           |    |               | 30 |       | 30  |                                     
|                                                             | Production                  |         | 43  |                           | 6   |           | 81  |               | 15 |       | 145 |                                     
|                                                             |                             |         |     |                           |     |           |     |               |    |       |     |                                     
|End of year                                                  |                             | 509     |     | 228                       |     | 920       |     | 89            |    | 1,746 |     |                                    
|Proved developed reserves, beginning of year                 |                             | 301     |     |                          |     | 476       |     | 73            |    | 850   |     |                                    
|End of year                                                  |                             | 503     |     | 228                       |     | 519       |     | 54            |    | 1,304 |     |                                    

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.

F-74

---

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.

Standardized measure of discounted future net cash flows relating to proved oil and gas reserves

|2002                                             |  | Germany |       | North Africa/
Middle East |   | Argentina |  | Rest of
World |       | Total |   | Investments
at equity,
Rest of World
|------------------------------------------------ |  | ------- | ----- | ------------------------- | - | --------- |  | ------------- | ----- | ----- | - | ------------------------------------
|
|Discounted future net cash flow                  |  |         |       |                           |   |           |  |               |       |       |   |                                     
|Revenues                                         |  | €       | 3,213 |                           | € | 10,048    |  | €             | 1,887 |       | € | 1,090                               
|Production/development costs                     |  |         | 1,363 |                           |   | 1,654     |  |               | 820   |       |   | 551                                 
|Income taxes                                     |  |         | 802   |                           |   | 7,278     |  |               | 213   |       |   | 146                                 
|Future net cash flows                            |  |         | 1,048 |                           |   | 1,116     |  |               | 854   |       |   | 393                                 
|Discounted to present value at a 10% annual rate |  |         | 252   |                           |   | 417       |  |               | 354   |       |   | 116                                 
|Total                                            |  | €       | 796   |                           | € | 699       |  | €             | 500   |       | € | 277                                 
|                                                 |  |         |       |                           |   |           |  |               |       |       |   |                                     

|2001                                             |  | Germany |       | North Africa/
Middle East |   | Argentina |  | Rest of
World |       | Total |   | Investments
at equity,
Rest of World
|------------------------------------------------ |  | ------- | ----- | ------------------------- | - | --------- |  | ------------- | ----- | ----- | - | ------------------------------------
|
|Discounted future net cash flow                  |  |         |       |                           |   |           |  |               |       |       |   |                                     
|Revenues                                         |  | €       | 3,111 |                           | € | 6,758     |  | €             | 1,720 |       | € | 372                                 
|Production/development costs                     |  |         | 1,429 |                           |   | 1,795     |  |               | 873   |       |   | 164                                 
|Income taxes                                     |  |         | 727   |                           |   | 4,108     |  |               | 207   |       |   | 104                                 
|Future net cash flows                            |  |         | 955   |                           |   | 855       |  |               | 640   |       |   | 104                                 
|Discounted to present value at a 10% annual rate |  |         | 242   |                           |   | 302       |  |               | 256   |       |   | 25                                  
|Total                                            |  | €       | 713   |                           | € | 553       |  | €             | 384   |       | € | 79                                  
|                                                 |  |         |       |                           |   |           |  |               |       |       |   |                                     

|2000                                             |  | Germany |       | North Africa/
Middle East |   | Argentina |  | Rest of
World |       | Total |   | Investments
at equity,
Rest of World
|------------------------------------------------ |  | ------- | ----- | ------------------------- | - | --------- |  | ------------- | ----- | ----- | - | ------------------------------------
|
|Discounted future net cash flow                  |  |         |       |                           |   |           |  |               |       |       |   |                                     
|Revenues                                         |  | €       | 3,597 |                           | € | 10,424    |  | €             | 1,895 |       | € | 297                                 
|Production/development costs                     |  |         | 1,453 |                           |   | 1,951     |  |               | 690   |       |   | 120                                 
|Income taxes                                     |  |         | 903   |                           |   | 7,346     |  |               | 277   |       |   | 92                                  
|Future net cash flows                            |  |         | 1,241 |                           |   | 1,127     |  |               | 928   |       |   | 85                                  
|Discounted to present value at a 10% annual rate |  |         | 405   |                           |   | 410       |  |               | 316   |       |   | 9                                   
|Total                                            |  | €       | 836   |                           | € | 717       |  | €             | 612   |       | € | 76                                  
|                                                 |  |         |       |                           |   |           |  |               |       |       |   |                                     

F-75

---

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.

|2002                                                                 |  | Germany |      | North Africa/
Middle East |   | Argentina |   | Rest of
World |      | Total |   | Investments
at equity,
Rest of World |  
|-------------------------------------------------------------------- |  | ------- | ---- | ------------------------- | - | --------- | - | ------------- | ---- | ----- | - | ------------------------------------ | -
|
|Summary of changes                                                   |  |         |      |                           |   |           |   |               |      |       |   |                                      |  
|Balance as of January 1                                              |  | €       | 713  |                           | € | 553       |   | €             | 384  |       |   | €79                                  |  
|Sales and transfers of oil and gas produced, net of production costs |  |         | (276 | )                         |   | (741      | ) |               | (115 | )     |   | (72                                  | )
|Net changes in prices and in development and production cost         |  |         | 181  |                           |   | 2,233     |   |               | 46   |       |   | 18                                   |  
|Extension, discoveries and improved recovery, less related costs     |  |         |     |                           |   | 57        |   |               | 3    |       |   | 40                                   |  
|Revisions of previous quantity estimates                             |  |         | 58   |                           |   | 171       |   |               | 35   |       |   | (12                                  | )
|Development costs incurred during the period                         |  |         | 61   |                           |   | 66        |   |               | 50   |       |   | 3                                    |  
|Changes in estimated future development cost                         |  |         | 0    |                           |   | (91       | ) |               | 59   |       |   | (24                                  | )
|Purchase (sales) of reserves in place  net                          |  |         |     |                           |   |          |   |               |     |       |   | 264                                  |  
|Accredition of discount                                              |  |         | 108  |                           |   | 287       |   |               | 50   |       |   | 13                                   |  
|Net changes in income taxes                                          |  |         | (49  | )                         |   | (1,836    | ) |               | (8   | )     |   | (32                                  | )
|Other                                                                |  |         |     |                           |   |          |   |               | (4   | )     |   |                                     |  
|                                                                     |  |         |      |                           |   |           |   |               |      |       |   |                                      |  
|Balance as of December 31                                            |  | €       | 796  |                           | € | 699       |   | €             | 500  |       | € | 277                                  |  

|2001                                                                 |  | Germany |      | North Africa/
Middle East |   | Argentina |   | Rest of
World |      | Total |   | Investments
at equity,
Rest of World
|-------------------------------------------------------------------- |  | ------- | ---- | ------------------------- | - | --------- | - | ------------- | ---- | ----- | - | ------------------------------------
|
|Summary of changes                                                   |  |         |      |                           |   |           |   |               |      |       |   |                                     
|Balance as of January 1                                              |  | €       | 836  |                           | € | 717       |   | €             | 612  |       | € | 76                                  
|Sales and transfers of oil and gas produced, net of production costs |  |         | (325 | )                         |   | (848      | ) |               | (121 | )     |   | (71                                 
|Net changes in prices and in development and production cost         |  |         | (73  | )                         |   | (1,765    | ) |               | (305 | )     |   | 20                                  
|Extension, discoveries and improved recovery, less related costs     |  |         |     |                           |   |          |   |               | 1    |       |   | 23                                  
|Revisions of previous quantity estimates                             |  |         | 102  |                           |   | (64       | ) |               | 42   |       |   | (1                                  
|Development costs incurred during the period                         |  |         | 65   |                           |   | 51        |   |               | 18   |       |   | 5                                   
|Changes in estimated future development cost                         |  |         | (91  | )                         |   | 54        |   |               | 18   |       |   | (3                                  
|Purchase (sales) of reserves in place  net                          |  |         |     |                           |   |          |   |               |     |       |   |                                    
|Accredition of discount                                              |  |         | 127  |                           |   | 481       |   |               | 72   |       |   | 12                                  
|Net changes in income taxes                                          |  |         | 72   |                           |   | 1,927     |   |               | 47   |       |   | 18                                  
|Other                                                                |  |         |     |                           |   |          |   |               |     |       |   |                                    
|                                                                     |  |         |      |                           |   |           |   |               |      |       |   |                                     
|Balance as of December 31                                            |  | €       | 713  |                           | € | 553       |   | €             | 384  |       | € | 79                                  

F-76

---

|2000                                                                 |  | Germany |      | North Africa/
Middle East |   | Argentina |   | Rest of
World |      | Total |   | Investments
at equity,
Rest of World
|-------------------------------------------------------------------- |  | ------- | ---- | ------------------------- | - | --------- | - | ------------- | ---- | ----- | - | ------------------------------------
|
|Summary of changes                                                   |  |         |      |                           |   |           |   |               |      |       |   |                                     
|Balance as of January 1                                              |  | €       | 378  |                           | € | 694       |   | €             | 454  |       | € | 39                                  
|Sales and transfers of oil and gas produced, net of production costs |  |         | (245 | )                         |   | (917      | ) |               | (180 | )     |   | (21                                 
|Net changes in prices and in development and production cost         |  |         | 393  |                           |   | 336       |   |               | 158  |       |   | 89                                  
|Extension, discoveries and improved recovery, less related costs     |  |         |     |                           |   | 103       |   |               |     |       |   |                                    
|Revisions of previous quantity estimates                             |  |         | 278  |                           |   | (57       | ) |               | 209  |       |   | 21                                  
|Development costs incurred during the period                         |  |         | 66   |                           |   | 46        |   |               | 26   |       |   | 26                                  
|Changes in estimated future development cost                         |  |         | (98  | )                         |   | (105      | ) |               | (41  | )     |   | (11                                 
|Purchase (sales) of reserves in place  net                          |  |         |     |                           |   | (8        | ) |               |     |       |   | (21                                 
|Accredition of discount                                              |  |         | 84   |                           |   | 492       |   |               | 51   |       |   | 5                                   
|Net changes in income taxes                                          |  |         | (20  | )                         |   | 133       |   |               | (65  | )     |   | (53                                 
|Other                                                                |  |         |     |                           |   |          |   |               |     |       |   | 2                                   
|                                                                     |  |         |      |                           |   |           |   |               |      |       |   |                                     
|Balance as of December 31                                            |  | €       | 836  |                           | € | 717       |   | €             | 612  |       | € | 76                                  

F-77

---

Item 19.Exhibits

---

F-78

---

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

|Date: March 12, 2003 | BASF AKTIENGESELLSCHAFT
|-------------------- | -----------------------
|                     |                        
|                     | By:                    
|                     |                        
|                     |                        
|                     | By:                    
|                     |                        

---

CERTIFICATION OF CHAIRMAN OF THE BOARD OF EXECUTIVE DIRECTORS

I,
Dr. Jürgen F. Strube, certify that:





|Date: March 12, 2003 |  |                                                                  
|-------------------- |  | -----------------------------------------------------------------
|                     |  |                                                                  
|                     |  | LOGO                                                             
|                     |  | Dr. Jürgen F. Strube
Chairman of the Board of
Executive Directors

---

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I,
Max Dietrich Kley, certify that:





|Date: March 12, 2003 |  |                                          
|-------------------- |  | -----------------------------------------
|                     |  |                                          
|                     |  | LOGO                                     
|                     |  | Max Dietrich Kley
Chief Financial Officer

---

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