BASF in Brief 2007

SHAPING THE FUTURE

BASF In Brief 2007 BASF GROUP 2007 re , ine questionnai Dear Reader to know what you think about “BASF In Brief ents to ﬁ ll in our onl it’s important totake us a few mom ionnaire. 2007”. Please tes will take at corporate.basf.com/questEveryone who participa book vouchers. You can also winfor a prize:thirty €25 part in a drawing April 25, 2008. Entry deadline is

Million €

2007 2006 Change in % Sales 57,951 52,610 10.2 Income from operations before depreciation and amortization (EBITDA) 10,225 9,723 5.2 Income from operations (EBIT) before special items 7,614 7,257 4.9 Income from operations (EBIT) 7,316 6,750 8.4 Income before taxes and minority interests 6,935 6,527 6.3 Net income 4,065 3,215 26.4 Earnings per share (€) 8.32 6.37 30.6 EBITDA in percent of sales 17.6 18.5 – Cash provided by operating activities 5,807 5,940 (2.2) Additions to long-term assets1 4,425 10,039 (55.9) Excluding acquisitions 2,629 2,425 8.4 Amortization and depreciation1 2,909 2,973 (2.2) Segment assets (as of December 31 )2 39,049 38,599 1.2 Personnel costs 6,648 6,210 7.1 Number of employees (as of December 31) 95,175 95,247 (0.1)

1 Intangible assets and property, plant and equipment (including acquisitions) 2 Intangible assets and property, plant and equipment, inventories and business-related receivables

Record year 2007 • Record income from operations of €7.3 billion • Premium of €2.9 billion earned on cost of capital • Dividend increased to €3.90 per share • Attractive dividend yield

THE COVER SHOWS DR. BETTINA SOBOTKA, HEAD OF NANO-BIO-SURFACES RESEARCH, LUDWIGSHAFEN, GERMANY

REGARDING CORPORATE REPORTING

The information contained on the fi nancial position and fi nancial performance of BASF Group is based on the requirements of the German Commercial Code as well as on International Financial Reporting Standards (IFRS), according to which the BASF Group Consolidated Financial Statements are prepared. “BASF In Brief 2007” as short report contains forward-looking statements. These statements are based on current ex- perience, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are diffi cult to predict and 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 those that may be expressed or implied by such statements. We do not assume any obligation to update the forward-looking statements contained in this short report. The reporting period was fi scal 2007. To ensure that this short report contains the latest information, the report includes relevant information up to the editorial deadline of March 4, 2008. “BASF In Brief” is published each year in mid-March in English and German. Chemicals

Our organic and inorganic basic chemicals are used to supply raw materials to our value- adding chains and are marketed to our external customers. Cost leadership is achieved thanks to integrated production facilities, our Research Verbund and modern large-scale plants. We enhance our portfolio of higher-value products through innovations and acquisitions. In addition, we market a broad range of organic and inorganic specialties, in particular catalysts and electronic chemicals.

Plastics

BASF is one of the global leading suppliers of plastics — the energy-efﬁ cient material. In standard plastics, we have a portfolio of focused product lines and efﬁ cient marketing processes. In our business with specialties, we offer a wide range of high-value products, system solutions and services. In close collaboration with our customers, we constantly extend this range and add new applications.

Performance Products

Our innovative solutions from performance chemistry contribute to the functionality and performance of many everyday products from cars, paper and construction materials to detergents and baby diapers. We want to be the key partner for our customers. We develop new products, system solutions and applications in close collaboration with our customers. Here the key to success is our powerful research and development.

Agricultural Products & Nutrition

We strengthen our competitive position with innovative products. Our crop protection products safeguard crops and thus protect harvests. Our broad range of high-value products makes us a preferred partner of customers from the cosmetics and pharmaceutical industries as well as for human and animal nutrition. Our research in plant biotechnology focuses on plants for more efﬁ cient agriculture, healthier nutrition and as renewable raw materials.

Oil & Gas

As the largest German producer of oil and gas, we beneﬁ t from our many years of expertise in exploration and production and we concentrate on oil and gas-rich regions in Europe, North Africa, South America, Russia and the Caspian Sea region. Together with our partner Gazprom, we are making use of the growth opportunities arising from growing demand and the liberalization of European gas markets.

CHANGE IN SALES BY SEGMENT CHEMICALS PLASTICS COMPARED WITH PREVIOUS YEAR

2007 +22% +6% +15% PERFORMANCE PRODUCTS 2 1 Income from operations(EBIT) special items Income from operationsbefore Sales special items Income from operationsbefore Sales Income from operations(EBIT) Million € Key dataAgriculturalProducts &Nutrition Million € Key dataPerformanceProducts Million € Key dataPlastics Million € Key dataChemicals Income from operations(EBIT) special items Income from operationsbefore Sales Million € Key dataOil&Gas Income from operations(EBIT) special items Income from operationsbefore Sales Income from operations(EBIT) special items Income from operationsbefore Sales Containsthesalesofconstructionchemicalsbusinessacquired onJuly1,2006. Containssalesfrom thecatalysts andMaterialsServicesbusinessacquired onJune6,2006. 11,697 14,162 10,517 13,496 2,014 1,995 3,014 3,014 4,989 1,236 1,327 2007 2007 2007 2007 2007 704 842 660 653 +1% NUTRITION AGRICULTURAL PRODUCTS& 01315.4 10,133 22.4 11,572 067(1.6) 10,687 5.6 12,775 2006 2006 ,0 18.2 1,704 ,8 44.6 1,380 ,5 (7.3) (7.1) 3,250 3,245 1.1 4,934 3.7 9.1 1,192 1,216 06% 2006 % 2006 06% 2006 6 5.2 (0.7) 669 848 8 73.2 50.1 381 435 1 2 % % 3 Sales bybusinesssector Sales bydivision Sales bydivision Sales bydivision Sales bydivision 2 2 4 3 4 €13,496 €11,697 €14,162 3 €10,517 €4,989 million million million million million 2 1 1 1 1 2 2 1 4 -- 3 -- 2 -- 1 -- 1 -- 2 -- 3 -- 4 -- 3 -- 2 -- 1 -- 2 -- 1 -- 2 -- Production: 1 -- –2% OIL &GAS Intermediates: Petrochemicals: Catalysts: Inorganics: Styrenics: Performance Polymers: Polyurethanes: Performance Chemicals: Functional Polymers: Coatings: Construction Chemicals: Fine Chemicals: Agricultural Products: Natural GasTrading: Exploration and 22% 39% 34% 8% 42% 18% 38% 37% 40% 58% 30% 63% 23% 30% 18%

BASF’s segments BASF In Brief 2007 Contents 1 SHAPING THE FUTURE

02 INTERVIEW DR. HAMBRECHT 04 BOARD OF EXECUTIVE DIRECTORS 05 STRATEGY 06 CORPORATE GOVERNANCE 07 SUPERVISORY BOARD

08 BASF SHARES

10 SOLUTIONS FOR GLOBAL CHALLENGES

CLIMATE PROTECTION 12

HOUSING HEALTH MOBILITY 18 DEMOGRAPHIC AND CONSTRUCTION 14 AND NUTRITION 16 CHANGE 20

22 SEGMENTS CHEMICALS 23 / PLASTICS 24 / PERFORMANCE PRODUCTS 25 AGRICULTURAL PRODUCTS & NUTRITION 26 / OIL & GAS 27

28 BASF WORLDWIDE RESULTS OF OPERATIONS 30 / BALANCE SHEETS 31 STATEMENTS OF CASH FLOWS 32

BASF GROUP 2007 / BASF’S SEGMENTS INSIDE FRONT COVER TEN-YEAR SUMMARY INSIDE BACK COVER

ABOUT “BASF IN BRIEF 2007”

“BASF In Brief 2007” offers an overview of the past business year and shows what BASF has achieved in 2007. In addition, short feature stories illustrate how our company contributes to important future topics. “BASF In Brief 2007” has not been attested by the external auditors. The audited Consolidated Financial Statements of BASF Group were published in “Report 2007” on March 12, 2008.

You can ﬁ nd more information on the business year 2007 in the Report 2007 or on the Internet at corporate.basf.com/report. Further feature stories and ﬁ lms about the most important future topics can be found on the Internet at corporate.basf.com/future. 2 Interview Dr. Hambrecht BASF In Brief 2007

“FIT AND FLEXIBLE FOR THE FUTURE” INTERVIEW WITH DR. JÜRGEN HAMBRECHT, CHAIRMAN OF BASF SE’S BOARD OF EXECUTIVE DIRECTORS

After a strong performance in 2006, 2007 was once What in your opinion were the highlights of 2007? again a complete success for BASF. The world’s leading The successful integration of the businesses acquired in chemical company continued to grow profi tably and to 2006 has further strengthened our competitive edge and achieve an attractive premium on its cost of capital. helped us to weather cyclical fl uctuations even more effec- Where do we go from here, and what do the coming tively. Operationally the company has become leaner and years hold? BASF Chairman Dr. Jürgen Hambrecht talks more effi cient. Major strategic steps were converting BASF about growth, goals and the future. into a European Company (SE) and restructuring our business. This will give us greater room for maneuvering. 2007 was a record year – what were the reasons? We were successful in the market! In 2007, we again fur- What does that mean for investors and customers? ther expanded our customer partnerships and together We are combining similar businesses in our newly posi- developed innovative products and solutions. Looking at tioned segments. This allows our investors and sharehold- the huge challenges of today and tomorrow, our goal is ers to monitor our performance more effectively. At the very clear: We want to help our customers to be even more same time, it allows us to focus our business even more successful – their success is our success. And our num- closely on our customers and to create new potential for bers for 2007 show that we’re on the right track: We have value-added growth. increased sales by 10% to nearly €58 billion. Income from operations reached a new record level of €7.3 billion. And where do you see the chemistry of tomorrow? Chemistry of today and tomorrow will be an innovation Does the share price refl ect this? driver for success in all production industries. Only with With an increase in value of 42% over the previous year, chemistry will there be answers for global topics such as our shares also performed extremely well. This excellent climate protection. At the same time, globalization makes result will enable us to propose to our shareholders a divi- competition faster, more demanding, and thus harder. dend of €3.90 per share. We remain ambitious here too: Shaping the future means working consistent and goal- We want to increase our dividend every year, and in diffi cult oriented, every day. That is why we are continuously opti- years at least keep it at the previous year’s level. In addi- mizing our portfolio, that is why we are investing in growth tion, we want to continue our more than €3 billion share markets early on and are constantly strengthening our buyback program as planned. After spending more than innovation platforms. €1.9 billion on share buybacks in 2007 – more than in any other year since 1999 – the program will, as announced,

be completed by the end of 2008.

DR. JÜRGEN HAMBRECHT

“We want to increase our dividend every year, and in difﬁ cult years at least keep it at the previous year’s level.” BASF In Brief 2007 Interview Dr.Hambrecht 3

So innovation plays an important role? And how do you handle BASF’s emissions? A huge role! And that’s why we will be spending more on Climate protection is an integral part of our sustainability Research and Development again in 2008. Between 2004 strategy and this is why we plan to further strengthen our and 2007 we increased R&D expenditure by 40% to nearly efforts in all areas of environmental and climate protection. €1.4 billion. And it’s worth it: we are proud of our well- We are one of the fi rst companies to have appointed a cli- stocked product pipeline for our customers. And we do mate protection offi cer charged with coordinating BASF’s even more for securing the future. Between 2006 and many different global activities in this area. 2008, we will spend more than €900 million on research in new fi elds of activity, our so-called growth clusters. From One successful year after another – will this continue? 2015 onwards, we expect annual sales of €2 billion to €4 Of course we will do all we can to ensure that it stays like billion from innovations from our fi ve growth clusters. We this. We are keeping ourselves fi t and fl exible! Despite the are working, for example, with Monsanto on the research, turbulence at the beginning of this year, and slowing development and marketing of genetically optimized crops growth momentum, we are moving into 2008 with great that have higher yields and higher stress tolerance than confi dence. And naturally we want to extract the best we conventional species. can for a profi table and cyclically robust BASF! Four things are especially important to me: we will continue to improve Back to the present: what is BASF’s position in the our business through acquisitions and divestitures; we will current climate debate? focus even more closely on our customers – in all global We view climate protection as a very important task, one growth markets; we will translate our innovative strength to which we can contribute in a number of effective ways, into market success; and we will further strengthen our with products, processes and technologies that save en- BASF team worldwide with purposeful personnel planning ergy and thus protect the global climate. And BASF is the and development. fi rst industrial company worldwide to prove it. With an integrated carbon balance we can show that our products can What does this mean in numbers? save three times more climate gas emissions than the en- We want to grow faster than the chemical market annually tire amount caused by the production and disposal of our and we are convinced that BASF Group will at least earn products. That means: we are producing climate protec- its cost of capital every year and thus generate value for tion! our shareholders. We aim to increase sales and slightly improve income before special items. The whole BASF team worldwide will work hard to achieve this. ///

OUTLOOK BASF GROUP 2008

“We want to grow faster than the chemical market annually and we are convinced that BASF Group will at least earn its cost of capital every year. We aim to increase sales and slightly improve income before special items.” 4 Board of Executive Directors BASF In Brief 2007

BOARD OF EXECUTIVE DIRECTORS

DR. JÜRGEN HAMBRECHT DR. H.C. EGGERT VOSCHERAU DR. KURT BOCK Chairman of the Board of Executive Directors, Vice Chairman of the Board of Executive Direc- Chief Financial Ofﬁ cer, Business economist, Chemist, 61, with BASF for 32 years tors, Economist, 64, with BASF for 39 years 49, with BASF for 17 years

DR. MARTIN BRUDERMÜLLER DR. HANS-ULRICH ENGEL DR. JOHN FELDMANN Chemist, Lawyer, Chemist, 46, with BASF for 20 years 48, with BASF for 20 years 58, with BASF for 20 years

DR. ANDREAS KREIMEYER DR. STEFAN MARCINOWSKI DR. HARALD SCHWAGER Research Executive Director, Biologist, Chemist, Chemist, 52, with BASF for 22 years 55, with BASF for 29 years 47, with BASF for 20 years

More information on the Board of Executive Directors can be found in the Report 2007, on page 10 and 120, or on the Internet at corporate.basf.com/board.

Report 2007, page 10/120 corporate.basf.com/board BASF In Brief 2007 Strategy 5

HOW WE ACHIEVE VALUE-ADDING GROWTH OUR STRATEGY BASF 2015

BASF is the world’s leading chemical company – The Chemical Company. We aim to constantly increase the value of our company by proﬁ table growth and to remain the number one in chemistry. With innovation and new technologies, we open up new market opportunities. We combine economic success with environmental protection and social responsibility.

To realize our goals everyday and across the company, the BASF team aligns its activities with four guidelines.

WE EARN A PREMIUM ON WE HELP OUR CUSTOMERS OUR COST OF CAPITAL TO BE MORE SUCCESSFUL

We increase BASF’s value: In 2007, In 2007, our subsidiary BASF Coatings we have again achieved our goal and was the recipient of General Motors’ earned a premium on our cost of capital “Supplier of the Year Award” for 2006. The of €2.9 billion. In doing so, we create award recognizes the outstanding per- value for our shareholders, beyond the formance as a global supplier of Original invested costs for stockholders’ equity Equipment Manufacturer (OEM) coatings. and liabilities. The decision is based on supplier performance in quality, service, technology and price. It is the fourth time in ﬁ ve years that BASF Coatings has received this award.

WE FORM THE BEST TEAM WE ENSURE SUSTAINABLE IN INDUSTRY DEVELOPMENT

Our most important success factor are We campaign for sustainability beyond our employees. To win the best experts our company: Our project “1+3” in China and executives worldwide, we focus on is such an example. In trainings, we pass systematic employee development, team on our know-how to three direct partners, culture and open dialogue. And that’s how such as customers or suppliers. They in we are perceived: Recently we have been return pass on their knowledge to three recognized as excellent employer – one other partners – and thanks to “1+3” 12 of the “Best Companies to work for” companies ensure sustainable develop- – by EXAME, one of the leading Brazilian ment even more. economy magazines.

Report 2007, page 14 corporate.basf.com/strategy 6 DIRECTING AND GUIDING CORPORATE ACTIVITIES CORPORATE GOVERNANCE Board to structure. corporate governance ReducingtheSupervisory the transformationwasfurtherdevelopmentofBASF’s mitment toourhomemarketinEurope. Animportantgoalof Corporation. Withthisdecision,weare makingaclearcom- The better suitedbya nership throughout Europe. maintained inthe tive Directors andSupervisoryBoard, willofcoursebe as thedualmanagementsystemwithBoard ofExecu- and effi the employees’side,setsfuture direction foramodern holders andemployeesaswelltheEuropeanization of • • • From partners, employees,andsociety. investors,fi and international • CORPORATE GOVERNANCE BASF As ofJanuary motes confi Effective andtransparent pro- corporategovernance A companycanonlybeasgooditsmanagement: Corporate Governance codetermination structure, resentatives intheSupervisoryBoard whilemaintainingthe national legalform.ByintegratingEuropean employeerep- greater extentthanwouldhavebeenpossiblewithapurely pation ofourEuropean employeesinthecorporationtoa verting the form oftheSocietasEuropaea shareholders The AnnualMeetingisthevoting platformforour advises theBoard ofExecutive Directors An independantSupervisoryBoard supervisesand A Board ofExecutiveDirectors managesthecompany involved indirecting and controlling acompany embracesalltheprocessesCorporate governance SE isthechemicalindustrypioneerinEurope BASF cient CorporateCharta.Establishedstructures such is a contemporary and modern legal form which is legalformwhichis isacontemporaryandmodern 12 AG dencein memberswithequalrepresentation ofshare- Aktiengesellschaftto 14, toan

SE. 2008, 12 -person SupervisoryBoard. Bycon- SE,

BASF

weare alsoincreasing thepartici- BASF BASF onthepartofournational nancialmarkets,business exists under the new legal existsunderthenewlegal (SE), isembracingsocialpart- theEuropean Stock BASF

SE exchange listing ers canbuyandsellshares justasbefore on everystock for BASF’s contractualpartnersisinthename.Sharehold- agreements likewisecontinuetoapply.Theonlychange unchanged, plantagreements andcollectivebargaining customers andemployees:Employeecontractscontinue The conversionhasbasicallynopracticalimplicationsfor Consequences oftheconversion tors in governing thecompany. tors ingoverning and supervisesadvisestheBoard ofExecutiveDirec- leadership team,manages ecutive Directors. TheBoard ofExecutiveDirectors, our cannot simultaneouslybeamemberoftheBoard ofEx- are strictlyseparate.AmemberoftheSupervisoryBoard and aSupervisoryBoard. Appointmentstothetwobodies management systemwithaBoard ofExecutiveDirectors prises agree oncorporatestrategy.TheSupervisoryBoard com- the company.Furthermore,vant mattersconcerning they larly, comprehensively andinatimelymanneronallrele- parties. TheBoard reports totheSupervisoryBoard regu- bility andrepresents thecompanyindealingswiththird Also aftertheconversionintoan Board andSupervisoryBoard reporting andotherreporting obligations. to speak,askquestions,orvote),norontheﬁ rights ofshareholders attheAnnualMeeting(e.g. Report2007,page116 corporate.basf.com/corporategovernance THE KEYTOSE • • • • customers, for employees, orforshareholders Conversion isnotassociatedwith changesfor The new Supervisory Board reduced to Board European employeesrepresented intheSupervisory members from 12 members.ItappointstheExecutiveDirectors BASF BASF Europe Works Councilhas 12 European countries shares. Italsohasnoeffect onthe BASF /// underitsownresponsi- SE, 12

BASF members hasadual BASF In Brief 2007 Brief In BASF 23 ,

theright nancial BASF In Brief 2007 Supervisory Board 7

THE SUPERVISORY BOARD

The Supervisory Board of BASF SE The Supervisory Board of BASF AG (effective January 14, 2008) (until January 13, 2008)

PROF. DR. JÜRGEN STRUBE, Chairman of the Supervi- PROF. DR. JÜRGEN STRUBE, Mannheim, Germany sory Board of BASF SE, Mannheim, Germany Chairman RALF-GERD BASTIAN, Member of the works council of ROBERT OSWALD, Altrip, Germany the Ludwigshafen site of BASF SE, Neuhofen, Germany Deputy Chairman WOLFGANG DANIEL, Deputy Chairman of the works RALF-GERD BASTIAN, Neuhofen, Germany council of the Ludwigshafen site of BASF SE, Limburgerhof, Germany WOLFGANG DANIEL, Limburgerhof, Germany PROF. DR. FRANÇOIS N. DIEDERICH, Professor at the PROF. DR. FRANÇOIS N. DIEDERICH, Zurich, Switzerland Swiss Federal Institute of Technology Zurich, Zurich, Switzerland MICHAEL DIEKMANN, Munich, Germany MICHAEL DIEKMAN, Chairman of the Board of Manage- DR. TESSEN VON HEYDEBRECK, ment of Allianz SE, Munich, Germany Frankfurt (Main), Germany FRANZ FEHRENBACH, Chairman of the Board of Man- ARTHUR L. KELLY, Chicago, Illinois, USA agement of Robert Bosch GmbH, Stuttgart, Germany ROLF KLEFFMANN, Wehrbleck, Germany DR. TESSEN VON HEYDEBRECK, Former member of the Board of Managing Directors of Deutsche Bank AG, MAX DIETRICH KLEY, Heidelberg, Germany Frankfurt (Main), Germany PROF. DR. RENATE KÖCHER, Allensbach, Germany MAX DIETRICH KLEY, Lawyer, Heidelberg, Germany EVA KRAUT, Ludwigshafen, Germany ULRICH KÜPPERS, Regional manager of the Rhineland- ULRICH KÜPPERS, Ludwigshafen, Germany Palatinate/Saarland branch of the Mining, Chemical and Energy Industries Union (IG BCE), Ludwigshafen, Germany KONRAD MANTEUFFEL, Bensheim, Germany ROBERT OSWALD, Chairman of the works council of the DR. KARLHEINZ MESSMER, Weisenheim am Berg, Ludwigshafen site of BASF SE and the chairman of the Germany (until April 30, 2007) joint works council of the BASF Group, Altrip, Germany HANS DIETER PÖTSCH, Wolfsburg, Germany DENISE SCHELLEMANS, Full-time union delegate, PROF. DR. HERMANN SCHOLL, Stuttgart, Germany Kalmthout, Belgien MICHAEL VASSILIADIS, Member of the Central Board of RALF SIKORSKI, Ludwigshafen, Germany Executive Directors of the Mining, Chemical and Energy ROBERT STUDER, Zurich, Switzerland Industries Union (IG BCE), Hemmingen, Germany MICHAEL VASSILIADIS, Hemmingen, Germany

Report 2007, page 122 DR. FRIEDRICH WIRSING, Kaiserslautern, Germany (from May 1, 2007) corporate.basf.com/supervisoryboard

THE SUPERVISORY BOARD

By reducing the Supervisory Board to 12 members with the transformation to an SE (Societas Euopaea), we strengthen and further develop our Corporate Governance. One half of the members of the Supervisory Board is elected by shareholders at the Annual Meeting, the other half by employee representatives.

More information on the Supervisory Board can be found in the Report 2007, page 122, or on the Internet at corporate.basf.com/supervisoryboard. 8 BASF Shares BASF In Brief 2007

BASF SHARES SHARE PRICE REACHES RECORD HIGH

In 2007, BASF’s share price increased by 37.3% and Record dividend of €3.90 per share reached a record level of €101.61 in December. Share- At the Annual Meeting, the Board of Executive Directors holders who invested their dividends increased the val- and the Supervisory Board will propose to increase the ue of their holding by 42.0%. dividend from €3.00 to €3.90 per share. This means that, on the basis of the number of qualifying shares as of De- This means that our shares outperformed the German cember 31, we will be paying out the record amount of and European stock markets. Their key indices DAX 30 nearly €1.9 billion to our shareholders. Based on the year- and DJ EURO STOXX 50 rose by 22.3% and 9.7% respec- end share price of €101.41, BASF shares offer an attractive tively in 2007. BASF shares also outperformed the global dividend yield of 3.8%. BASF belongs to the DivDAX share industry indices DJ Chemicals and MSCI World Chemicals: index, which contains the 15 companies with the highest With 32.9% and 26.7% respectively, their increases in val- dividend yield in the DAX 30. We aim to increase the divi- ue lie considerably below those of BASF. The successes dend further in the future, or in a difﬁ cult business year at for the assets of a long-term investor can be shown with least maintain it at the previous year’s level. a calculation: Shareholders who invested the equivalent of €1,000 in BASF shares at the end of 1997 and reinvested Share buybacks for €1.9 billion the dividends would have increased the value of their hold- In 2007, BASF bought back 21.5 million shares for a total ing to €4,252 by the end of 2007. This average annual re- of approximately €1.9 billion. With 478.2 million outstand- turn of 15.6% puts BASF shares substantially above the ing shares on December 31, 2007, BASF’s market capital- corresponding return for the EURO STOXX 50 (7.8%) and ization was €48.5 billion. At the beginning of 2007, we an-

DAX 30 (6.6%). nounced that we would be buying back BASF shares

Change in value of an investment in BASF shares 2007 (with dividends reinvested, indexed)

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 42.0% 140

130 26.7% 22.3% 120

110 9.7%

100

● BASF ● DAX 30 ● EURO STOXX ● MSCI World Chemicals

SHARES AT A GLANCE Dividend (€ per share)

• The 42% performance in BASF shares 4 3.90 was signiﬁ cantly above industry average 3.00 • Dividend increased to €3.90 per share 3

• Share buybacks for €1.9 billion in 2007 2.00 2 • Two-for-one stock split is planned 1.70 1.30 1.30 1.40 1.40 1.12 1.13 1

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ﬁ share capitalwasrepresented ateachmeeting. This shareholders wouldreceive oneadditionalshare foreach stock split.Followingare-division oftheshare capital, propose totheAnnualMeetingconductatwo-for-one trum ofinvestors,Board andSupervisoryBoard decidedto To make Two-for-one stocksplitplanned further shares. sheet structure. We are planningtocontinuebuyback crease pershare earnings andfurtheroptimizeourbalance With around Broad structure shareholders ofinternational ordered shares, worthatotalofaround ers. Withsuccess:in (Million €) Share buybacks BASF worth atotalof 2007 Brief In BASF to encourageouremployeesbecome Inmanycountriesweoffer share purchase programs most ofwhomare resident inGermany. of thecompany’s share capitalisheldbyprivateinvestors, licly ownedcompanywithahighfree ﬂ The 55 Increased attendanceattheAnnualMeeting April investors from Germanywith largest regional group ofinstitutionalinvestors,followedby share capital,theUnitedStatesandCanadamakeup 1,000 1,500 2,000 gure rose to 500 0 26,

SE 1999 th 256 AnnualMeetingwasheldinMannheimon

2007. BASF share heldwithoutanadditionalpayment. 2000 460,000 700 48% Intheyearsbefore, lessthan shares availabletoanevenbroader spec- €3 1,300 billionin 2001 in shareholders, 2007, 2007, 2002 500 more than constitutinganincrease of 2007 17% 2003 500 and ofcapital.Around 2004 726 BASF 2008 oat. At oat. 18,000 €37 BASF 1,435 2005 isalarge pub- inorder toin- million. 40% employees 26% sharehold- 2006 938 ofthe of 1,899 2007 28%

and furtherinformationon Exchange the best also received adistinctionintheThomsonExtelSurveyfor casions inthepastbusinessyear. Forexample, the categoryof presented withthe“GermanInvestorRelationsAward” in Delisting from the year. ADR Receipts As ofSeptember 10 BASF reduce bothcomplexityandcosts. markets. Shareholders canaccessthecurrent Relations Prize”among quality ofourcommunicationefforts andhaveranked value enhancement.Analystsandinvestorsconﬁ parts ofourcompany’s strategy, which aimsatsustainable with allparticipantsonthecapitalmarketare important Transparency aswell regular andopencommunication Close dialoguewiththecapitalmarkets PremierQX.platform International Report2007,page20 corporate.basf.com/share percentage pointscompared withtheprevious • INVESTOR RELATIONS TEAM YOU CANREACHOUR • • • corporate.basf.com/share/newsletter Online Registrationat: Internet: Telephone: program intheUnitedStates“Over-the-Counter” InvestorRelationsasthenumberoneonmanyoc- -mail: E IR (ADR) (NYSE). workintheEuropean chemicalindustry. [email protected] corporate.basf.com/share are nolongerlistedontheNewYork Stock DAX

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50 iscontinuingits companies,and ADR BASF Shares BASF rm the rm price /// was 9 10 BASF shapes the future BASF In Brief 2007 BASF In Brief 2007 BASF shapes the future 11 SOLUTIONS FOR GLOBAL CHALLENGES

The global thirst for energy is increasing, fossil fuels are be- coming scarcer, people live longer, the population is growing, boundaries are erased. Next to climate change, other huge future topics will coin our life and our work. In the ﬁ elds of housing and construction, health and nutrition, mobility, and demographic change, we have to be ideally prepared in the coming years. As the leading chemical company, BASF – The Chemical Company, we see these global challenges as huge opportunities: This is why we are investing in Research and Develop- ment as well as in new plants worldwide. Our employees are working hand in hand with customers, organizations and society to ﬁ nd solutions for the problems of the future. On the next pages we will introduce you to tomorrow’s questions – and show that we are already working on the right answers. ///

More information, feature stories and interviews at corporate.basf.com/future 12 BASF shapes the future BASF In Brief 2007

OUR CONTRIBUTION TO CLIMATE PROTECTION SUSTAINABLE SOLUTIONS AND PROCESSES BY BASF

GREENHOUSE GAS EMISSIONS TONS PER YEAR 1 87 MILLION

GREENHOUSE GAS SAVINGS TONS PER YEAR 252 MILLION

OUR MOST IMPORTANT CLIMATE GOAL

We want to reduce our speciﬁ c greenhouse gas emissions per metric ton of sales product by 25% by 2020 compared with 2002. –25% BASF In Brief 2007 BASF shapes the future 13

RESEARCH FOR CLIMATE PROTECTION

BASF offers multifold solutions: We develop innovative technologies and materials for sustainable climate protection, and at the same time focus on energy-efﬁ cient production at our own sites. That is how we actively contribute to climate protection – and use our opportunities on future markets. We invest more than a third of our research expenditures – about €400 million per year – in energy efﬁ ciency, climate protection, conservation of resources and renewable raw materials. In addition to our commitment in these areas, we are also concerned with the consequences of climate change for our sites. Therefore we have established an expert group in our Competence Center Responsible Care, which involves all regions worldwide in its work. More information at corporate.basf.com/future/climate 14 BASF shapes the future BASF In Brief 2007

“Given the growing concerns for energy consumption, tomorrow’s house builders will demand better alternatives in construction methods, products and building systems. What will houses of the future look like – and how can we save energy?”

Steve Wing is an engineer and Executive Director of Insulfoam, the largest producer of insulating EPS-foam (expanded polystyrene) blocks and panels in the United States. systems availableunderthebrandnamesHeck with otherinsulators.Ourthermalinsulationcomposite sult, homebuildersuselessconstructionmaterialsthan radiation likeamirror andthusreduces heatloss.Asare- walls androofs. Itcontainsgraphite,whichrefl ule materialusedtoconstructthermalinsulationpanelsfor • • • reduce costs.Onesuchproduct isNeopor materials, homeownerscanbetterprotect theclimateand building By usingtherightthermalinsulationandmodern No chanceforcoldanddamp cause ofenergyeffi builders andrenovators everywhere canadvancethe dwindle outinthenearfuture. WithBASF’s helphome responsibility forensuringthatenergysuppliesdonot heating, lightingandelectricity.Societybearsthe will liveinurbancities.Billionsofpeoplemore willneed helps tooffset hightemperatures. Micronal’s tinyplastic Senergy BASF TAKES ACTION By FUTURE THE SHAPES BASF ANDCONSTRUCTIONHOUSING 2007 Brief In BASF Cool insummerandwarmwinter warm andprotected. roof waterproofi during heating.Ourphase-changematerialMicronal Insulating materialsminimizetheamountofwarmthlost heating. Rajasil ance ofexteriors.Drybuildingsalsoneedlessenergy for ditional built-inlayerstoprotect andimprove theappear- With theElastopor ample, helpkeepbuildingsdrybyblockingoutmoisture. the world construction oflow-energy buildingsthroughout BASF Micronal composite systemsreduce energy consumption Insulating materialsandthermalinsulation 2025, provides adviceandguidance onthe ® almosttwo-thirds oftheworld’s population haveboththermalinsulatingproperties andad- PCM ® ng membranes,evenatticspacesstay equalizestemperature water-repellant exteriorcoatings,forex- ®

ciencyandclimateprotection. H insulationsystemandConiroof - withMicronal ® , aplasticgran- ects thermal ects ® and ®

® PCM

If allofthe of olderbuildingstolow-energy orzero heating-costhouses. ments of eco-efﬁ with ourcustomers,wedevelopall-around solutionsfor South Korea, ChinaandtheUnitedStates.Inpartnership energy-saving housesinothercountriestoo,including struction oflow-energy residences. We haveerected oldbuildingsandinthecon- customers inmodernizing Italy andSlovakia,forinstance,wesupportadvise Our know-howisputtouseallovertheworld.InFrance, as much would cutannual ings, e.g. of climaticzones,butalsoforverydifferent typesofbuild- Our constructionproducts are suitablenotonlyforarange quired forcoolingbymore than cess equalizestemperatures andlowerstheenergy re- the waxhardens andthestored heatisreleased. Thispro- energy intheformofheat.Whentemperature drops, When thetemperature rises,thewaxmeltsandabsorbs particles containawaxstoragemediumintheircores. BASF know-how forclimate protection: low-energy houses inLudwigshafen. BASF Renovating oldbuildingssavesmoneyand mate, buildinganduserstructure. below insulated soastoreduce heatingenergy requirements to corporate.basf.com/future/housing know-howallovertheworld 7 cient constructionwhichevensurpasstherequire- litersofheatingoilpersquare meterperyear, it , E.U. for newly built homes and for the modernization fornewlybuilthomesandthemodernization 24 14 millionoldresidential unitsinGermanywere directives onsavingenergy. powerplantsemiteveryyear. CO 2 emissionsbyabout 30% dependingonthecli- BASF shapes the future the shapes BASF 80 /// million tons – milliontons– CO 2 15 16 BASF shapes the future BASF In Brief 2007

“Supplying a growing global population with healthy food is more of a challenge than ever. How can we implement efﬁ cient agriculture even under difﬁ cult climatic conditions, such as droughts?”

Yang Do Choi has a Ph.D. in biochemistry, molecular biology and cell biology. He is a professor at Seoul National University and since 2002 head of the research institute “Crop Functional Genomics Center” in Seoul, South Korea. ogy companyMonsantoinspring We startedourlong-termcooperationwiththebiotechnol- successful agriculture healthier nutrition,andforuseasrenewable resources. focus isondevelopingcrops formore effi Therefore weare investinginplantbiotechnology.Our will notsucceedinproducing asmuchisneeded. tial asever. However, thesemethodsontheirownaccord and conventionalcrop cultivationmethodsare asessen- issues. Establishedaidssuchasfertilizers,pesticides at thesametimeaddressing sustainabledevelopment expect agriculturiststodelivertopqualityharvestswhile Consumers makeheavydemandsonagriculture. They The future isinthegenes to developresistant crops forhigh-yieldharvests. resources, weneedtoactnow. Thisiswhyitourgoal for nutritious,healthy,low-costfoodsandrenewable • • • Twenty percent populationgrowth: inonly and more stress tolerant.From soybean, cottonandcanola(oilseedrape)higher-yielding BASF TAKES ACTION €1.2 BASF FUTURE THE SHAPES BASF HEALTH ANDNUTRITION 2007 Brief In BASF a type of corn thatistolerantagainstdroughts.a typeofcorn Thismarks market introduction ofthefi such asdrought. Together wewillinvestatotalofupto more resistant tounfavorableenvironmental infl cooperation istodevelophigh-yieldingcrops thatare or time, theglobalpopulationwillbealmost Monsanto Research, developmentand marketingalliancewith tolerant crops Our research produces higher-yielding, more stress BASF BASF 1.5 billiontomakeimportantcrops (maize), suchascorn billionmore thantoday.To meettherequirement andMonsanto:cooperationfor PlantScience–witheightsites worldwide hasitsownplantbiotechnologyorganization – rst geneticallymodifi 2012 2007. on,weexpectthe Theaimofthe cient agriculture, cient 8 15 billion, years’ uences ed plant, ed seriously: This isthereason whywetake oursocialresponsibility In Europe, plantbiotechnology isdiscussedverycritically. and governments Engaging indialoguewithsociety,interest groups biofuel. which serveasabasisforrenewable resources, suchas starch andprotein contents,aswellimproved plants, and theenvironment togetherwithourcustomers. we developsolutionswithclearbenefi and theassociatedproducts atanearlystage.In thisway, public dialogueandexplainingthebenefi is putat ally, with Even todaymore than Large marketpotentialworldwide crops andforrenewable resources. allow themtomeettherisingdemandsbothforfood a bigstepinthewayofoffering farmerscrops thatwill We helpfarmers tobringinrichharvests. year. Thearea ofcultivablelandalsogrows by genetically optimizedcrops, andthenumberrisesevery the globalmarketforgeneticallyimproved crops in corporate.basf.com/future/nutrition $50 100 BASF billion.Thisincludescrops withoptimumoil, millionhectares atthemoment.Altogether, istakinganactivepartinshapingthe 10 millionfarmersworldwideuse ts forconsumers BASF shapes the future the shapes BASF ts ofthemethods 10% /// 2025 annu-

17 18 BASF shapes the future BASF In Brief 2007 “Mobility is a basic need of mankind, and the number of vehicles is steadily increasing worldwide. For us, sustainable mobility is not a vision but a necessity. And the crucial question is: How can we improve the environmental compatibility of our vehicles with creative and innovative ideas?”

Dr. Thomas Weber is an engineer and has been a member of the Board of Management of Daimler AG since January 2003. In this function, he has been responsible for Group Research & Mercedes-Benz Cars Development since May 1, 2004. additives andultralightplastics. offered bythemarketsoffuture –withcatalysts,fuel compatible solutionsandare seizingtheopportunities century. We haverecognized theneedforenvironmentally diffi ample, theafter-treatment indieselenginesisparticularly customers. Duetotheemissionofsootparticles,forex- We developtailor-made products andsolutionsforour • • • The increase incarsisputtingastrainontheenvironment: Intelligent solutionsforfuture markets vehicles ofthefuture more environmentally friendly. motive industrytodevelopsolutionsthatwillmakethe neers andchemistsworkhandinwiththeauto- them needgasolineandproduce emissions.Ourengi- Roads are crowded allovertheworld:by BASF TAKES ACTION BASF CO FUTURE THE SHAPES BASF MOBILITY 2007 Brief In BASF be about consumption evenfurther, automobilemanufacturers are produce fewerharmfulemissions.Inorder toreduce fuel these, enginesstaycleaner, lastlonger, performbetterand Our fueladditivesalsoensure betterairquality.Thanksto Clean airthankstoadditivesandplastics ly reduced. maintenance. Harmfulsootemissionsare thereby effi that interactswiththeenginetocleanfi tion tocomplywiththestatutoryemissionlimitisacatalyst usually needstoberemoved onaregular basis.Oursolu- consumption Plastics helptolowerweight, thus reducing fuel Fuel additiveslowerconsumption bycirca Catalysts causeareduction inemissions and reduce emissionsby almost cult. Inorder forthefi 2 emissionscouldquadruplebythemiddleof catalystsloweremissions 1.4 billionautomobilesworldwideandallof lter toremain effi 20% cient, thesoot lter –without 2020 2%

there will cient- total sales. sized vehiclecontains brand thatdoesn’t containourplastics.Today, amedium- components orinteriors–there isvirtuallynoautomobile vantage: lowerfuelconsumption.Whetherit’s autobodies, properties thanmetalcomponentsbutweighless.Thead- now alsousingplastics.Thesehavesimilarorevenbetter BASF products help toreduce exhaustemissions. our plasticssavetheequivalentof save about components weighingtwiceasmuch,everycardrivercan motive industryaccountforaround automobile manufacturers: Overall,products fortheauto- technologies havealready convincedalarge numberof and atthesametimeprotecting theenvironment. Our tomotive industry,weare seizingbusinessopportunities productsBy developingmodern andsolutionsfortheau- Tailor-made solutionsforourcustomers nents fortheelectricautomobilesoffuture. goal, weare workingtogetherwithpartnersoncompo- vehicles were totallyemissions-free. To getclosertothis Of courseitwouldbeevenbetterfortheenvironment if Research forautomobilesofthefuture ed byamedium-sizedEuropean cityeveryyear. With corporate.basf.com/future/mobility 100 kilogramsofplasticparts,whichreplace metal /// 0.4 litersoffuelper 200 to 300 100 kilogramsofplastics. CO kilometers.Asaresult, 10% 2 BASF shapes the future the shapes BASF emissionsproduc- of BASF Group’s 19 20 BASF shapes the future BASF In Brief 2007

“By 2020, one out of three members in the workforce in the E.U. will be over 50. How are society and industry preparing for this and for other aspects of demographic changes?”

Vladimír Špidla was Prime Minister of the Czech Republic and since 2004 he is the E.U. Commissioner for Employment, Social Affairs and Equal Opportunity in Brussels, Belgium. different projects at Generations@Work isbeingimplementedinanumberof Extensive program forjob,trainingandfamily is whywesetuptheGenerations@Work program. but uponworkingconditionsandtheircommitment.That not dependentupontheageororiginsofouremployees, performance andtheabilitytogenerateinnovativeideasis ented professionals, nowandinthefuture? We believe both remaining competitiveandcontinuingtoattracttal- available forouremployees?Andhowcanwesucceedin and olderemployees?Whattrainingopportunitiesare effectively facilitateworkcollaborationbetweenyounger es, manyofwhichaffect Society isshifting,andthischangeposingnewchalleng- consistentfi developing highlyqualifi expertise. Thiswillhelpustocontinueattractingand health intheworkplace,andbestwaystoshare work enhance career-childrearing balance,howtopromote how tooptimizeworkplacedesignforthefuture, howto BASF TAKES ACTION FUTURE THE SHAPES BASF DEMOGRAPHIC CHANGE 2007 Brief In BASF • • • • Western Europe andinJapanwillbeovertheageof In justafewyears’time,themajorityofpopulationin Keeping fi our employeesandforcompany. believe itcan,andthatiswhyweare takingaction–for this process ofchangealsobeanopportunity?We far advanced,especiallyintheWestern world.Butcan’t are havinglesschildren. Thisdemographicchangeis The world’s populationisgrowing olderandfamilies profi Our goal:tosupportemployees andsecure productivity andourinnovation power Generations@Work: aprogram tosecure our positionsinour BASFTraining Verbund Together withpartnerswecreate additionaltrainee at selectedGroup companies Worldwide implementationofGenerations@Work table growth withaqualifi t forthefuture withGenerations@Work nancing ofpensionschemes.We supplythe BASF. ed employeesandensure the BASF: Teams ofemployeeslookat Howcanwecontinueto ed team ed 50.

scene forasuccessfulfuture. tunities ofsocialchangeearlyonandare nowsettingthe Group companiesinallregions. We recognized theoppor- Ludwigshafen siteandhasnowbeenextendedtoselected The Generations@Work program waslaunchedatthe Projects atsitesallovertheworld to themthechildcare centercalled“Kiwi. employees atourWintershallsiteinKasselhaveavailable returning toworksoonerafterhavingababy.Since such as“LuKids,”inLudwigshafen,weassistparents in childrearing balancingact.Through ourday-care centers, the times.Anotherofouraimsistoenhancecareer- dustry” onlyifwehelpallouremployeestokeeppacewith We canachieveourgoalofformingthe“bestteaminin- allthemoreall ofus,makinglifelonglearning important. out theirprofessional lives.Working livesare extendedfor through-ample. Itenablesemployeestoengageinlearning CenterinLudwigshafenisasuccessfulex- The Learning CenterandLuKids Achievements: Learning nity toactontheirowninitiative. tools andinstitutionsgiveouremployeestheopportu- Lifelong learning: employees inBASF’sLifelong learning: centerinLudwigshafen. learning corporate.basf.com/future/demography /// BASF shapes the future the shapes BASF ”

2001,

21 22 Segments BASF In Brief 2007 SEGMENTS DEVELOPMENT OF OUR SEGMENTS IN THE BUSINESS YEAR 2007

SALES BY SEGMENT 2007

OIL & GAS SALES €10,517 M CHEMICALS EBIT SALES €3,014 M €14,162 M EBIT €1,995 M

AGRICULTURAL PRODUCTS & NUTRITION SALES €4,989 M EBIT €660 M

PLASTICS SALES PERFORMANCE €13,496 M PRODUCTS EBIT SALES €1,236 M €11,697 M EBIT €704 M BASF GROUP* SALES €57,951 M EBIT €7,316 M

* Including Other: Sales €3,090 M EBIT €(293) M

NEW SEGMENT STRUCTURE EFFECTIVE JANUARY 1, 2008

BASF has reorganized its business: Since January 1, 2008, the company consists of six segments. As a result of our acquisitions in 2006, we have also restructured our segments. It was our goal to focus businesses even more closely on our customers. Similar businesses are now combined in each of our segments – this enables us to connect our competencies and our knowledge and to bring products and system solutions faster to the market. Our investors will therefore be better able to assess BASF.

More information about the new segments can be found in the Report 2007, page 12, or on the Internet at corporate.basf.com/segments. BASF In Brief 2007 Segments -- Chemicals 23

CHEMICALS

In 2007, the Chemicals segment consisted of the Inor- Research for forward-looking technologies ganics, Catalysts, Petrochemicals and Intermediates We focus on the development of more competitive produc- divisions. We produce a broad range of basic chemicals tion processes and structures as well as new products. Ex- and higher value products at our integrated production isting products and applications are continually being im- facilities (our Verbund) in Europe, Asia and North proved for our customers. In addition, we also develop America. novel solutions and forward-looking technologies. One example is ionic liquids – salts which are liquid below 100°C. Rise in sales worldwide We signed a joint development agreement with G24 Inno- In 2007, sales increased by €2,590 million to €14,162 mil- vations Limited (G24i), a U.K. company that manufactures lion compared with the previous year. The Catalysts divi- solar cells, to test and optimize the performance of BASF’s sion, included for the ﬁ rst time for an entire year, contrib- ionic liquids in G24i’s dye-sensitized solar cells. uted in particular to the segment’s double-digit sales growth. However, other parts of the segment also grew Outlook: As of January 1, 2008, the Catalysts division faster than the market. Sales in Inorganics and Intermedi- will come under the Functional Solutions segment. For ates grew due to higher sales volumes and sales prices. Catalysts, assuming precious metal prices remain high Sales in Petrochemicals were lower than last year, primarily and that the U.S. dollar does not depreciate further, we due to a decline in sales of cracker products as a result of expect sales and earnings to increase in 2008. We ex- scheduled plant turnarounds. All regions contributed to pect a slight increase in sales and earnings for the re- sales growth, Europe and Asia in particular grew strongly. maining businesses in the Chemicals segment. Increased production capacities as well as high demand will con- EBIT rose in spite of special charges tribute to our strong performance. /// Income from operations rose by 44.6% to €1,995 million. All four divisions recorded higher earnings, in spite of increasing raw material prices and planned turnarounds. The restructuring measures initiated in Intermediates in recent years contributed to the increase in earnings. Earnings were negatively impacted by special items connected with the integration costs of the catalysts business acquired in 2006. Special income resulted from the sale of our stake in an ethane cracker in Geismar, Louisiana.

Report 2007, page 64

FULL YEAR 2007 compared to previous year

SALES EBIT +22% +45%

Solar cells serve as energy source thanks to BASF’s ionic liquids. 24 Segments -- Plastics BASF In Brief 2007

PLASTICS

BASF is one of the world’s leading producers of plastics. improve on the high level of earnings. In addition to ex- We offer our customers innovative solutions based on panding the global network of system houses, we also aim these energy-effi cient materials. In 2007, the segment to increase the effi ciency of our basic products. With our was organized in three divisions: Styrenics, Performance partner Dow Chemical, we will start operations in 2008 at Polymers and Polyurethanes. our plant in Antwerp, Belgium, that is the largest of its kind in the world to use the new HPPO process to produce Increase in sales due to higher volumes and prices propylene oxide. In 2007, we increased sales by €721 million to €13,496 million. Once again, we have successfully positioned our Saving energy with plastics products in an expanding market. We increased sales vol- Along with their insulating properties, plastics are also umes and we were largely able to pass on increased raw characterized by their low specifi c weight, which contrib- material and energy costs to our customers in the form of utes to the optimization of energy effi ciency in many indus- higher sales prices. The increase in volumes was mainly tries. One example is the innovative foam specialty Baso- achieved in Europe and Asia. tect® which, next to its excellent sound absorption capacities and low fl ammability, causes weight reduction for both Further improvement in earnings compared to 2006 automobiles as well as aircrafts. Thus, less gasoline is We increased income from operations by €44 million to used. €1,236 million compared with the previous year’s high level. In the Styrenics division, we were able to establish spe- Outlook: In our ongoing operations, in a market environ- cialties and foams in new applications and markets. Since ment which is still dynamic, we expect sales volumes for we do not see suffi cient differentiation possibilities vis-à- our products to increase faster than the market average vis our competitors in the market for standard styrenics, in 2008, especially in Asia and Europe. Despite the ex- we are planning to sell our business in styrene monomers, pected higher raw material and energy prices, overall we and standard styrene polymers and copolymers. Sales in expect a slight increase in earnings. /// the businesses concerned amounted to approximately €3 billion. In the Performance Polymers division, we have expanded our global plant capacity to meet increasing customer demand in the long term. Scheduled plant turnarounds and production interruptions negatively impacted earnings in this division. We have also strongly expanded

capacity in the Polyurethanes division and could further Report 2007, page 68

FULL YEAR 2007 compared to previous year

SALES EBIT +6 % +4 %

Basotect is used in the interior insulation of the Dreamliner Boeing 787 . BASF In Brief 2007 Segments -- Performance Products 25

PERFORMANCE PRODUCTS

In 2007, the Performance Products segment was made In the Coatings division, income from operations was be- up of the Construction Chemicals, Coatings, Functional low the previous year’s level. This was primarily due to an Polymers and Performance Chemicals division. In this impairment loss on assets. In the Functional Polymers divi- segment, we use intermediates from the BASF Verbund sion, earnings were lower than in 2006, especially in the to produce products, formulators and system solutions acrylic monomers business. for customers in almost all sectors of the processing industry. Performance products add signifi cantly to the Tailor-made products and solutions functionality and performance of processes and fi nal Our researchers are working on a large number of innova- products and thus create differentiation potentials on the tions which will decisively improve the performance of our market for our customers. products and processes. By employing the Smart Dynamic Construction™ concept, our customers can increase the Increased sales and volumes durability of concrete and can build more energy effi ciently We increased sales by €1,564 million to €11,697 million in and economically. The concrete no longer needs to be 2007 compared with 2006. We posted sales and volume mechanically compacted, saving on labor and energy. increases in all divisions. A signifi cant portion of the increase in sales resulted from the acquisitions made in mid- Outlook: As of January 1, 2008, the operating divisions 2006. The Construction Chemicals division, which reported Construction Chemicals and Coatings will be reported its fi rst full year of sales, made the most signifi cant contri- under the new segment Functional Solutions. For both bution. The integration of new businesses also strength- divisions we expect higher sales and earnings in 2008. ened the portfolio in the other divisions and increased For the remaining businesses in the Performance Poly- sales. mers segment we expect positive sales and earnings development in a challenging market environment. We Higher earnings achieved will strengthen our product portfolio through innovations In spite of negative currency effects and further increases and accelerate business development in the growth re- in raw material costs, segment earnings increased, thanks gions. /// to innovative customer-specifi c solutions, in a challenging market environment. In total, we increased income from operations to €704 million, €35 million higher than in 2006. The Construction Chemicals division in particular, contributed to this. We also signifi cantly increased earnings in the

Performance Chemicals division. Report 2007, page 71

FULL YEAR 2007 compared to previous year

SALES EBIT +15% +5%

Smart Dynamic Construction saves time, money and energy. 26 Segments -- Agricultural Products & Nutrition BASF In Brief 2007

AGRICULTURAL PRODUCTS & NUTRITION

In 2007, the Agricultural Products & Nutrition segment important trends in agriculture and grow profi tably. comprised the Agricultural Products and Fine Chemicals We see great opportunities in the increasing demand divisions. BASF Plant Science conducts research in the for plants as food and to produce renewable energy. fi eld of plant biotechnology. Fine Chemicals: Sales match the level of 2006, Agricultural Products: Higher sales and earnings earnings increased signifi cantly In 2007, sales increased by €58 million to €3,137 million At €1,852 million, sales matched the level in 2006. The loss compared with 2006. Currency effects impacted sales by of sales due to the exit from the lysine and premix busi- €108 million. Reasons for this positive market development nesses as well as negative currency effects were offset. were higher prices for important agricultural commodities Higher sales prices in the unit Nutrition and the cosmetics such as soybeans, corn (maize), and cereals as well as the business acquired in 2006, contributed signifi cantly to the increased demand for biofuels. Sales in Europe increased sales increase. Income from operations rose signifi cantly by 4% to €1,441 million. The development of our business by €237 million to €171 million. It contains special income in Eastern Europe was once again encouraging. In North from the reversal of provisions established in the previous America, sales decreased by 11% to €789 million due to year which were not needed to their full amount. In addi- the divestitures in 2006, negative currency effects and the tion, 2006 was negatively impacted by special charges due strong competitive pressure in the forestry sector. In Asia, to restructuring measures. sales were slightly lower than in 2006 at €267 million. In South America, sales increased signifi cantly by 21% to Outlook: As of the fi rst quarter 2008, the new Care €640 million, in particular due to the positive market devel- Chemicals division will combine the activities of the for- opment in Brazil. Income from operations increased signifi - mer Fine Chemicals division as well as the Performance cantly by €42 million to €489 million. This was primarily due Chemicals division’s detergents and formulators busi- to higher volumes and sales prices. ness. In 2008, we expect lower sales in Care Chemicals due to the divestures in 2007; earnings will increase fur- Outlook: Assuming continuing good seasonal conditions ther. /// and unfavorable exchange rates, we anticipate slightly higher sales and earnings in 2008. In an intensely competitive environment, our plant health concept and our innovative portfolio put us in a strong position to shape

Report 2007, page 75

FULL YEAR 2007 compared with previous year

SALES EBIT + 1% +73 %

Fungizide for specialized crops: Boscalid with sales target of over €200 million. BASF In Brief 2007 Segments -- Oil & Gas 27

OIL & GAS

BASF’s oil and gas activities are pooled in the Winters- responds to this trend faster than sales prices which hall Group. Wintershall and its subsidiaries are active in contractually can only be adjusted with a lag of several two business sectors: The exploration and production of months. crude oil and natural gas as well as the trading, transport and storage of natural gas. Successful negotiations with Gazprom Negotiations with Gazprom concerning a stake in the Sales slightly down from last year Yuzhno Russkoye gas fi eld were successfully completed At €10,517 million, sales in the Oil & Gas segment were in 2007. Wintershall has an interest of 35% in the econom- €170 million lower than in 2006. In the exploration and pro- ic rewards of this fi eld. In return, Gazprom received a 49% duction business sector, sales declined by approximately stake in a German Wintershall company that holds onshore €190 million to €4,365 million compared with 2006. The av- exploration and production rights in Libya. In addition, erage price of Brent crude in 2007 increased by $7 to $72 Gazprom’s stake in our natural gas trading company, per barrel. As a result of the signifi cant weakening of the WINGAS, was increased from 35% to 50% minus one U.S. dollar against the euro, the price in euros increased by share. only €1 to €53 per barrel. The natural gas trading business sector generated net sales of €6,152 million, which repre- Outloook: We have based our planning for 2008 on per- sents an increase of €20 million compared with 2006. In sistently high crude oil prices of around $78 per barrel total, natural gas volumes grew by 5% to nearly 370 billion and in euro terms of approximately the same level as in kilowatt hours. the previous year. We expect higher sales due to the strong performance of the natural gas trading business Earnings decreased compared with record year 2006 and, due to the higher share of natural gas in the produc- Income from operations declined to €3,014 million, which tion of hydrocarbons, earnings to match the level is €236 million below the record level of 2006. In the explo- achieved in 2007. /// ration and production business sector, income from operations decreased by €175 million to €2,470 million. This was among others due to increased expenditures on crude oil and natural gas exploration and the general cost trend in the industry. Earnings in our natural gas trading business declined by €61 million to €544 million. Margins were negatively impacted by the steady increase in oil prices throughout the year. The purchase price of natural gas Report 2007, page 78

FULL YEAR 2007 compared with previous year

SALES EBIT –2% –7%

Production launched at the natural gas ﬁ eld Yuzhno Russkoye. 28 BASF worldwide BASF In Brief 2007 BASF GROUP

LUDWIGSHAFEN

ANTWERP NORTH AMERICA SALES INCREASED COMPARED TO PREVIOUS YEAR, EBIT IMPACTED BY FLORHAM PARK PLANT TURNAROUNDS AND SPECIAL ITEMS FREEPORT SALES 2007 EBIT 2007 GEISMAR +4% –12%

SOUTH AMERICA, AFRICA, MIDDLE EAST HIGHER SALES AND EARNINGS, SÃO PRIMARILY IN THE AGRICULTURAL PAULO PRODUCTS DIVISION SALES 2007 EBIT 2007 +19% +45%

DR. JÜRGEN HAMBRECHT, CHAIRMAN OF BASF SE

“We have completed the business year 2007 with record results: We have grown faster than the market and further increased earnings.” BASF In Brief 2007 BASF worldwide 29

EUROPE INCREASED SALES IN ALMOST ALL SEGMENTS, SIGNIFICANT, THOUGH REGRESSIVE, EARNINGS CONTRIBU- TION BY OIL & GAS SALES 2007 EBIT 2007 +10% –1%

ASIA PACIFIC NANJING INCREASED SALES IN ALMOST ALL SEG- MENTS, STRONG GROWTH IN EARNINGS HONGKONG IN THE CHEMICALS AND PLASTICS SEG- MENTS. LAST YEAR’S EARNINGS SIGNIFI- CANTLY IMPACTED BY SPECIAL ITEMS SALES 2007 EBIT 2007

KUANTAN +18% +358% SINGAPUR

REGIONAL HEADQUARTER VERBUND SITE MAJOR PRODUCTION SITE

Report 2007, page 81 www.basf.com

BASF WORLDWIDE Sales by region (Location of customer)

BASF is the world’s leading chemical company – 4 The Chemical Company, with over 95,000 employees 1 -- Europe: 56% 3 (thereof Germany: 21%) as well as close to 100 large and a multitude of smaller production sites worldwide and customers €57,951 2 -- North America: 21% million and partners in almost all countries of the world. 1 3 -- Asia Paciﬁc: 16% 2 4 -- South America, Africa, Middle East: 7% 30 Results of Operations BASF In Brief 2007

RESULTS OF OPERATIONS IN THE BASF GROUP

Sales and Earnings (million €)

2007 2006 Change in % Sales 57,951 52,610 10.2

Income from operations before depreciation and amortization (EBITDA) 10,225 9,723 5.2

Income from operations (EBIT) before special items 7,614 7,257 4.9

Income from operations (EBIT) 7,316 6,750 8.4

Income from operations (EBIT) as a percentage of sales 12.6 12.8 –

Financial result (381) (223) (70.9)

Income before taxes and minority interests 6,935 6,527 6.3

Net income 4,065 3,215 26.4

Income before minority interests as a percentage of sales 7.5 6.6 –

Earnings per share (€) 8.32 6.37 30.6

BASF Group remained on its successful course in 2007. We were able to largely offset signifi cantly higher raw ma- Sales and income from operations were signifi cantly terial prices by our increasing sales prices. The increase in higher than in the previous record year of 2006. This earnings was due to our ongoing programs to optimize was driven in particular by organic growth and the posi- and increase effi ciency and, in particular, to the businesses tive development of the businesses acquired in 2006. acquired in 2006. Income from operations in 2007 contained special Sales in 2007 rose by 10.2% compared with the previous charges due to structural measures and the integration year to €57,951 million. We posted higher sales volumes in of the acquires businesses of €298 million (previous year: almost all areas of our portfolio. In many businesses this €507 million). Compared with the previous year, income was associated with increases in sales prices due to con- before taxes and minority interests increased by tinued strong demand and higher raw material costs. The €408 million to €6,935 million. acquisitions contributed €3,580 million to the sales in- Net income increased by €850 million, or 26.4%, to crease. €4,065 million. We increased earnings per share by €1.95 We increased income from operations by €566 million to a new record high of €8.32. /// to a new record high of €7,316 million. At €2,895 million, we again earned a signifi cantly higher premium on our cost

of capital than in the previous year (2006: €2,126 million).

RECORD YEAR 2007

• Signiﬁ cant increase in sales due to higher volumes and the contribution of the acquired businesses. • Earnings improved due to new business, higher prices and volumes and limited special charges. • Earnings per share increased to €8.32.

In 2007, sales and earnings reached a new record level. BASF In Brief 2007 Balance Sheets 31

CONSOLIDATED BALANCE SHEETS

Assets

2007 2007 2006 Million € % Million € Long-term assets

Intangible assets 9,559 20.4 8,922

Property, plant and equipment 14,215 30.4 14,902

Financial assets 2,786 6.0 1,841

Miscellaneous long-term assets 1,334 2.8 1,234

Short-term assets

Inventories 6,578 14.1 6,672

Accounts receivable, trade 10,898 23.3 10,830

Marketable securities, cash and cash equivalents 818 1.7 890

Assets of disposal groups 614 1.3 –

Total assets 46,802 100 45,291

Stockholders’ equity and liabilities

2007 2007 2006 Million € % Million € Stockholders’ equity 20,098 42.9 18,578

Long-term liabilities

Provisions 4,307 9.2 4,532

Deferred taxes 2,060 4.4 1,441

Financial indebtness 6,954 14.9 5,788

Other liabilities 901 1.9 972

Short-term liabilities

Accounts payable, trade 3,763 8.1 4,755

Provisions 2,697 5.8 2,848

Financial indebtness 3,148 6.7 3,695

Other liabilities and tax liabilities 2,857 6.1 2,682

Liabilities of disposal groups 17 – –

Total stockholders’ equity and liabilities 46,802 100 45,291

Key data

2007 2006 Stockholders’ equity Equity ratio (%) = 42.9 41.0 Total assets Cash provided by operating activities Dynamic debt level (%) = 57 63 Financial indebtness Financial indebtness Debt-equity ratio (%) = 50.3 51.0 Stockholders’ equity Income from operations before depreciation and amortization EBITDA Interest coverage = 21.7 26.1 Interest expense – Interest income 32 Statements of Cash Flows BASF In Brief 2007

CONSOLIDATED STATEMENTS OF CASH FLOWS

In 2007, cash provided by operating activities was Free Cashfl ow amounted to €3,245 million. €5,807 million. This approximates the previous record In 2007, cash used in fi nancing activities was level of 2006. €(2,236) million, after an infl ow of €2,421 million in 2006. Net expenses decreased to €3,612 million from We repurchased 21.5 million shares for a total of €8,414 million. Expenditures for acquisitions were signifi - €1.9 billion. €1,624 million was paid in dividends and cantly higher in 2006. profi t transfers in 2007. ///

Statements of cash ﬂ ows (million €)

2007 2006 Net income 4,065 3,215

Depreciation and amortization of intangible assets, property, plant and equipment and ﬁ nancial assets 2,947 2,994

Changes in working capital (999) 10

Miscellaneous items (206) (279)

Cash provided by operating activities 5,807 5,940

Payments related to property, plant and equipment and intangible assets (2,562) (2,411)

Acquisitions/divestitures (536) (6,240)

Financial investments and other items (514) 237

Cash provided by (used in) investing activities (3,612) (8,414)

Capital increases/repayments (1,749) (920)

Changes in ﬁ nancial liabilities 1,137 4,574

Dividends (1,624) (1,233)

Cash provided by (used in) ﬁ nancing activities (2,236) 2,421

Net changes in cash and cash equivalents (41) (53)

Cash and cash equivalents as of beginning of year and other changes 808 887

Cash and cash equivalents as of end of year 767 834

Cash ﬂ ow (billion €)

Cash provided by operating activities 6 Payments related to property, plant and equipment 5 and intangible assets 4 Free cash ﬂ ow1 3

2 1 Cash provided by operating activities less payments for property, plant and equipment and intangible assets; in 2005 before the external ﬁ nancing of 1 pension obligations (CTA) 0 2 According to the German Commercial Code HGB 20032 2004 2005 2006 2007 TEN-YEAR SUMMARY

Million €

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sales and Earnings1 Sales 27,643 29,473 35,946 32,500 32,216 33,361 37,537 42,745 52,610 57,951

Income before depreciation and amortization (EBITDA) 4,884 4,671 5,986 4,142 5,105 5,110 7,685 8,233 9,723 10,225

Income from operations (EBIT) 2,624 2,009 3,070 1,217 2,641 2,658 5,193 5,830 6,750 7,316 Income from ordinary activities 2,771 2,606 2,827 609 2,641 2,168 4,347 5,926 6,527 6,935 Extraordinary income – – – 6,121 – – – – – – Income before taxes and minority interests 2,771 2,606 2,827 6,730 2,641 2,168 4,347 5,926 6,527 6,935 Income before minority interests 1,664 1,245 1,282 5,826 1,599 976 2,133 3,168 3,466 4,325 Net income 1,699 1,237 1,240 5,858 1,504 910 2,004 3,007 3,215 4,065

Capital expenditures and depreciation1

Additions to property, plant and equipment and intangible assets 3,722 3,253 6,931 3,313 3,055 3,415 2,163 2,523 10,039 4,425

Thereof property, plant and equipment 2,899 2,764 3,631 3,037 2,677 2,293 2,022 2,188 4,068 2,564

Depreciation of property, plant and equipment and intangible assets 2,260 2,662 2,916 2,925 2,464 2,452 2,492 2,403 2,973 2,909

Thereof property, plant and equipment 1,843 2,018 2,245 2,307 2,012 1,951 2,053 2,035 2,482 2,294

Number of employees At year-end 105,945 104,628 103,273 92,545 89,389 87,159 81,955 80,945 95,247 95,175 Annual average 106,928 107,163 105,784 94,744 90,899 88,167 85,022 80,992 88,160 94,893

Personnel costs1 6,010 6,180 6,596 6,028 5,975 5,891 5,615 5,574 6,210 6,648

Key data1 Earnings per share (€) 2.73 2.00 2.02 9.722 2.60 1.62 3.65 5.73 6.37 8.32 Cash provided by operating activities 3,744 3,255 2,992 2,319 2,313 4,878 4,634 5,2503 5,940 5,807 EBITDA in percent of sales (%) 17.7 15.8 16.7 12.7 15.8 15.3 20.5 19.3 18.5 17.6 Return on assets (%) 11.9 10.2 9.9 3.1 8.4 7.4 13.2 17.7 17.5 16.4 Return on equity after taxes (%) 13.2 9.1 9.0 36.62 9.3 6.0 12.9 18.6 19.2 22.4

Number of shares as of December 31 (in thousands)4 623,794 620,985 607,399 583,401 570,316 556,643 540,440 514,379 499,680 478,185

1 Starting in 2005, the accounting and reporting of the BASF Group is performed in accordance with International Financial Reporting Standards (IFRS). The previous year’s fi gures have been restated in accordance with IFRS. The fi gures for years up to and including 2003 were prepared according to German Com- merical Code. 2 Including extraordinary income 3 Before external fi nancing of pension obligations 4 After deduction of repurchased shares earmarked for cancellation

Registered Trademarks of BASF Group: Basotect, Coniroof, Elastopor, Heck, Micronal, Neopor, Rajasil, Senergy Unreg. trademark rights of BASF Group: Smart Dynamic Construction

Publisher: BASF SE, Communication BASF Group, D-67056 Ludwigshafen Design: Strichpunkt Photographs: Steffen Jänicke, Andreas Pohlmann (Photographs of the Board), BASF Archive, Boeing Images, G24i Archive

This report is printed on certiﬁ ed Galaxi Supermat paper from sustainable forestry. BASF SE, www.basf.com Internet Magdalena Moll,Phone:+4962160-48230,Fax:60-22500 Investor Relations Dr. LotharMeinzer, Phone:+4962160-41976,Fax:60-95873 Sustainability Center Michael Grabicki,Phone:+4962160-99938,Fax:60-92693 Corporate MediaRelations Phone: +4962160-0,Fax:60-42525 General inquiries energy efficiency, nutrition the answers for global challenges such as environmental protection. We combine D-67056Ludwigshafen,Germany economic success We make our contribution to finding and with with mobility. BASF’s AnnualMeeting2009:April30, 2009, Mannheim BASF’s AnnualMeeting2008:April24, 2008, Mannheim • • • • You can alsoorder thereports: atwww.basf.comBASF ontheInternet You can ﬁ Further Information on theInternet: per e-Mail: by fax: by telephone: social responsibility +4962160-20162 nd thisandotherpublicationsfrom climate protection, protection, climate [email protected] +4962160-91827 corporate.basf.com/mediaorders and

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