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Countermotions

We have received the following countermotions, requiring publication, to Items 2, 3, 4, 6 and 8 of the Agenda of our Annual Meeting on April 29, 2010:

Regarding Item 2 of the Agenda, shareholder Friederike Bürger has submitted the following countermotion:

"It is proposed to pay a dividend of € 1.95 per qualifying share from the profit retained by BASF SE in the financial year 2009 in the amount of € 2,176,499,635.06. The total dividend would then be € 1,791,033,453.30. Shareholder Frederike Bürger also proposes that the remaining profit retained of € 385,466,181.76 be carried forward." Regarding Item 2 of the Agenda, shareholder Professor Dr. Rochlitz moves that € 200 million should be used from the profit retained as an employment safeguard up to the year 2020 for all jobs including a waiver of involuntary redundancies. Specifically this is to mean that the number of fulltime jobs should be increased annually, but at least maintained at the level of the previous year. The number of limited-term and agency jobs is to be reduced in favor of fulltime jobs. Regarding Item 2 of the Agenda, the Dachverband der Kritischen Aktionärinnen und Aktionäre also moves that the profit retained of 2,176,499,635.06 euros should be divided up as follows: allocation to reserves for an Amflora risk fund: 500 million euros, training funds: 300 million euros, distribution to the shareholders: 700 million euros, and retained income: 676.5 million euros.

Shareholder Bürger gives as reasons for her motion that BASF SE’s profit retained in the financial year 2009 in the amount of € 2,176,499,635.06, BASF SE’s cash flow in the financial year 2009 amounting to € 6.27 million, as well as the economic development in 2009, would permit BASF SE’s dividend policy to be realized for the financial year 2009 too, namely of maintaining the dividend at least at the previous year’s level. Even after this, a respectable remaining profit retained of € 385,466,181.76 EUR could still be carried forward.

Shareholder Rochlitz gives as reasons for his countermotion that social responsibility manifested itself particularly in that the interests of the employees were treated in the same way as those of the Board of Executive Directors or the shareholders. This was a component of social sustainability. After all, BASF had recognized that a disproportionately high number of employees leaving the company due to old age in North America and Europe could lead to adverse effects on the business and that the risk of such adverse effects through the loss of employees could be significant. The optimum solution for all parties was safeguarding employment up to at least 2020, while taking the following framework conditions into consideration: No involuntary redundancies up to the year 2020, increase in the number of permanent jobs, thus at the same time a reduction in limited-term employment contracts and agency jobs, and no further flexibilization of working hours. The weekend would have to remain quite free again in the normal shift, wages and salaries that should remain independent of BASF’s earnings situation and of performance assessments by superiors, the introduction of humane working conditions that made it possible to work until retirement age and remain healthy. The current accumulation of burnt-out cases must not even be allowed to happen. In connection with this program of safeguarding employment, appropriate consideration must also be given to the demographic development through the following measures that should cover all employees: less strain resulting from optimization pressure, less stress resulting from time and target settings that could be met in normal working hours and not lead to excessive overtime as is currently the case, more health programs and support for private initiatives for improving the health of the various employees, shortening of week working hours and working life in the final years before retirement without any reduction in earnings, age-appropriate working conditions, and constant further qualification, particularly of older employees. These measures could only be realized in connection with relinquishing the absurd and unsustainable growth orientation. The growth course of the Chairman of the Board of Executive Directors had now already received a damper: The goal of annually increasing the dividend violated all economic and scientific laws.

The Dachverband der Kritischen Aktionärinnen und Aktionäre gives as reasons for its countermotion that BASF was taking enormous risks with the cultivation of Amflora. The World Health Organization had assessed the genetic potato Amflora as a health risk on account of its antibiotic resistance marker genes. According to Directive 2001/18/EC of the European Parliament and the Council of March 12, 2001 on the deliberate release into the environment of genetically modified organisms, the use of antibiotic resistance markers in GMOs was to be gradually phased out completely by December 31, 2008 according to Article 4, Paragraph 2. It was therefore incomprehensible and completely irresponsible to still release genetically modified organisms into the environment in the year 2010, which contradicted precisely that Release Directive of the European Parliament and the Council. After even two scientists of the European Food Safety Authority EFSA had expressed scientific doubts about the harmlessness of Amflora, it had to be expected that in the case of expected damage that was attributable to the horizontal gene transfer, the antibiotics Kanamycin and Neomycin could no longer be used for medical therapy. This would not only put the life and limb of our population at stake, this circumstance could also result in claims for damages amounting to billions in the coming years. Therefore humanity dictates that society should be protected from this incalculable danger and there should be no cultivation of Amflora. Should the company insist on cultivation of this antiquated risk technology, it was very probable that this would involve high consequential costs. This was why BASF was being called upon to pay 500 million euros from the retained profit into an Amflora risk fund. On taking over the Swiss pharmaceutical company Ciba, BASF had cut the number of trainee positions at the Grenzach site in Baden. In order to retain these and other trainee positions, the Dachverband called for 300 million euros from the retained profit to be paid into a training fund.

Regarding Items 3 and 4 of the Agenda, shareholder Rochlitz and the Dachverband der Kritischen Aktionärinnen und Aktionäre move that formal approval should not be given to the actions of the members of the Supervisory Board or the members of the Board of Executive Directors of BASF SE for the financial year 2009.  

Shareholder Rochlitz gives as reasons for his motion that neither body was able, or willing, to draw the consequences from the World Agriculture Report of 2008 published by the UNO and World Bank (German version in Oct 2009). According to the World Agriculture Report, “Just going on” in agriculture, in other words chemistrygene technology-oriented industrial agriculture, involved: Increasing the poverty and hunger in less developed and advanced developing countries, continuation and increasing soil degradation through intensive farming (now already more than 1 billion tonnes of crop losses), exploitation of fresh water reserves, salinization of irrigated areas, destruction of biodiversity through large-scale monocrops, destruction of the rain forests in order to get at more fertile soils, and multiplication of these effects by means of genetically modified plants. Accordingly, a change of business policy in the sense of the World Agriculture Report was urgently required – also to do justice to the claim of avoiding in the CO2 balance three times more greenhouse gases with BASF products than were formed in their production. This balance definitely did not currently apply to the BASF products in the agricultural sector. Furthermore, the shareholder mentions two examples of the BASF business policy in contrast to this report: In India, the quantities of pesticides used were being enormously increased in the Samruddhi Project with great labor input. What remained unheeded in the process was the permanent destruction of the soil’s fertility, which could ultimately be completely destroyed. With Amflora, BASF had developed a genetically modified potato and was unfortunately now being allowed to cultivate it in trials. However, the starch industry at which this product was aimed had not shown any interest in it to date. What is more, a competitive product had been developed on the basis of classical plant breeding. Amflora was thus superfluous.

The Dachverband der Kritischen Aktionärinnen und Aktionäre gives as reasons for its motion regarding Item 3 of the Agenda that the members of the Supervisory Board of BASF SE had not exercised their control duty vis-à-vis the Board of Executive Directors. The Supervisory Board should have required the Board of Executive Directors to provide evidence of an environmental impact assessment for the genetic potato Amflora. According to Art. 13, Paragraph 2, of the Release Directive, an environmental impact assessment (EIA) must be carried out. The criteria for the carrying out of the EIA were regulated in Annex II of the Release Directive. It was particularly the case that it should have been possible to derive the following conclusions from the environmental impact assessment (Annex II D.2.): "Possible immediate and/or delayed effects of the direct or indirect interactions between the genetically modified higher plants and the target organisms such as predators, parasitoids and pathogens (if applicable) on the environment" (Annex II D.2. No. 4). "Possible immediate and/or delayed effects of the direct or indirect interactions between the genetically modified higher plants and the non-target organisms on the environment including the effects on population levels of competitors, herbivores, symbionts (where applicable), parasites and pathogens" (Annex II D.2. No. 5). "Possible immediate and/or delayed effects on the health of animals and consequences for the feed/food chain resulting from the consumption of genetically modified higher plants and any products derived from them, if the use of the GMOs as animal feed is intended." (Annex II D.2. No. 7). In connection with the application proceedings, several Member States should have classified the EIA submitted by BASF back in 2005 as completely inadequate. This applied equally to the supplements by field studies that were carried out. Nor would these have resulted in the EIA finally complying with the requirements of Annex II of the Release Directive. The Dachverband der Kritischen Aktionärinnen und Aktionäre gives as reasons for its countermotion regarding Item 4 of the Agenda that the Board of Executive Directors was irresponsibly cutting the numbers of trainee positions at the Grenzach site and thus putting the company’s future at risk. With the taking over of Ciba by BASF, the cut in the number in jobs at the Grenzach site was accompanied by a cut in the number of trainee positions. Previously, approximately 15 new trainees had been taken on annually. This year it was none at all and from 2011 a number to be determined in accordance with requirements. In the view of those responsible at BASF, that was at most two to three young people to whom a training opportunity was offered. This was a corporate, economic and human loss: Corporate because the know-how and the capacity for competent training and further training were lost. If it were no longer possible to employ instructors who provided competent recruits and would also be needed for further training, there was the danger of a loss of qualification and, in the foreseeable future, a loss of competitiveness. It did not matter if more trainees were recruited than were required by the company after their training had been completed; on the contrary: The company could then make choices and ensure that it employed the best skilled personnel. Economically, the cutback was a loss because the system of corporate traineeships that had proven itself in German-speaking countries depended on the commitment of the companies that provide vocational training. The pharmaceutical and chemical sectors had a model function in this respect. They could continue to provide this commitment. The cutback was a shame in human and social terms, because a good vocational qualification offered the best guarantee for vocational prospects and thus the best prevention against unemployment and dependence on welfare benefits.

The Dachverband called on the company to be guided for future training not only by its own requirements but also by the social responsibility in the region. With its own instructors, the theoretical know-how in its own company could be sensibly linked to the practical knowledge on the spot. This was the only way that a production company could remain sustainable in the long term, so that BASF could continue to operate it in Grenzach.

Regarding Item 6 of the Agenda, the Dachverband der Kritischen Aktionärinnen und Aktionäre submits the following motion:

"The Dachverband der Kritischen Aktionärinnen und Aktionäre objects to the Amendment to the Statutes proposed by the Administration and moves that BASF SE continues to adhere to bearer shares.

The following reasons are given for this motion:

"The introduction of the registered share leads to a problem that has already been adequately discussed under the catchphrase “see-through shareholder”. Registered shares can cause considerable disadvantages particularly for employee shareholders. In order to be able to exercise all his shareholder rights, a shareholder must have himself registered in BASF’s share register. BASF thus knows the name, address, date of birth and number of shares. Shareholders will no longer receive the invitation to the Annual Meeting from their depository bank but directly from BASF. They must also order their admission ticket from BASF in order to be able to attend an Annual Meeting. If you want to assign your voting rights to a bank or shareholder association, you must use the specific forms that the company sends you for this purpose. The shareholder has transferred his votes."

Regarding Item 8 of the Agenda, shareholder Helmut Steffes has submitted the following countermotion:

"...Partial right B retains its value if the performance of the BASF share is better than that of the MSCI World Chemicals Index, calculated in local currency (relative hurdle)."

The reasons that he gives are the following:

"Along the lines of a relative consideration, you had recourse to the MSCI World Chemicals Index. Since BASF operates mainly in this sector, the choice of the index is understandable. What I object to is that this choice of index is not completely unambiguous. Index providers such as Morgan Stanley basically offer various types. Depending on the index provider, a Performance Variant, a Total Return Variant and a Net Return Variant are offered. The type chosen will naturally also determine when the hurdle is cleared.

Nor is it understood what is meant by local currency. Does this mean euros or USD? The MSCI World Chemicals Index is normally listed in USD. Since the development is to be measured against the development in value of the BASF share, the only conversion of the index that makes sense is into euros. Consequently, the above passage should be amended as follows:

“Partial right B retains its value if the performance of the BASF share is better than that of the MSCI World Chemical Index, Total Return, converted into euros (relative hurdle)."

 

Comments by the Administration

Re the countermotion of shareholder Bürger:

The proposed dividend of € 1.70 € per share for the financial year 2009 takes into account the extraordinarily difficult economic situation last year. The Board of Executive Directors is following its announcement in 2009 to lower the dividend, if BASF does not earn its capital costs. Despite the € 0.25 € less per share, BASF continues to provide an attractive dividend return of 3.9% on the basis of the end-ofyear price in 2009.

Re the assertions in the countermotions of the Dachverband der Kritischen Aktionärinnen und Aktionäre and shareholder Rochlitz with reference to the genetically modified potato Amflora:

The European Food Safety Authority (EFSA) has repeatedly confirmed the safety of Amflora for humans, animals and the environment. Furthermore, regarding the npt2 antibiotic resistance gene, EFSA stated that, in the drawing up of the joint expertise, two minority opinions were expressed and thoroughly taken into account. Further clarifications or scientific studies were not required at the present time. The Release Directive (Directive 2001/18/EC on the placing on the market of genetically modified organisms) constitutes the basis for the approval decision for the Amflora potato by the EU Commission. The environmental impact assessment was carried out by EFSA on the basis of the documents submitted by BASF. The safety of Amflora was confirmed and the data that had been submitted were considered to be adequate.

The demand for amylopectin starch is the reason why work has been carried out on the development of amylopectin potatoes for decades. Our partners in the starch industry are leading potato starch producers in Europe. They see in Amflora a competitive access to pure amylopectin starch for industrial applications in the paper, adhesives or textile industries.

Re the other countermotions of the Dachverband der Kritischen Aktionärinnen und Aktionäre and shareholder Rochlitz:

The registered share is a form of share that is common and widely used in Germany and that for example significantly simplifies the sending of the Annual Meeting documents to the company’s shareholders. We are unable to perceive any disadvantages for shareholders in the introduction of the registered share.

As far as the other countermotions of the Dachverband der Kritischen Aktionärinnen und Aktionäre and shareholder Rochlitz are concerned, we find that they repeat in part arguments and proposals from previous years. We do not consider them to make sense or to be to the point.

Re the countermotion of shareholder Steffes:

performance of the MSCI World Chemicals IndexSM is based on reinvested net dividends (Net Return Variant). This procedure is in line with the method of calculating the performance of the BASF share, which in each case assumes the reinvestment of the cash dividends announced by BASF. Incidentally, the system for the remuneration of the members of the Board of Executive Directors is presented as a whole in the explanation on Item 8 of the Agenda. In order to ensure clarity and comprehensibility here, details such as the type of reference index used for a partial right in connection with the LTI Program are not given. Furthermore, the performance of the companies contained in the MSCI World Chemicals IndexSM is determined in the particular national currency (companies located in the Eurozone in euros, companies located in the United States in USD, etc.), in order to reduce currency effects on the relative hurdle (Partial right B).

To sum up, we stick to our recommendation to vote in the sense of the proposals of the Board of Executive Directors and the Supervisory Board regarding Items 2, 3, 4, 6 and 8.

 

BASF SE
The Board of Executive Directors

Last Update April 15, 2010