20-F 1 file001.htm FORM 20-F

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2005

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004

COMMISSION FILE NUMBER 1-15419

CELANESE AG
(Exact name of Registrant as specified in its charter)

CELANESE CORPORATION
(Translation of Registrant's name into English)

FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)

61476 KRONBERG/TAUNUS, GERMANY
(Address of principal executive offices)

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

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Ordinary Shares with no par value None

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

NONE
(Title of Class)

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

NONE
(Title of Class)

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

Ordinary Shares with no par value.....................................49,881,618
(as of September 30, 2004)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [_]

Indicate by check mark which financial statement item the registrant has
elected to follow.

Item 17 [_] Item 18 [X]

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TABLE OF CONTENTS

PART I

Item 1. Identity of Directors, Senior Management and Advisers................2
Item 2. Offer Statistics and Expected Timetable..............................2
Item 3. Key Information......................................................2
Selected Financial Data.....................................................2
Exchange Rate Information...................................................4
Risk Factors................................................................5
Item 4. Information on the Company..........................................13
Acquisition of Celanese....................................................13
Introduction...............................................................20
Business Summary...........................................................20
Segment Overview...........................................................20
Strategy...................................................................22
Business Segments..........................................................23
Other Activities...........................................................33
Acquisitions and Divestitures..............................................34
Raw Materials and Energy...................................................34
Research and Development...................................................35
Intellectual Property......................................................35
Environmental and Other Regulation.........................................36
Organizational Structure...................................................38
Description of Property....................................................39
Item 5. Operating and Financial Review and Prospects........................42
Acquisition of Celanese....................................................42
Basis of Presentation......................................................44
Major Events In 2004.......................................................45
Financial Highlights.......................................................47
Overview - Nine Months Ended September 30, 2004 Compared with Nine Months
Ended September 30, 2003................................................48
Selected Data by Business Segment..........................................49
Summary of Consolidated Results - Nine Months Ended September 30, 2004
Compared with Nine Months Ended September 30, 2003......................55
Summary by Business Segment - 2003 Compared with 2002......................59
Summary of Consolidated Results - 2003 Compared with 2002..................63
Liquidity and Capital Resources............................................67
Critical Accounting Policies and Estimates.................................75
Outlook....................................................................80
Item 6. Directors, Senior Management and Employees..........................84
Directors and Senior Management............................................84
Compensation of Directors and Officers.....................................86
Incentive Plans............................................................92
Board Practices............................................................93
Employees..................................................................95
Share Ownership............................................................96
Item 7. Major Shareholders and Related Party Transactions...................96
Major Shareholders.........................................................96
Related Party Transactions.................................................96
Item 8. Financial Information...............................................97
Export Sales...............................................................97
Legal Proceedings..........................................................97
Dividend Policy...........................................................100
Significant Changes.......................................................100
Item 9. The Offer and Listing..............................................101
Nature of Trading Market..................................................101
Item 10. Additional Information.............................................104
Articles of Association...................................................104

Material Contracts........................................................108
Exchange Controls and Other Limitations Affecting Security Holders........108
Taxation..................................................................108
Documents on Display......................................................111
Item 11. Quantitative and Qualitative Disclosures About Market Risk.........112
Interest-Rate Risk Management.............................................112
Foreign-Exchange Risk Management..........................................112
Commodity Risk Management.................................................113
Stock Based Compensation Risk Management..................................113
Item 12. Description of Securities Other Than Equity Securities.............114
Item 13. Defaults, Dividend Arrearages and Delinquencies....................114
Item 14. Material Modifications to the Rights of Security Holders and
Use of Proceeds...........................................................114
Item 15. Controls and Procedures............................................114
Item 16. Reserved...........................................................115
Item 16A. Audit Committee Financial Expert...................................115
Item 16B. Code of Ethics and Governance Matters..............................115
Item 16C. Principal Accountant Fees and Services.............................116
Pre-Approval Policies and Procedures of the Finance and Audit
Committee.................................................................117
Item 17. Financial Statements...............................................117
Item 18. Financial Statements...............................................118
Item 19. Exhibits...........................................................118
Index to Consolidated Financial Statements...................................F-2

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INTRODUCTION

Celanese AG is incorporated as a stock corporation organized under the laws
of the Federal Republic of Germany. As used in this annual report, "Celanese"
refers to Celanese AG, its consolidated subsidiaries and, except for accounting
purposes, its non-consolidated affiliates. For accounting purposes, "Celanese"
refers solely to Celanese AG and its majority owned subsidiaries over which
Celanese exercises control, as well as a special purpose entity, which is a
variable interest entity where Celanese is deemed the primary beneficiary.

During April 2004, BCP Crystal Acquisition GmbH & Co. KG (renamed Celanese
Europe Holding GmbH & Co. KG), then a German limited partnership
(Kommanditgesellschaft) controlled by a group of investment funds advised by The
Blackstone Group, completed a voluntary public offer and acquired, at a price of
(euro)32.50 per share, a total of 41,588,227 of the ordinary shares of Celanese
AG, representing approximately 84 percent of the Celanese ordinary shares
outstanding on that date, excluding treasury shares (the "Tender Offer").
Celanese Europe Holding GmbH & Co. KG is an indirect wholly-owned subsidiary of
Celanese Corporation, a Delaware corporation whose shares have been listed on
the New York Stock Exchange since January 2005 and are traded under the symbol
CE. Affiliates of The Blackstone Group own a majority of the shares of Celanese
Corporation. As a dominating company, Celanese Europe Holding GmbH & Co. KG is
required, at the request of each minority shareholder, to acquire minority
shares in exchange for "fair cash compensation." Accordingly, pursuant to the
requirements of German law, Celanese Europe Holding GmbH & Co. KG commenced a
tender offer on September 2, 2004 for minority shares, which offer will continue
until two months after the day on which the decision on the last motion in the
award proceedings (Spruchverfahren) and any related appeals, as described in
Item 8. Financial Information - Legal Proceedings, which has been disposed of
has been published. These award proceedings were dismissed in March 2005,
however, the dismissal is still subject to appeal. For a more complete
discussion of the tender offer, see - Item 4. Information on the Company -
Acquisition of Celanese - Domination and Profit and Loss Transfer Agreement.

Celanese Europe Holding GmbH & Co. KG is, except for accounting purposes,
referred to in this annual report as "Celanese Europe Holding". For accounting
purposes, Celanese Europe Holding GmbH & Co. KG is referred to as "BCP" or
"Purchaser". See Note 3 to the Consolidated Financial Statements contained in
this annual report (the "Consolidated Financial Statements").

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BASIS OF PRESENTATION

In July 2004, the majority of Celanese's shareholders approved changing the
Celanese fiscal accounting year to commence October 1st and end September 30th.
As a result, Celanese's 2004 fiscal year ended on September 30, 2004.
Accordingly, the results of operations and cash flows for the nine months ended
September 30, 2003 are presented on an unaudited basis. The results presented in
this document should not be taken as an indication of the results of operations
to be reported for any subsequent period or for the full fiscal year,
particularly following the transfer on October 5, 2004 of Celanese Americas
Corporation and CPO Celanese AG & Co. Procurement Olefin KG, Frankfurt am Main
to BCP Caylux Holdings Luxembourg S.C.A. and Celanese Europe Holding GmbH & Co.
KG, respectively.

The Consolidated Financial Statements were prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP") for
all periods presented. The Consolidated Financial Statements reflect, for the
periods indicated, the financial condition, results of operations and cash flows
of the businesses transferred to Celanese from Hoechst Aktiengesellschaft, also
referred to as Hoechst, in a demerger that became effective on October 22, 1999,
adjusted for acquisitions and divestitures. The Consolidated Financial
Statements and other financial information included in this annual report,
unless otherwise specified, have been presented to separately show the effects
of discontinued operations. The Consolidated Financial Statements, for the
periods prior to the effective date of the demerger from Hoechst, assume that
Celanese had existed as a separate legal entity with four business segments,
Chemical Products, Acetate Products, Technical Polymers Ticona and Performance
Products, as well as the other businesses and activities of Hoechst transferred
to Celanese in the demerger. The financial results of Celanese, prior to the
effective date of the demerger, have been carved out from the consolidated
financial statements of Hoechst using the historical results of operations and
assets and liabilities of these businesses and activities and reflect the
accounting policies adopted by Hoechst in the preparation of its financial
statements and thus do not necessarily reflect the accounting policies which
Celanese might have adopted had it been an independent company during those
periods.

CURRENCY TRANSLATION

Celanese's Consolidated Financial Statements are prepared in euro. U.S.
dollar or U.S.$ amounts as of and for the nine months ended September 30, 2004
are unaudited, and have been converted solely for the convenience of the readers
for 2004 from euro into U.S. dollars, at an exchange rate of U.S.$1.2417 per
(euro)1.00, the noon buying rate in New York City for cable transfers in foreign
currencies announced by the Federal Reserve Bank of New York for customs
purposes (the "Noon Buying Rate") on September 30, 2004. For information
regarding recent rates of exchange between euro and U.S. dollar, see "Item 3.
Key Information - Exchange Rate Information." Celanese does not represent that
the U.S. dollar amounts presented in the U.S. dollar convenience translation or
any amounts translated from euro into other currencies could have been converted
from euro at the rates indicated.

On March 29, 2005, the Noon Buying Rate for the euro was U.S$1.2913 per
(euro)1.00.

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FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

Investors are cautioned that the forward-looking statements contained in this
annual report involve both risk and uncertainty. Many important factors could
cause actual results to differ materially from those anticipated by these
statements. Many of these statements are macroeconomic in nature and are,
therefore, beyond the control of management. See "Forward-Looking Statements May
Prove Inaccurate" in "Item 5. Operating and Financial Review and Prospects."

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

The following table presents selected consolidated financial information of
Celanese. You should read this table in conjunction with "Item 5. Operating and
Financial Review and Prospects," the audited Consolidated Financial Statements
and the notes to those statements that are included elsewhere in this annual
report.

The balance sheet data shown below as of September 30, 2004 and December
31, 2003, and the statement of operations data for the nine months ended
September 30, 2004 and for the years ended December 31, 2003 and 2002, all of
which are set forth below, are derived from the audited Consolidated Financial
Statements included elsewhere in this annual report and should be read in
conjunction with those financial statements and the notes thereto. The balance
sheet data as of December 31, 2002, 2001 and 2000, and the statement of
operations data for the years ended December 31, 2001 and December 31, 2000 are
derived from audited Consolidated Financial Statements not included in this
annual report. The results of operations and cash flows for the nine months
ended September 30, 2003 are presented on an unaudited basis.

NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------------- ------------------------
2004 2004 2003 2003 2002 2001 2000
-------- ------ ------ ------ ------ ------ ------
(UNAUDITED)
-------------------------------------------------------------
U.S.$(1) (EURO)
-------- ---------------------------------------------------
(IN MILLIONS, EXCEPT FOR SHARE AND PER SHARE DATA,
PERCENTAGES AND NUMBER OF EMPLOYEES)
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STATEMENT OF OPERATIONS DATA:
Net sales ............................................. 3,789 3,051 3,103 4,075 4,064 4,433 4,461
Cost of sales ......................................... (3,077) (2,478) (2,592) (3,435) (3,359) (3,806) (3,684)
Selling, general and administrative expenses .......... (410) (330) (345) (451) (474) (547) (539)
Research and development expenses ..................... (70) (56) (59) (79) (69) (82) (81)
Special charges(2) .................................... (176) (142) 7 (5) 5 (464) (19)
Operating profit (loss) ............................... 57 46 115 107 183 (464) 144
Interest and other income, net(3) ..................... 70 57 64 69 7 (7) 54
Income tax benefit (provision) ....................... (237) (191) (55) (48) (59) 123 (107)
Minority interests .................................... -- -- -- -- -- -- --
Earnings (loss) from continuing operations ............ (110) (88) 124 129 131 (348) 91
Earnings (loss) from discontinued operations .......... 22 18 (7) 4 25 (59) 1
Cumulative effect of changes in accounting
principles, net of income tax ...................... -- -- (1) (1) 19 -- --
Net earnings (loss) ................................... (88) (70) 116 132 175 (407) 92
Earnings (loss) per common share - basic(4) ........... (1.78) (1.42) 2.34 2.67 3.48 (8.08) 1.73
Earnings (loss) per common share - diluted(4) ......... (1.78) (1.42) 2.34 2.67 3.48 (8.08) 1.73

BALANCE SHEET DATA:
Debt .................................................. 729 587 -- 504 615 880 1,165
Dividends paid per share .............................. 0.15 0.12 -- 0.44 -- 0.40 0.11
Common stock .......................................... 174 140 -- 140 140 143 143
Weighted average shares - basic (in thousands) ........ 49,402 49,402 49,488 49,446 50,329 50,332 53,293
Weighted average shares - diluted (in thousands) ...... 49,402 49,402 49,488 49,457 50,329 50,332 53,293
OTHER DATA:
Operating margin (%) .................................. 1.5% 1.5% 3.7% 2.6% 4.5% -10.5% 3.2%
Depreciation and amortization ......................... 226 182 192 260 262 364 333
Capital expenditures .................................. 153 123 120 185 214 213 200
Number of employees on a continuing
basis (end of period) in thousands ................. 9.1 9.1 10.0 9.5 10.5 10.6 11.4

(1) The U.S.$ figures are unaudited and have been translated solely for the
convenience of the reader at an exchange rate of U.S.$1.2417 per (euro)
1.00, the noon buying rate of the Federal Reserve Bank of New York on
September 30, 2004.

(2) Special charges include impairment charges, provisions for restructuring,
which include costs associated with employee termination benefits and,
plant and office closures, and other expenses and income incurred outside
the normal course of ongoing operations. See Note 27 to the Consolidated
Financial Statements.

(3) Interest and other income, net, represents equity in net earnings of
affiliates, interest expense, and interest and other income, net, as set
forth in the Consolidated Financial Statements.

(4) Earnings (loss) per common share - basic and diluted, is calculated by
dividing net earnings (loss) by the weighted average diluted shares
outstanding. At December 31, 2000, Celanese did not have any dilutive
common stock equivalents.

EXCHANGE RATE INFORMATION

As noted in "Currency Translation" above, Celanese uses the euro as its
reporting currency and will make the guaranteed fixed annual payment (Ausgleich)
to minority shareholders pursuant to the Domination and Profit and Loss Transfer
Agreement between Celanese AG and Celanese Europe Holding (the "Domination
Agreement") in euro. Furthermore, prices quoted for Celanese shares on the
Frankfurt Stock Exchange are quoted in euro.

Fluctuations in the exchange rate between the euro and the U.S.$ may
affect:

o The U.S.$ equivalent for the guaranteed fixed annual payment
(Ausgleich) pursuant to the Domination Agreement received by U.S.
holders of Celanese shares;

o The U.S.$ equivalent for the fair cash compensation (Abfindung)
pursuant to the Domination Agreement received by U.S. holders
tendering Celanese shares; and

o The trading market price of Celanese shares on the Frankfurt Stock
Exchange.

For more information on the Domination Agreement see Item 4. Information on
the Company - Acquisition of Celanese. The table below shows the Noon Buying
Rates for the euro in U.S.$. The average amounts set forth below under "Average"
are calculated as the average of the Noon Buying Rates on the last business day
of each month.

Year Low High Average End
---- ------ ------ ------- -------
2000................................ 0.8270 1.0335 0.9231 0.9388
2001................................ 0.8437 0.9535 0.8952 0.8901
2002................................ 0.8594 1.0485 0.9454 1.0485
2003................................ 1.0361 1.2597 1.1411 1.2597
2004
April ........................... 1.1802 1.2358 1.1989 1.1975
May.............................. 1.1801 1.2274 1.2000 1.2217
June............................. 1.2006 1.2320 1.2146 1.2179
July............................. 1.2032 1.2437 1.2266 1.2032
August........................... 1.2025 1.2368 1.2191 1.2183
September........................ 1.2052 1.2417 1.2224 1.2417
October.......................... 1.2271 1.2783 1.2507 1.2746
November......................... 1.2703 1.3288 1.2997 1.3259
December......................... 1.3224 1.3625 1.3407 1.3538
2005
January.......................... 1.2954 1.3476 1.3123 1.3049
February......................... 1.2773 1.3274 1.3011 1.3274
March (through March 29)......... 1.2877 1.3465 1.3207 1.2913

For a more complete discussion of exchange rate fluctuations and the
hedging techniques used by Celanese to manage its exposure to these
fluctuations, please see "Risk Factors" set forth below and "Item 5. Operating
and Financial Review and Prospects - Market Risks", "Item 11. Quantitative and
Qualitative Disclosures About Market Risk." and "Item 9. The Offer and Listing -
Nature of the Trading Market."

RISK FACTORS

Many factors could have an effect on Celanese's financial condition, cash
flows and results of operations. Celanese is subject to various risks resulting
from changing economic, environmental, political, industry, business and
financial conditions. The principal factors are described below.

Celanese is an international company and is exposed to general economic,
political and regulatory conditions and risks in the countries in which it has
significant operations.

Celanese operates in the global market and has customers in many countries.
During the period covered by this annual report, Celanese had major facilities
located in North America, Europe and Asia, including facilities in Germany,
China and Korea operated through joint ventures. Its principal customers are
similarly global in scope, and the prices of its most significant products are
typically world market prices. Consequently, Celanese's business and financial
results are affected directly and indirectly by world economic, political and
regulatory conditions.

Conditions such as the uncertainties associated with war, terrorist
activities, epidemics, pandemics, or political instability in any of the
countries in which Celanese operates could affect Celanese by causing delays or
losses in the supply or delivery of raw materials and products as well as
increased security costs, insurance premiums and other expenses. These
conditions could also result in or lengthen economic recession in Europe, Asia,
the United States or elsewhere. Moreover, changes in laws or regulations, such
as unexpected changes in regulatory requirements (including import or export
licensing requirements), or changes in the reporting requirements of United
States, German or European Union governmental agencies, could increase the cost
of doing business in these regions. Any of these conditions may have an effect
on Celanese's business and financial results as a whole and may result in
volatile current and future prices for Celanese shares.

Cyclicality in the industrial chemicals industry has in the past and may in the
future result in reduced operating margins or operating losses.

Consumption of the basic chemicals that Celanese manufactures, in
particular those in acetyl products, such as formaldehyde, acetic acid and vinyl
acetate monomer, has increased significantly over the past 30 years. Despite
this growth in consumption, producers have experienced alternating periods of
inadequate capacity and excess capacity for these products. Periods of
inadequate capacity, including some due to raw material shortages, have usually
resulted in increased selling prices and operating margins. This has often been
followed by periods of capacity additions, which have resulted in declining
capacity utilization rates, selling prices and operating margins. Celanese
expects that these cyclical trends in selling prices and operating margins
relating to capacity shortfalls and additions will likely persist in the future,
principally due to the continuing combined impact of five factors:

o Significant capacity additions, whether through plant expansion or
construction, can take two to three years to come on stream and are
therefore necessarily based upon estimates of future demand.

o When demand is rising, competition to build new capacity may be
heightened because new capacity tends to be more profitable, with a
lower marginal cost of production. This tends to amplify upswings in
capacity.

o When demand is falling, the high fixed cost structure of the
capital-intensive chemicals industry leads producers to compete
aggressively on price in order to maximize capacity utilization.

o As competition in these products is focused on price, being a low-cost
producer is critical to profitability. This favors the construction of
larger plants, which maximize economies of scale, but which also lead
to major increases in capacity that can outstrip current growth in
demand.

o Cyclical trends in general business and economic activity produce
swings in demand for chemicals.

Celanese believes that the basic chemicals industry, particularly in the
commodity chemicals manufactured by Celanese's Chemical Products segment, is
currently characterized by overcapacity, and that there may be further capacity
additions in the next few years.

The length and depth of product and industry business cycles of Celanese's
markets, particularly in the automotive, electrical, construction and textile
industries, may result in reduced operating margins or operating losses.

Some of the markets in which Celanese's customers participate, such as the
automotive, electrical, construction and textile industries, are cyclical in
nature, thus posing a risk to Celanese which is beyond its control. These
markets are highly competitive, to a large extent driven by end-use markets, and
may experience overcapacity, all of which may affect demand for and pricing of
Celanese's products.

Celanese is subject to risks associated with the increased volatility in raw
materials prices and the availability of key raw materials.

Celanese purchases significant amounts of natural gas, ethylene, butane,
and propylene from third parties for use in its production of basic chemicals in
the Chemical Products segment, principally methanol, formaldehyde, acetic acid,
vinyl acetate monomer, as well as oxo products. Celanese uses a portion of its
output of these chemicals, in turn, as inputs in the production of further
products in all its segments. Celanese also purchases significant amounts of
natural gas, electricity and fuel oil to supply the energy required in its
production processes.

Prices of natural gas, oil and other hydrocarbons have increased
dramatically in 2004. To the extent this trend continues and Celanese is unable
to pass through these price increases to its customers, Celanese's operating
profit and results of operations may be less favorable than expected.

Celanese is exposed to any volatility in the prices of our raw materials
and energy. Although Celanese has agreements providing for the supply of natural
gas, ethylene, propylene, electricity and fuel oil, the contractual prices for
these raw materials and energy vary with market conditions and may be highly
volatile. Factors which have caused volatility in Celanese's raw material prices
in the past and which may do so in the future include:

o Shortages of raw materials due to increasing demand, e.g., from
growing uses or new uses;

o Capacity constraints, e.g., due to construction delays, strike action
or involuntary shutdowns;

o The general level of business and economic activity; and

o The direct or indirect effect of governmental regulation.

Celanese strives to improve profit margins of many of its products through
price increases when warranted and accepted by the market; however, Celanese's
operating margins may decrease if it cannot pass on increased raw material
prices to customers. Even in periods during which raw material prices decline,
Celanese may suffer decreasing operating profit margins if raw material price
reductions occur at a slower rate than decreases in the selling prices of
Celanese's products.

A substantial portion of Celanese's products and raw materials are
commodities whose prices fluctuate as market supply/demand fundamentals change.
Celanese manages its exposure through the use of long-term supply agreements,
multi-year purchasing and sales agreements, and until the Recent Restructuring,
as defined in Item 4. Information on the Company - Acquisition of Celanese,
derivative instruments and forward purchase contracts for commodity price
hedging in North America. Celanese's policy, for the majority of its natural gas
and butane requirements, allows entering into supply agreements and forward
purchase or cash-settled swap contracts. During the nine months ended September
30, 2004, Celanese did not enter into any forward contracts for its butane
requirements and, for natural gas, had positions covering about 35 percent of
its then existing North American Chemical Products segment requirements,
primarily as a result of forward contracts entered into in 2003. Although
Celanese seeks to offset increases in raw material prices with corresponding
increases in the prices of its products, it may not be able to do so, and there
may be periods when such product price increases lag behind raw material cost
increases.

Celanese has a policy of maintaining, when available, multiple sources of
supply for raw materials. However, some of Celanese's individual plants may have
single sources of supply for some of their raw materials, such as carbon
monoxide and acetaldehyde. Celanese may not be able to obtain sufficient raw
materials as a result of unforeseen developments that would cause an
interruption in supply. Even if Celanese has multiple sources of supply for a
raw material, these sources would not make up for the loss of a major supplier.
Nor can there be any

guarantee that profitability will not be affected should Celanese be required to
qualify additional sources of supply in the event of the loss of a sole or a
major supplier.

Failure to develop new products and production technologies or to implement
productivity and cost reduction initiatives successfully may harm Celanese's
competitive position.

Celanese's operating results, especially in its Performance Products and
Technical Polymers Ticona segments, depend significantly on the development of
commercially viable new products, product grades and applications, as well as
production technologies. If Celanese is unsuccessful in developing new products,
applications and production processes in the future, its competitive position
and operating results will be negatively affected. Likewise, Celanese has
undertaken and is continuing to undertake initiatives in all segments to improve
productivity and performance and to generate cost savings. These initiatives may
not be completed or beneficial or the estimated cost savings from such
activities may not be realized.

Frankfurt airport expansion could require Celanese to reduce production capacity
of, limit expansion potential of, or incur relocation costs for its Kelsterbach
plant, which would lead to significant additional costs.

The Frankfurt airport's expansion plans include the construction of an
additional runway. One of the three sites under consideration, the northwest
option, would be located in close proximity to Celanese`s Kelsterbach production
plant. The construction of this particular runway could have a negative effect
on the plant's current production capacity and future development. While the
government of the state of Hesse and the owner of the Frankfurt airport promote
the expansion of the northwest option, it is uncertain whether this option is in
accordance with applicable laws. Although the government of the state of Hesse
expects the plan approval for the airport expansion in 2007 and the start of
operations in 2009-2010, neither the final outcome of this matter nor its timing
can be predicted at this time.

Environmental regulations and other obligations relating to environmental
matters could subject Celanese to liability for fines, clean-ups and other
damages, require it to incur significant costs to modify its operations and
increase its manufacturing and delivery costs.

Costs related to Celanese's compliance with environmental laws concerning,
and potential obligations with respect to, contaminated sites may have a
significant negative impact on its operating results. These include obligations
related to sites currently or formerly owned or operated by Celanese, or where
waste from its operations was disposed. Celanese also has obligations related to
the indemnity agreement contained in the demerger and transfer agreement between
Celanese AG and Hoechst, also referred to as the demerger agreement, for
environmental matters arising out of a number of divestitures that took place
prior to the demerger. Celanese's accruals for environmental remediation
obligations, (euro) 119 million as of September 30, 2004, may be insufficient if
the assumptions underlying those accruals prove incorrect or if Celanese is held
responsible for currently undiscovered contamination. See "Celanese may be
required to make payments to Hoechst" below, Item 4. Information on the Company
- Environmental and Other Regulation, and Item 5. Operating and Financial Review
and Prospects - Liquidity and Capital Resources.

Celanese's operations are subject to extensive international, national,
state, local, and other supranational laws and regulations that govern
environmental and health and safety matters. Celanese incurs substantial capital
and other costs to comply with these requirements. If they are violated,
Celanese can be held liable for substantial fines and other sanctions, including
limitations on its operations as a result of changes to or revocations of
environmental permits involved. Stricter environmental, safety and health laws,
regulations and enforcement policies could result in substantial costs and
liabilities to Celanese or limitations on Celanese's operations and could
subject Celanese's handling, manufacture, use, reuse or disposal of substances
or pollutants to more rigorous scrutiny than at present. Consequently,
compliance with these laws could result in significant capital expenditures as
well as other costs and liabilities, and Celanese's business and operating
results may be less favorable than expected. For example, recent European Union
regulations require a trading system for carbon dioxide emissions to have been
in place by January 1, 2005. Accordingly, an emission trading system came into
effect in Germany at the start of 2005. This regulation will directly affect
Celanese's power plants at the Kelsterbach and Oberhausen sites, as well as
power plants operated by other InfraServ entities. Celanese, along with the
InfraServ entities, may be required to purchase carbon dioxide credits, which
could result in increased operating costs, or may be required to develop
additional cost-effective methods to reduce carbon dioxide emissions further,
which could result in increased capital expenditures. Celanese has not yet
determined the impact of this legislation on future capitial spending. The new
regulation indirectly affects Celanese's other Operations in the European Union,
which may experience higher energy costs from third party providers. Celanese
has not yet determined the impact of this legislation on its operating costs.
See "Item

4. Information on the Company - Environmental and Other Regulation", and Notes
25 and 26 to the Consolidated Financial Statements.

Celanese is also involved in several claims, lawsuits and administrative
proceedings relating to environmental matters. An adverse outcome in any of them
may negatively affect Celanese's earnings and cash flows in a particular
reporting period.

Changes in environmental, health and safety regulatory requirements could have a
significant negative effect on the demand for Celanese's products.

New or revised governmental regulations relating to health, safety and the
environment may also affect demand for Celanese's products.

Pursuant to the European Union regulation on Risk Assessment of Existing
Chemicals, the European Chemicals Bureau of the European Commission has been
conducting risk assessments on approximately 140 major chemicals. Some of the
chemicals initially being evaluated include vinyl acetate monomer or VAM, which
Celanese produces. These risk assessments entail a multi-stage process to
determine to what extent the European Commission should classify the chemical as
a carcinogen and, if so, whether this classification and related labeling
requirements should apply only to finished products that contain specified
threshold concentrations of a particular chemical. In the case of VAM, a final
ruling is not expected until mid-2005. Celanese and other VAM producers are
participating in this process with detailed scientific analyses supporting the
industry's position that VAM is not a probable human carcinogen and that
labeling of final products should not be required. If labeling is required, then
it should depend on relatively high parts per million of residual VAM in these
end products. It is not possible for Celanese to predict the outcome or effect
of any final ruling.

Several recent studies have investigated possible links between
formaldehyde exposure and various end points including leukemia. The
International Agency for Research on Cancer, or IARC, recently reclassified
formaldehyde from Group 2A (probable human carcinogen) to Group 1 (known human
carcinogen) based on studies linking formaldehyde exposure to nasopharyngeal
cancer, a rare cancer in humans. IARC also concluded that there is insufficient
evidence for a causal association between leukemia and occupational exposure to
formaldehyde, although it also characterized evidence for such an association as
strong. The results of IARC's review will be examined by government agencies
with responsibility for setting worker and environmental exposure standards and
labeling requirements. Celanese is a producer of formaldehyde and plastics
derived from formaldehyde. Celanese is participating together with other
producers and users in the evaluations of these findings. Celanese cannot
predict the final effect of IARC's reclassification.

Other recent initiatives will potentially require toxicological testing and
risk assessments of a wide variety of chemicals, including chemicals used or
produced by Celanese. These initiatives include various European Commission
programs, such as the European Environment and Health Strategy, commonly known
as SCALE, as well as the Proposal for the Registration, Evaluation and
Authorization and Restriction of Chemicals or REACH. REACH, which the European
Commission proposed in October 2003, will establish a system to register and
evaluate chemicals manufactured or imported to the European Union. Depending on
the final ruling, additional testing, documentation and risk assessments will
occur for the chemical industry. This will affect European producers of
chemicals as well as all chemical companies worldwide that export to member
states of the European Union. The final ruling has not yet been decided.

The above-mentioned assessments may result in heightened concerns about the
chemicals involved, and in additional requirements being placed on the
production, handling, labeling or use of the subject chemicals. Such concerns
and additional requirements could increase the cost incurred by Celanese's
customers to use its chemical products and otherwise limit the use of these
products, which could lead to a decrease in demand for these products.

Celanese's production facilities handle the processing of some volatile and
hazardous materials that subject Celanese to operating risks that could have a
negative effect on Celanese's operating results.

Celanese's operations are subject to operating risks associated with
chemical manufacturing, including the related storage and transportation of raw
materials, products and wastes. These hazards include, among other things:

o Pipeline and storage tank leaks and ruptures;

o Explosions and fires; and

o Discharges or releases of toxic or hazardous substances.

These operating risks can cause personal injury, property damage and
environmental contamination, and may result in the shutdown of affected
facilities and the imposition of civil or criminal penalties. The occurrence of
any of these events may disrupt production and have a negative effect on the
productivity and profitability of a particular manufacturing facility and
Celanese's operating results and cash flows.

Celanese maintains property, business interruption and casualty insurance
which it believes is in accordance with customary industry practices, but
Celanese cannot provide any assurance that this insurance will be adequate to
fully cover all potential hazards incidental to its business.

For more detailed information on environmental issues, see "Item 4.
Information on the Company - Environmental and Other Regulations" and Note 26 to
the Consolidated Financial Statements.

Fluctuations in exchange and interest rates may affect Celanese's profitability.

Celanese is exposed to market risk through commercial and financial
operations. Celanese's market risk consists principally of exposure to
fluctuations in currency exchange and interest rates.

As Celanese conducts a significant portion of its operations outside the
euro zone, fluctuations in currencies of such countries, especially the U.S.
dollar, may materially affect Celanese's operating results. For example, changes
in currency exchange rates may affect:

o The relative prices at which Celanese and its competitors sell
products in the same market; and

o The cost of items required in Celanese's operations.

Celanese uses financial instruments to hedge its exposure to foreign
currency fluctuations. More than 90 percent of outstanding foreign currency
contracts are used to hedge the foreign currency denominated intercompany net
receivables. The net notional amounts under such foreign currency contracts
outstanding at September 30, 2004 were (euro)766 million. The hedging activity
of foreign currency denominated intercompany net receivables resulted in a cash
inflow of approximately (euro)12 million for the nine months ended September 30,
2004. These positive effects may not be indicative of future effects.

Celanese holds a variety of interest rate sensitive assets and liabilities
to manage the liquidity and cash needs of its day-to-day operations. Celanese is
primarily exposed to changes in interest rates in the U.S. dollar and the euro.
To manage these risks, Celanese enters into interest rate swap agreements to
reduce the exposure of interest rate risk inherent in Celanese's debt portfolio.
Celanese uses swaps for hedging purposes only. The maturities of these swaps
depend on the underlying debt portfolio.

Prior to the Recent Restructuring, a substantial portion of Celanese's net
sales was denominated in currencies other than the euro. Following the Recent
Restructuring, the translation effects of changes in the value of other
currencies against the euro have not been eliminated, but will be reduced
substantially for Celanese. In its consolidated financial statements, Celanese
translates its local currency financial results into euros based on average
exchange rates prevailing during a reporting period or the exchange rate at the
end of that period. During times of a weakening U.S. dollar, at a constant level
of business, reported international sales, earnings, assets and liabilities will
be reduced because the local currency will translate into fewer euros. We
estimate that the translation effects of changes in the value of other
currencies against the euro increased net sales by approximately 6 percent for
the nine months ended September 30, 2004, 13 percent for the year ended December
31, 2003 and increased net sales by approximately 3 percent in 2002. We estimate
that the translation effects of changes in the value of other currencies against
the euro had increased total assets by approximately 1 percent for the nine
months ended September 30, 2004 and decreased total assets by approximately 13
percent in 2003.

Celanese also incurs a currency transaction risk whenever one of its
operating subsidiaries enters into either a purchase or a sales transaction
using a different currency from the currency in which revenues are received.
Given

the volatility of exchange rates, Celanese may not be able to manage its
currency transaction and/or translation risks effectively, or volatility in
currency exchange rates may expose its financial condition or results of
operations to a significant additional risk. Since a significant portion of its
indebtedness is and will be denominated in U.S. dollars, a strengthening of the
U.S. dollar could make it more difficult for Celanese to repay its indebtedness.

Celanese may be required to make payments to Hoechst.

Under the demerger agreement, Celanese agreed to indemnify Hoechst for
environmental liabilities that Hoechst may incur with respect to Celanese's
German production sites, which were transferred from Hoechst to Celanese in
connection with the demerger. Celanese also has an obligation to indemnify
Hoechst against liabilities for environmental damages or contamination arising
under certain divestiture agreements entered into by Hoechst prior to the
demerger. As the indemnification obligations depend on the occurrence of
unpredictable future events, the costs associated with them are not yet
determinable and may materially affect operating results. Celanese's obligation
to indemnify Hoechst against liabilities for environmental contamination in
connection with the divestiture agreements is subject to the following
thresholds:

o Celanese will indemnify Hoechst for the total amount of these
liabilities up to(euro) 250 million;

o Hoechst will bear the full amount of those liabilities
between (euro) 250 million and (euro)750 million; and

o Celanese will indemnify Hoechst for one third of those liabilities for
amounts exceeding (euro) 750 million.

Celanese has made payments through September 30, 2004 of (euro) 38 million
for environmental contamination liabilities in connection with the divestiture
agreements, and may be required to make additional payments in the future. As of
September 30, 2004, Celanese had reserves of approximately (euro) 38 million for
this contingency, and may be required to record additional reserves in the
future.

Also, Celanese has undertaken in the demerger agreement to indemnify
Hoechst to the extent that Hoechst is required to discharge liabilities,
including tax liabilities, in relation to assets included in the demerger, where
such liabilities have not been demerged due to transfer or other restrictions.
Celanese did not make any payments to Hoechst in either the nine months ended
September 30, 2004 or in the year ended December 31, 2003 in connection with
this indemnity.

Under the demerger agreement, Celanese will also be responsible, directly
or indirectly, for all of Hoechst's obligations to past employees of businesses
that were demerged to Celanese. Under the demerger agreement, Hoechst agreed to
indemnify Celanese from liabilities (other than liabilities for environmental
contamination) stemming from the agreements governing the divestiture of
Hoechst's polyester businesses, which were demerged to Celanese, insofar as such
liabilities relate to the European part of that business. Hoechst has also
agreed to bear 80 percent of the financial obligations arising in connection
with the government investigation and litigation associated with the sorbates
industry for price fixing described in "Item 8. Financial Information - Legal
Proceedings" and Note 25 to the Consolidated Financial Statements, and Celanese
has agreed to bear the remaining 20 percent.

As a dominated company, Celanese may be affected by risks arising out of the
debt levels of Celanese Corporation and several of its subsidiaries.

Celanese Corporation and several of its subsidiaries are highly leveraged.
Since Celanese is a consolidated subsidiary of Celanese Corporation, Celanese
Corporation's substantial debt could have an effect on Celanese, including:

o Increasing Celanese's vulnerability to general economic and industry
conditions;

o Limiting Celanese's ability to obtain additional financing for working
capital, capital expenditures, product development, debt service
requirements, acquisitions and general corporate or other purposes;
and

o Limiting Celanese's ability to adjust to changing market conditions
and placing Celanese at a competitive disadvantage compared to its
competitors who have less debt.

Celanese's future success will depend in part on its ability to protect its
intellectual property rights, and its inability to enforce these rights could
reduce its ability to maintain its market position and its margins.

Celanese attaches great importance to patents, trademarks, copyrights and
product designs in order to protect its investment in research and development,
manufacturing and marketing. Celanese's policy is to seek the widest possible
protection for significant product and process developments in its major
markets. Patents may cover products, processes, intermediate products and
product uses. Protection for individual products extends for varying periods in
accordance with the date of patent application filing and the legal life of
patents in the various countries. The protection afforded, which may also vary
from country to country, depends upon the type of patent and its scope of
coverage. Celanese's continued growth strategy may bring it to regions of the
world where intellectual property protection may be limited and difficult to
enforce.

As patents expire, the products and processes described and claimed in
those patents become generally available for use by the public. Celanese's
European and U.S. primary production patents for making Sunett, an important
product in Celanese's Performance Products segment, expired at the end of the
first quarter of 2005, which will reduce its ability to realize revenues from
making Sunett due to increased competition and potential limitations and will
result in Celanese's results of operations and cash flows relating to the
product being less favorable than today.

Celanese also seeks to register trademarks extensively as a means of
protecting the brand names of its products, which brand names become more
important once the corresponding patents have expired. If Celanese is not
successful in protecting its trademark rights, its revenues, results of
operations and cash flows may be adversely affected.

Under the Domination Agreement Celanese's majority shareholder may require it to
take actions that are disadvantageous to it.

Celanese has entered into a domination and profit and loss transfer
agreement (Beherrschungs- und Gewinnabfuhrungsvertrag) with its majority
shareholder, Celanese Europe Holding. Pursuant to this agreement, Celanese
Europe Holding may instruct Celanese's board of management to take actions that
are disadvantageous to Celanese if such instruction is in the interest of
Celanese Europe Holding or its affiliated companies. In addition, pursuant to
the Domination Agreement, Celanese is obligated to transfer its entire profits
to Celanese Europe Holding, while the Domination Agreement requires Celanese
Europe Holding to compensate Celanese for any annual statutory loss incurred.
Furthermore, the net amount of the guaranteed fixed annual payment (Ausgleich)
guaranteed by Celanese Europe Holding vis-a-vis the minority shareholders of
Celanese in lieu of any future dividend, which, at the time of the entering into
of the Domination Agreement, amounted to (euro) 2.89 per share for a full fiscal
year, may, depending on applicable corporate tax rates, in the future be higher,
lower or the same as (euro) 2.89. As a dominated company, Celanese may be
affected by risks that affect Celanese Europe Holding and its affiliates,
including but not limited to risks arising out of the debt levels of some of
these entities. The Domination Agreement cannot be terminated by Celanese Europe
Holding in the ordinary course of business until September 30, 2009.

Irrespective of whether a domination agreement is in place between Celanese
Europe Holding and Celanese, under German law Celanese is effectively controlled
by Celanese Europe Holding because of its 84 percent ownership of all
outstanding Celanese ordinary shares. Celanese Europe Holding has the ability,
through a variety of means, to utilize its controlling rights to, among other
things, (1) use its ability, through its 84 percent voting power at any
shareholders' meetings of Celanese, to elect the shareholder representatives on
the supervisory board and to thereby effectively control the appointment and
removal of the members of the Celanese board of management; and (2) effect all
decisions that a majority shareholder is permitted to make under German law.

For more information on the Domination Agreement, see Item 4. Information
on the Company--Acquisition of Celanese.

Actions taken by Celanese AG's majority shareholder may eliminate a liquid
market for Celanese shares.

Celanese Europe Holding currently owns approximately 84 percent of Celanese
AG's shares. If Celanese Europe Holding acquires shares representing 95 percent
or more of Celanese's registered ordinary share capital (excluding treasury
shares), it intends to require, as permitted under German law, the transfer of
the Celanese ordinary shares owned by the then-outstanding minority shareholders
of Celanese in exchange for fair cash compensation (the "Squeeze-out"). As
alternatives to the Squeeze-out, Celanese Europe Holding might also consider

instructing Celanese to apply to revoke the admission of its shares from the
Frankfurt Stock Exchange, or converting Celanese AG from its current legal form
of a stock corporation (Aktiengesellschaft, AG) into either a limited
partnership (Kommanditgesellschaft, KG) or a limited liability company
(Gesellschaft mit beschrankter Haftung, GmbH) in accordance with the provisions
of the German Transformation Act (Umwandlungsgesetz, UmwG). Such a conversion
would trigger an automatic delisting from the Frankfurt Stock Exchange. An
application to revoke the admission of Celanese AG's shares from the Frankfurt
Stock Exchange would be subject to approval by the affirmative vote of a
majority of the share capital of Celanese AG, while the conversion to a limited
partnership or limited liability company would require at least a 75 percent
majority. If Celanese AG's shares are delisted from the Frankfurt Stock
Exchange, minority shareholders would cease to have a liquid market in which to
trade their shares. However, if Celanese Europe Holding completely delists the
Celanese's shares from the Frankfurt Stock Exchange, effects a squeeze-out or
converts Celanese AG into a limited partnership or a limited liability company,
Celanese Europe Holding and/or Celanese AG must in each case offer Celanese AG's
remaining minority shareholders fair cash compensation in exchange for their
shares or, in the case of a conversion, in exchange for their equity interest in
the entity that results from the conversion. The amount of the fair cash
compensation per share may be equal to, higher or lower than the Tender Offer
price or the fair cash compensation offered pursuant to the Domination
Agreement. (See Item 4. Information on the Company - Acquisition of Celanese).

Celanese's internal controls over financial reporting may not be effective and
its independent auditors may not be able to certify as to their effectiveness,
which could have a significant and adverse effect on Celanese's business and
reputation.

Celanese is evaluating its internal controls over financial reporting in
order to allow management to report on, and its independent auditors to attest
to, internal controls over financial reporting, as required by Section 404 of
the Sarbanes-Oxley Act of 2002 and rules and regulations of the Securities and
Exchange Commission, or the Commission, thereunder, which is referred to as
Section 404. Celanese is currently performing the system and process evaluation
and testing required (and any necessary remediation) in an effort to comply with
management certification and auditor attestation requirements of Section 404.
The management certification and auditor attestation requirements of Section 404
will initially apply to Celanese as of September 30, 2006. In the course of
Celanese's ongoing Section 404 evaluation, areas of internal controls that may
need improvement have been identified, and plans are in place to design enhanced
processes and controls to address these and any other issues that might be
identified through this review. Currently, none of the identified areas that
need improvement have been categorized as significant deficiencies or material
weaknesses, individually or in the aggregate. However, as the evaluation process
is still ongoing, conditions that may result in significant deficiencies or
material weaknesses in the future may still be identified. In 2004, certain
members of Celanese's accounting staff identified two significant deficiencies,
and, in 2005, Celanese's external auditor discovered a material weakness in
addition to, and separate from, our Section 404 evaluation process, and those
deficiencies and the material weakness are discussed in detail in the
immediately subsequent risk factor.

Celanese cannot be certain as to the timing of completion of its
evaluation, testing and any remediation actions or the impact of the same on its
operations. If the requirements of Section 404 cannot be implemented in a timely
manner or with adequate compliance, Celanese's independent auditors may not be
able to certify as to the effectiveness of its internal control over financial
reporting and it may be subject to sanctions or investigation by regulatory
authorities, such as the Commission. As a result, there could be a negative
reaction in the financial markets due to a loss of confidence in the reliability
of Celanese's financial statements. In addition, Celanese may be required to
incur costs in improving its internal control system and the hiring of
additional personnel. Any such action could negatively affect Celanese's
results.

Celanese expects to incur expenses of an aggregate of approximately (euro)
2.5 million to (euro) 4 million in the fiscal year 2005 in connection with its
compliance with Section 404.

Celanese has, in the past, identified significant deficiencies and material
weaknesses in its internal controls, and the identification of any significant
deficiencies or material weaknesses in the future could affect its ability to
ensure timely and reliable financial reports.

In addition to, and separate from, Celanese's evaluation of internal
controls under Section 404 of the Sarbanes-Oxley Act of 2002 and any areas
requiring improvement identified as part of that process, Celanese previously
identified two significant deficiencies and a material weakness in its internal
controls of Celanese Corporation, our parent company. The Public Company
Accounting Oversight Board ("PCAOB") defines a significant deficiency as a
control deficiency, or a combination of control deficiencies, that adversely
affects the company's ability to initiate,

authorize, record, process or report external financial data reliably in
accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected. The PCAOB defines a material weakness as a single deficiency, or a
combination of deficiencies, that results in more than a remote likelihood that
a material misstatement of the annual or interim financial statements will not
be prevented or detected.

Celanese is in the process of implementing changes to strengthen its
internal controls. In addition, while actions have been taken to address these
deficiencies and weakness, additional measures may be necessary and these
measures, along with other measures expected to be taken to improve our internal
controls, may not be sufficient to address the issues identified by us or ensure
that the internal controls are effective. For a description of these
deficiencies and weakness, see Item 15 - "Controls and Procedures." If
deficiencies in internal controls cannot be corrected in a timely manner,
Celanese's ability to record, process, summarize and report financial
information within the time periods specified in the rules and forms of the
Commission will be adversely affected. This failure could materially and
adversely impact Celanese's business, its financial condition and the market
value of its securities.

Celanese expects to record significant charges in the three months ended
December 31, 2004.

Celanese expects to incur certain significant charges in the three months
ended December 31, 2004, as more fully described under Note 30 to the
Consolidated Financial Statements, including (all figures are based on
preliminary estimates):

o A (euro) 25 million loss related to asset impairment charges resulting
from the disposition of the cyclo-olefin copolymer business included
within the Technical Polymers Ticona segment;

o A (euro) 9 million charge to equity in net earnings of affiliates,
representing Celanese AG's portion of restructuring charges recorded
by European Oxo GmbH, Celanese's oxo chemicals joint venture; and

o An expense of (euro) 10 million related to a stock incentive plan for
executive officers, key employees and directors, a deferred
compensation plan for executive officers and key employees, as well as
other management incentive programs approved by Celanese Corporation
in December 2004.

The foregoing is not intended to be a complete list of the charges and
other items that could have an effect on results of operations for the three
months ended December 31, 2004.

ITEM 4. INFORMATION ON THE COMPANY

ACQUISITION OF CELANESE

During April 2004, Celanese Europe Holding GmbH & Co. KG (or Celanese
Europe Holding), a German limited partnership (Kommanditgesellschaft) controlled
by a group of investment funds advised by The Blackstone Group, completed a
voluntary public offer and acquired, at a price of (euro)32.50 per share, a
total of 41,588,227 of the ordinary shares of Celanese, representing
approximately 84 percent of the Celanese ordinary shares outstanding on that
date, excluding treasury shares (the "Tender Offer").

In addition, as a part of the Tender Offer, Celanese Europe Holding agreed
to refinance certain existing debt of Celanese, pre-fund certain pension
obligations of Celanese, pre-fund certain contingencies and certain obligations
linked to the value of Celanese ordinary shares, and payment obligations related
to outstanding stock appreciation rights, stock options and interest payments,
provide additional funds for working capital and other general corporate
purposes, and pay related fees and expenses.

For more information on the acquisition of Celanese, see Note 2 to the
Consolidated Financial Statements.

Post-Tender Offer Events

After the completion of the Tender Offer, the following events occurred:

Delisting. Celanese's ordinary shares were delisted from the New York Stock
Exchange, or NYSE, on June 2, 2004. Celanese may also apply to revoke the
admission of its ordinary shares to the Frankfurt Stock Exchange, which would
require, among other things, a resolution at the shareholders' meeting of
Celanese with the majority of the votes cast in favor of such resolution. If the
shares were to be delisted from both the NYSE and from the Frankfurt Stock
Exchange, Celanese Europe Holding or Celanese would have to offer the then
outstanding minority shareholders fair cash compensation in exchange for their
shares as described below.

Domination and Profit and Loss Transfer Agreement. On June 22, 2004,
Celanese Europe Holding entered into a domination and profit and loss transfer
agreement (Beherrschungs- und Gewinnabfuhrungsvertrag) or, Domination Agreement,
with Celanese, pursuant to which Celanese agreed to submit itself to the
direction of, and to transfer its entire profits to, Celanese Europe Holding,
and Celanese Europe Holding agreed to compensate Celanese for any annual losses
(Jahresfehlbetrag) incurred while the Domination Agreement is in effect. The
Domination Agreement was approved by shareholders at an extraordinary general
meeting held on July 30-31, 2004. The Domination Agreement was registered in the
commercial register on August 2, 2004 and became operative on October 1, 2004.
The Domination Agreement is subject to legal challenges instituted by dissenting
shareholders. Minority shareholders have filed nine actions against Celanese in
the Frankfurt District Court (Landgericht), seeking, among other things, to set
aside the shareholder resolutions passed at the July 30 - 31, 2004 extraordinary
general meeting based, among other things, on the alleged violation of
procedural requirements and information rights of the shareholders, to declare
the Domination Agreement and the change in the fiscal year void and to prohibit
Celanese from performing its obligations under the Domination Agreement. In
addition, a German court could revoke the registration of the Domination
Agreement in the commercial register. On August 2, 2004, two minority
shareholders instituted public register proceedings with the Konigstein Local
Court (Amtsgericht) and the Frankfurt District Court, both with a view to have
the registration of the Domination Agreement in the Commercial Register deleted
(Amtsloschungsverfahren). See "Item 8. Financial Information - Legal
Proceedings." The Domination Agreement cannot be terminated by Celanese Europe
Holding in the ordinary course of business until September 30, 2009.

Under the Domination Agreement, the board of management may be compelled to
take actions that are disadvantageous to Celanese if the board of management is
instructed to do so by Celanese Europe Holding, and provided that such
instructions are in the interest of Celanese Europe Holding or its affiliates.
The board of management may only refuse to comply with any such instruction, if,
at the time such instruction is given, (i) it is, in the opinion of the board of
management of Celanese, obviously not in the interests of Celanese Europe
Holding or its affiliates, (ii) in the event of a disadvantageous instruction,
the negative consequences to Celanese are disproportionate to the benefits to
Celanese Europe Holding or its affiliates, (iii) compliance with the instruction
would violate legal or statutory restrictions, (iv) compliance with the
instruction would endanger the existence of Celanese; or (v) it is doubtful
whether Celanese Europe Holding will be able to fully compensate Celanese, as
required by the Domination Agreement, for its annual loss (Jahresfehlbetrag)
incurred during the fiscal year in which such instruction is given. The
supervisory board is not bound by instructions issued by Celanese Europe Holding
under the Domination Agreement. If Celanese Europe Holding instructs the board
of management to take an action that requires the supervisory board's approval
and such approval is not given, the board of management nevertheless has to
comply with such instruction if Celanese Europe Holding repeats it.

Pursuant to the Domination Agreement, the entire annual statutory profits
of Celanese, if any, less any loss carried forward from the previous fiscal
year, less any amount to be allocated to the statutory capital reserve
(gesetzliche Ruecklage) and less any amount to be allocated to other profit
reserves (andere Gewinnrucklagen) upon approval by Celanese Europe Holding, will
be transferred to Celanese Europe Holding. If, however, during any fiscal year
while the Domination Agreement is in effect, Celanese incurs an annual loss
(Jahresfehlbetrag), on a non-consolidated basis, Celanese Europe Holding would
have to pay to Celanese an amount equal to such loss to the extent that the
respective annual loss is not fully compensated for by dissolving other profit
reserves (andere Gewinnruecklagen) accrued at Celanese since the date on which
the Domination Agreement became operative (Verlustausgleichspflicht). Such
payment obligation would accrue at the end of any fiscal year of Celanese in
which an annual loss was incurred, and such accrual would be independent from
the adoption of the financial statements. The payment obligation would have to
be fulfilled by a cash payment to Celanese by Celanese Europe Holding. Celanese
Europe Holding may be able to reduce or avoid cash payments to Celanese by
offsetting against such loss compensation claims by Celanese any counterclaims
of value against Celanese that Celanese Europe Holding may have. Unless Celanese
Europe Holding is able to obtain funds from a source other than annual profits
of Celanese, it may not be able to satisfy its obligation to fund such
shortfall. BCP Caylux

Holdings Luxembourg S.C.A., or BCP Caylux, and BCP Crystal US Holdings Corp., or
BCP Crystal, both of which are indirect wholly-owned subsidiaries of Celanese
Corporation, have each agreed to provide Celanese Europe Holding with financing
to further strengthen its ability to be in a position at all times to fulfill
all of its obligations when they become due under, or in connection with, the
Domination Agreement and to ensure that it will perform all of its obligations
under, or in connection with, the Domination Agreement when such obligations
become due, including, without limitation, the obligations to pay a guaranteed
fixed annual payment to the outstanding minority shareholders of Celanese, to
offer to acquire all outstanding Celanese ordinary shares from the minority
shareholders in return for payment of fair cash consideration and to compensate
Celanese for any annual loss it incurs while the Domination Agreement is in
effect.

As a consequence of entering into the Domination Agreement, Section 305(1)
of the German Stock Corporation Act (Aktiengesetz) requires that, upon the
Domination Agreement becoming operative, Celanese Europe Holding must at the
request of each remaining minority shareholder of Celanese, acquire such
shareholder's registered ordinary shares of Celanese in exchange for payment of
"fair cash compensation" (angemessene Barabfindung). As required under Section
305(3) sentence 3 of the German Stock Corporation Act, Celanese Europe Holding
will pay to all minority shareholders who tender into such offer and whose
shares are paid for after the day following the date the Domination Agreement
becomes operative, interest on the offer price from such day until the day
preceding the date of settlement at a rate of 2 percent per annum plus the base
rate (as defined in Section 247 of the German Civil Code (BGB)) per annum
prevailing from time to time, as reduced by any guaranteed dividend payments.
The mandatory offer required pursuant to Section 305(1) of the German Stock
Corporation Act is not a voluntary public takeover offer or any other offer
under the German Securities Acquisition and Takeover Act (Wertpapiererwerbs-und
Ubernahmegesetz) or a takeover or tender offer under any other applicable German
law. However, it may be considered a tender offer under applicable laws of the
United States of America. Therefore, in order to comply with applicable U.S.
securities laws, Celanese Europe Holding commenced an offer on September 2,
2004, which will continue as long as Celanese AG remains a defendant in the
minority shareholder award proceedings (Spruchverfahren) as described in "Item
8. Financial Information - Legal Proceedings", in which case the offer will
remain open for two months following final resolution of the award proceedings
by the German courts. The terms of this offer are set forth in the offer
document, dated September 2, 2004, which was filed with the Commission under
cover of Schedule TO on the same day. As of March 29, 2005, pursuant to this
offer Celanese Europe Holding had acquired an additional 642,608 shares. On
March 29, 2005, the closing price of the Celanese ordinary shares on the
Frankfurt Stock Exchange was (euro)46.10 per share. In addition, if Celanese
delists its shares from the Frankfurt Stock Exchange, Celanese Europe Holding
effects a squeeze-out or Celanese is converted into a limited partnership or a
limited liability company, as described below, Celanese Europe Holding and/or
Celanese must in each case make another offer to the then remaining minority
shareholders of Celanese of fair cash compensation in exchange for their shares
or, in the case of a conversion, in exchange for their equity interest in the
entity that results from the conversion. The (euro) 41.92 per share fair cash
compensation, plus interest, required to be offered to minority shareholders in
connection with the Domination Agreement is greater than the Tender Offer price.
The amount of fair cash compensation per share to be offered upon the occurrence
of such event may be equal to, higher or lower than, the Tender Offer price or
the fair cash compensation of (euro) 41.92, plus interest, offered as described
below under "Determination of the Amount to be Paid to the Minority
Shareholders".

Any minority shareholder who elects not to sell shares to Celanese Europe
Holding will be entitled to remain a shareholder of Celanese and to receive a
gross guaranteed fixed annual payment on such shares (Ausgleich) of (euro) 3.27
per Celanese ordinary share less certain corporate taxes in lieu of any future
dividend. Taking into account the circumstances and the tax rates at the time of
entering into the Domination Agreement, the net guaranteed fixed annual payment
is (euro) 2.89 per share for a full fiscal year. The net guaranteed fixed annual
payment may, depending on applicable corporate tax rates, in the future be
higher, lower or the same as (euro) 2.89 in lieu of any future dividends,
determined as described below under - "Determination of the Amount to be Paid to
Minority Shareholders."

Irrespective of whether a domination agreement is in place between Celanese
Europe Holding and Celanese, under German law Celanese is effectively controlled
by Celanese Europe Holding because of its 84 percent ownership of all
outstanding Celanese ordinary shares. Celanese Europe Holding has the ability,
through a variety of means, to utilize its controlling rights to, among other
things, (1) through its 84 percent voting power at any shareholders' meetings of
Celanese, to elect the shareholder representatives on the supervisory board and
to thereby effectively control the appointment and removal of the members of the
Celanese board of management; and (2) effect all decisions that a majority
shareholder is permitted to make under German law.

Change in Fiscal Year. At the extraordinary general meeting on July 30 -
31, 2004, Celanese shareholders also approved a change of Celanese's fiscal year
and a corresponding change of Celanese's articles of association in order to
take advantage of the consolidated tax filing status. Therefore, from September
30, 2004 onwards, Celanese's fiscal year begins on October 1 and ends on
September 30 of the following year. A short fiscal year ran from January 1, 2004
to September 30, 2004 and is covered by this annual report.

Subsequent Purchases of Celanese Shares. Celanese Europe Holding may from
time to time purchase or be required to purchase any or all of the outstanding
Celanese ordinary shares not owned by it in market transactions or otherwise.
Examples of instances in which Celanese Europe Holding may be required to
purchase additional shares include the ongoing mandatory offer relating to the
Domination Agreement, or additional mandatory offers required by actions that
Celanese Europe Holding or its affiliates may take in the future, such as a
possible delisting of the shares from the Frankfurt Stock Exchange, a possible
squeeze-out of minority shareholders or a possible conversion of Celanese into a
different legal form. Celanese Europe Holding's decision to pursue subsequent
voluntary purchases will depend on, among other factors, the then-prevailing
market prices and any negotiated terms with minority shareholders. If Celanese
Europe Holding purchases any shares in an individually negotiated purchase not
over the stock exchange, and before the first anniversary of the publication of
the final results of the Tender Offer, for consideration higher than the Tender
Offer price, it will be required to make additional compensating payments to
sellers of Celanese ordinary shares in the Tender Offer.

Squeeze-out and Conversion. If Celanese Europe Holding acquires shares
representing 95 percent or more of the registered ordinary share capital
(excluding treasury shares) of Celanese, Celanese Europe Holding intends to
require, as permitted under German law, the transfer to Celanese Europe Holding
of the shares owned by the then-outstanding minority shareholders of Celanese in
exchange for fair cash compensation (the "Squeeze-out") determined as described
below under - "Determination of the Amount to be Paid to Minority Shareholders."
As an alternative to the Squeeze-out, Celanese Europe Holding might also
consider converting Celanese from its current legal form of a stock corporation
(Aktiengesellschaft, AG) into either a limited partnership
(Kommanditgesellschaft, KG) or a limited liability company (Gesellschaft mit
beschrankter Haftung, GmbH) in accordance with the provisions of the German
Transformation Act (Umwandlungsgesetz, UmwG). Such a conversion would trigger an
automatic delisting from the Frankfurt Stock Exchange. An application to revoke
the admission of Celanese AG's shares from the Frankfurt Stock Exchange would be
subject to approval by the affirmative vote of a majority of the share capital
of Celanese AG, while the conversion to a limited partnership or limited
liability company would require at least a 75 percent majority. The conversion
would allow Celanese Europe Holding to take advantage of a more efficient
governance structure, as legal requirements applicable to GmbHs and KGs are in
many respects less onerous than those applicable to AGs. However, if Celanese
Europe Holding completely delists the Celanese ordinary shares from the
Frankfurt Stock Exchange, effects a squeeze-out or converts Celanese into a
limited partnership or a limited liability company, Celanese Europe Holding
and/or Celanese must in each case offer the then remaining minority shareholders
of Celanese fair cash compensation, as described below, in exchange for their
shares or, in the case of a conversion, in exchange for their equity interest in
the entity that results from the conversion. The amount of the fair cash
compensation per share may be equal to, higher or lower than the Tender Offer
price or the fair cash compensation offered pursuant to the Domination
Agreement.

Determination of the Amount to be Paid to the Minority Shareholders. The
amount to be paid to the minority shareholders as fair cash compensation in
exchange for their shares in connection with the Domination Agreement becoming
operative, the delisting from the Frankfurt Stock Exchange, or a Squeeze-out or,
in the case of a conversion, in exchange for their equity interest in the entity
resulting from such conversion, has been (in the case of the amount payable in
connection with the Domination Agreement) or will be (in each other case)
determined on the basis of the fair value of the enterprise of Celanese,
determined by Celanese and/or Celanese Europe Holding in accordance with
applicable German legal requirements, as of the date of the applicable
resolution of Celanese's shareholders' meeting, and, except in the case of a
delisting from the Frankfurt Stock Exchange, examined by one or more duly
qualified auditors chosen and appointed by the Frankfurt district court
(Landgericht). The amount of the guaranteed fixed annual payment in connection
with the Domination Agreement becoming effective to minority shareholders who
elect not to sell their shares to Celanese Europe Holding but to remain a
shareholder of Celanese was determined by Celanese Europe Holding and Celanese
in accordance with applicable German law, on the basis of the hypothetical
projected earnings of Celanese assuming a full distribution of profits. The
gross guaranteed fixed annual payment of (euro) 3.27 per share may be equal to,
higher or lower than the actual otherwise distributable profits per share of
Celanese. The (euro) 41.92 per share fair cash compensation, plus interest,
offered to minority shareholders in connection with the Domination Agreement is
greater than the Tender Offer price. The amount of cash compensation per share
to be offered to minority shareholders in connection with any delisting from the
Frankfurt

Stock Exchange, Squeeze-out or conversion, as applicable, may be equal to,
higher or lower than, the Tender Offer price or the fair cash compensation of
(euro) 41.92 per share, plus interest, offered pursuant to the Domination
Agreement. Furthermore, each of the guaranteed fixed annual payment and the fair
cash compensation is subject to review by the court in award proceedings
(Spruchverfahren) which have been instituted by several dissenting shareholders.
The court dismissed these award proceedings in March 2005, however, the
dismissal is still subject to appeal. If as a result of such award proceedings,
the court increases the amount of the guaranteed fixed annual payment and/or the
fair cash consideration, or if such increase is agreed between the parties in a
court settlement, payments already made to minority shareholders pursuant to the
offer required by the Domination Agreement would have to be increased
accordingly with retroactive effect.

Any delisting from the Frankfurt Stock Exchange, Squeeze-out or conversion
would require approval by the shareholders of Celanese. While it is to be
expected that in each case, Celanese Europe Holding will have the requisite
majority in such meeting to assure approval of such measures, minority
shareholders, irrespective of the size of their shareholding, may, within one
month from the date of any such shareholder resolution, file an action with the
court to have such resolution set aside. While such action would only be
successful if the resolution were passed in violation of applicable laws and
cannot be based on the unfairness of the amount to be paid to the minority
shareholders, a shareholder action may substantially delay the implementation of
the challenged shareholder resolution pending final resolution of the action. If
such action proved to be successful, the action could prevent the implementation
of a delisting, squeeze-out or conversion. Accordingly, there can be no
assurance that any of the steps described above can be implemented timely or at
all.

The Recent Restructuring

In October 2004, Celanese Europe Holding completed an organizational
restructuring (the "Recent Restructuring"). As a part of the Recent
Restructuring, Celanese Europe Holding instructed Celanese AG to transfer all of
the shares of Celanese Americas Corporation or CAC from Celanese Holding GmbH, a
wholly owned subsidiary of Celanese, ultimately to BCP Caylux. Consequently,
substantially all of Celanese's North American assets, including significant
portions of its Chemical Products and Technical Products Ticona segments, as
well as its entire Acetate Products segment, including that segment's European
and Asian assets, were transferred out of Celanese AG. In addition, CPO Celanese
Aktiengesellschaft & Co. Procurement Olefin KG, Frankfurt am Main ("CPO"), a
wholly-owned subsidiary of Celanese AG, which acts as a purchasing entity on
behalf of Celanese as well as for third parties, was transferred to Celanese
Holding Europe. Thereafter, BCP Caylux transferred certain assets, including its
equity ownership interest in CAC, to BCP Crystal;

As a result of these transactions, BCP Crystal holds 100 percent of CAC's
equity and, indirectly, all equity owned by CAC in its subsidiaries. In
addition, BCP Crystal holds, indirectly, all of the Celanese ordinary shares
held by Celanese Europe Holding. Management is still in the process of
determining the potential impact of these transfers on Celanese. Celanese now
serves primarily as the holding company for the European business and certain
Asian businesses.

Corporate Structure

The charts below summarize our ownership structure immediately before
completion of the Recent Restructuring and our current ownership structure.

PRE-RESTRUCTURING STRUCTURE

[FLOW CHART]

CURRENT STRUCTURE

[FLOW CHART]

INTRODUCTION

Celanese AG was incorporated as Diogenes Erste Vermogensverwaltungs GmbH as
a stock corporation organized under the laws of the Federal Republic of Germany
on November 22, 1996. It changed its name to Celanese AG upon its demerger from
Hoechst on October 22, 1999. Celanese's registered office is located at
Frankfurter Stra(beta)e 111, 61476 Kronberg/Taunus, Germany, telephone +49 69
305 16000.

BUSINESS SUMMARY

Celanese is an integrated global industrial chemicals company with strong
competitive positions in its major products and production technologies. Its
business involves processing chemical raw materials, such as ethylene and
propylene, and natural products, including natural gas, into value-added
chemicals and chemical-based products. Celanese's leadership position is based
on two key factors: its significant market shares and competitive cost
structures in its major products. Celanese's competitive cost structures are
based on economies of scale, vertical integration, technical know-how and the
use of advanced technologies. Prior to the Recent Restructuring, the Celanese
portfolio consisted of four main business segments: Chemical Products, Acetate
Products, Technical Polymers Ticona and Performance Products. The entire Acetate
Products segment, along with significant portions of the Chemical Products and
Technical Polymers Ticona segments were transferred out of Celanese on October
5, 2004 as part of the Recent Restructuring. See Item 4. Information on the
Company - Acquisition of Celanese.

For the nine months ended September 30, 2004, Celanese had net sales of
(euro) 3,051 million and an operating profit of (euro) 46 million from
continuing operations. At September 30, 2004, Celanese had approximately 9,050
employees worldwide. As of the Recent Restructuring, Celanese had approximately
3,500 employees worldwide on a continuing basis. As of September 30, 2004,
Celanese had 24 production plants and five research centers in ten countries,
including significant joint ventures. As of the Recent Restructuring, Celanese
has nine production plants and three research centers in Europe and Asia,
including significant joint ventures. In the nine months ended September 30,
2004 months of 2004, 47 percent of net sales were derived from sales in North
America, 41 percent from sales in Europe, 11 percent from sales in Asia and
Australia and 1 percent from sales in the rest of the world. Celanese has a
large and diverse global customer base consisting principally of major
industrial companies. In the nine months ended September 30, 2004, sales to the
10 largest customers of Celanese accounted for less than 20 percent of its net
sales and the single largest customer represented less than 5 percent of its net
sales.

Celanese's aggregate capital expenditures for property, plant and equipment
were (euro) 123 million, (euro) 185 million, and (euro) 214 million for the nine
months ended September 30, 2004 and for the years ended December 31, 2003 and
2002, respectively. North America and Europe accounted for 64 percent and 30
percent, respectively, of Celanese's capital expenditures in the nine months
ended September 30, 2004. The capital expenditures were financed by means of
Celanese's operating cash flows, cash reserves and additional funds drawn down
from existing credit facilities. See also "Business Segments" for capital
expenditures by business segment. For a description of principal acquisitions
and dispositions of businesses during the last three years, see "Acquisitions
and Divestitures," "Item 5. Operating and Financial Review and Prospects -
Summary of Consolidated Results - Nine Months Ended September 30, 2004 Compared
to Nine Months Ended September 30, 2003 - Discontinued Operations", and Note 7
to the Consolidated Financial Statements.

As of September 30, 2004, Celanese had 49,881,618 shares outstanding and
approximately 13,500 shareholders. Its ordinary shares are traded on the
Frankfurt Stock Exchange under the symbol CZZ.

SEGMENT OVERVIEW

As of September 30, 2004, Celanese operated through four principal business
segments: Chemical Products, Technical Polymers Ticona, Acetate Products, and
Performance Products. The Acetate Products segment was transferred out of
Celanese on October 5, 2004 as part of the Recent Restructuring.

Chemical Products. This segment produces and supplies acetyl products,
including acetic acid, acetate esters, vinyl acetate monomer, polyvinyl alcohol,
and emulsions. These products are generally used as building blocks for
value-added products or in intermediate chemicals used in the paints, coatings,
and inks. Celanese, together with its affiliates, is a leading global producer
of acetic acid.

Technical Polymers Ticona. This segment develops, produces and supplies a
broad portfolio of high performance technical polymers for application in
automotive and electronics products and in other consumer and

industrial applications, often replacing metal or glass. The primary products
within the Ticona segment are Hostaform polyacetal, or POM, offerings, and GUR,
an ultra-high molecular weight polyethylene. Hostaform is used in a broad range
of products including automotive components, electronics and appliances. GUR is
used in battery separators, conveyor belts, filtration equipment, coatings and
medical devices.

Acetate Products. This segment primarily produced and supplied acetate tow,
which is used in the production of filter products, and acetate filament, which
is used in the apparel and home furnishing industries. The Acetate Products
segment was transferred out of Celanese as part of the Recent Restructuring on
October 5, 2004.

Performance Products. This segment operates under the trade name of
Nutrinova and produces and sells Sunett(R) high intensity sweetener and food
protection ingredients, such as sorbates, for the food, beverage and
pharmaceuticals industries.

The table below illustrates each segment's share of total segment net sales
to external customers for the nine months ended September 30, 2004 and for the
years ended December 31, 2003 and 2002.

NET SALES TO EXTERNAL CUSTOMERS BY SEGMENT

NINE MONTHS
ENDED SEPTEMBER YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------
2004 2003 2002
------------------- ------------------- -------------------
% OF % OF % OF
(EURO) SEGMENT(1) (EURO) SEGMENT(1) (EURO) SEGMENT(1)
------ ---------- ------ ---------- ------ ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
---------------------------------------------------------------

Chemical Products........... 1,942 64% 2,628 65% 2,482 62%
Acetate Products............ 425 14% 578 14% 670 17%
Technical Polymers Ticona... 539 18% 675 17% 696 17%
Performance Products........ 111 4% 150 4% 161 4%

(1) The percentages in this column represent the percentage contribution of each
segment to the total of all segments.

Other Activities

The portfolio of Celanese contains other businesses and activities
separate from its principal chemical operations, which consists primarily of
general corporate functions, Celanese Advanced Materials, Inc., its
approximately 41 percent interest in Pemeas GmbH or Pemeas, companies that
provide infrastructure services, and other ancillary businesses. Pemeas is a
venture with a consortium of investors led by Conduit Ventures, a London based
venture capital company, to develop high temperature membrane assemblies or MEAs
for fuel cells. Celanese contributed its MEA activity to Pemeas in April 2004
and in December 2004 approved a plan to sell its interest. Celanese Advanced
Materials, Inc. manufactures and distributes high performance fibers and
polymers globally and was transferred out of Celanese AG in the Recent
Restructuring.

STRATEGY

As a dominated company, Celanese will implement the strategy of Celanese
Corporation by focusing on operating cash flows, profitability, return on
investment and shareholder value. It is believed that these goals can be
achieved through the following business strategies:

o Maintain Cost Advantage and Productivity Leadership. Celanese
continually seeks to reduce its production and raw material costs. Its
advanced process control projects (APC) generate savings in energy and
raw materials while increasing yields in production units. Energy and
raw materials savings resulting from APC projects were approximately
(euro) 9 million in 2003 and (euro) 11 million in the nine months
ended September 30, 2004. Most significantly, Celanese intends to
intensify the implementation of Six Sigma, which has become a
pervasive and important tool in both operations and administration for
achieving greater productivity and growth. Celanese is also engaged in
several projects and process technology improvements focused on energy
reduction. For example, the Oberhausen site reduced the energy
consumption 2004 by 22.4 percent mainly as result of changing the raw
material basis for synthesis gas. Celanese intends to continue using
best practices to reduce costs and increase equipment reliability in
maintenance and project engineering.

o Focused Business Investment. Celanese intends to continue investing
strategically in growth areas, including new production capacity, to
extend its global market leadership position. Historically, Celanese's
strong market position has enabled it to initiate capacity growth to
take advantage of projected demand growth. For example, Celanese
building a 600,000 metric ton per year world-scale acetic acid plant
in China, the world's fastest growing market for acetic acid and its
derivatives. Celanese also increased the capacity of its GUR
ultra-high molecular weight polyethylene plant in Germany by 10,000
tons per year in the third calendar quarter of 2004. Celanese expects
to continue to benefit from its investments and capacity expansion
that enables it to meet increases in global demand.

o Maximize Cash Flow and Reduce Debt. Despite a difficult operating
environment over the past several years, Celanese has generated a
significant amount of operating cash flow. Celanese believes there are
opportunities to further improve its operating cash flow through
increasing productivity, receiving cash dividends from its joint
ventures and pursuing additional cost reduction efforts. Celanese
believes in a focused capital expenditure plan that is dedicated to
attractive investment projects.

o Deliver Value-Added Solutions. Celanese continually develops new
products and industry leading production technologies that solve its
customers' problems. For example, Ticona has worked closely with fuel
system suppliers to develop an acetal copolymer with the chemical and
impact resistance necessary to withstand exposure to hot diesel fuels.
Celanese's emulsions business pioneered a technological solution that
leads the industry in product offerings for ecologically friendly
emulsions for solvent-free interior paints. Celanese believes that its
customers value its expertise, and it will continue to work with them
to enhance the quality of their products.

o Enhance Value of Portfolio. Celanese will continue to further optimize
its business portfolio through divestitures, acquisitions and
strategic investments that enable it to focus on businesses in which
it can achieve market, cost and technology leadership over the long
term. In addition, Celanese intends to continue to expand its product
mix into higher value-added products. For example, Celanese has begun
construction of a 600,000 metric ton acetic acid plant in China, the
world's fastest growing market for acetic acid. The plant is expected
to come on stream in late 2006 or early 2007. Celanese also divested
non-core businesses, such as acrylates, which was sold to Dow in
February 2004, and nylon 6/6, which was sold to BASF in December 2003.

BUSINESS SEGMENTS

Chemical Products

The Chemical Products segment consists of six business lines: Acetyls,
Acetyl Derivatives and Polyols, Polyvinyl Alcohol, Emulsions, Specialties, and
other chemical activities. All business lines in this segment mainly conduct
business using the "CELANESE" trade name, except Polyvinyl Alcohol, which uses
the trademark Celvol(R), and Emulsions, which uses the trademarks Mowilith(R)
and Celvolit(R). The following table lists key products and their major end use
markets.

--------------------------------------------------------------------------------
KEY CHEMICAL PRODUCTS
--------------------------------------------------------------------------------
Acetic Acid
--------------------------------------------------------------------------------
Acetic Anhydride
--------------------------------------------------------------------------------
Vinyl Acetate Monomer
--------------------------------------------------------------------------------
Acetate Esters
--------------------------------------------------------------------------------
Oxo Alcohols
--------------------------------------------------------------------------------
Polyvinyl Alcohol
--------------------------------------------------------------------------------
Emulsions
--------------------------------------------------------------------------------
Emulsion Powders
--------------------------------------------------------------------------------
Carboxylic Acids
--------------------------------------------------------------------------------
Amines
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
MAJOR END USE MARKETS
--------------------------------------------------------------------------------
Vinyl Acetate Monomer, Acetic Anhydride and Purified Terephthalic Acid or PTA,
an intermediate used in the production of polyester resins, films and fibers
--------------------------------------------------------------------------------
Cellulose Acetate and Pharmaceuticals
--------------------------------------------------------------------------------
Paints, Adhesives, Paper Coatings, Films and Textiles
--------------------------------------------------------------------------------
Coatings, Inks
--------------------------------------------------------------------------------
Plasticizers, Acrylates, Esters, Solvents and Inks
--------------------------------------------------------------------------------
Adhesives, Building Products, Paper Coatings, Films and Textiles
--------------------------------------------------------------------------------
Water-Based Quality Surface Coatings, Adhesives, Non-Woven Textiles
--------------------------------------------------------------------------------
Building Products
--------------------------------------------------------------------------------
Lubricants, Detergents and Specialties
--------------------------------------------------------------------------------
Agricultural Products and Water Treatments
--------------------------------------------------------------------------------

Business Lines

Acetyls. During the periods presented, the acetyls business line produced:

o Acetic acid, used to manufacture vinyl acetate monomer and other
acetyl derivatives. Celanese manufactures acetic acid for its own
use, as well as for sale to third parties, including producers of
purified terephthalic acid, or PTA, and to other participants in
the acetyl derivatives business.

o Vinyl acetate monomer, used in a variety of adhesives, paints,
films, coatings and textiles. Celanese manufactures vinyl acetate
monomer for its own use, as well as for sale to third parties.

o Methanol, principally used internally in the production of acetic
acid and formaldehyde. The balance is sold to the merchant
market.

o Acetic anhydride, a raw material used in the production of
cellulose acetate, detergents and pharmaceuticals.

o Acetaldehyde, a major feedstock for the production of polyols.
Acetaldehyde is also used in other organic compounds such as
pyridines, which are used in agricultural products.

Methanol, which Celanese produced only in North America, was transferred
out of Celanese as part of the Recent Restructuring. The manufacturing
operations for acetic anhydride were also transferred out of Celanese as part of
the Recent Restructuring, but Celanese still purchases this product from its
U.S. affiliates and resells it in Europe and Asia.

Celanese, together with its subsidiaries and affiliates, is a leading
global producer of acetic acid and the world's leading producer of vinyl acetate
monomer according to the Tecnon Orbichem's Acetic Acid and Vinyl Acetate
1999-2009 World Survey.

Acetic acid, methanol, and vinyl acetate monomer, like other commodity
products, are characterized by cyclicality in pricing. The principal raw
materials in these products are natural gas and ethylene, which are purchased
from numerous sources; carbon monoxide, which is purchased by Celanese under
long-term contracts; methanol, which is both manufactured and purchased by
Celanese under short-term contracts; and butane, which is purchased from one
supplier. All these raw materials, except carbon monoxide, are themselves
commodities and are available from a wide variety of sources.

Celanese's production of acetyl products employs leading proprietary and
licensed technologies, including Celanese's proprietary AO Plus(TM)
acid-optimization technology for the production of acetic acid and VAntage(TM)
vinyl acetate monomer technology. AO Plus enables plant capacity to be increased
with minimal investment, while VAntage enables significant increases in
production efficiencies, lower operating costs and increases in capacity at 10
to 15 percent of the cost of building a new plant.

Acetyl Derivatives and Polyols. The acetyl derivatives and polyols business
line produces a variety of solvents, polyols, formaldehyde and other chemicals,
which in turn are used in the manufacture of paints, coatings, adhesives and
other products.

Many acetyl derivatives products are derived from Celanese's production of
acetic acid and oxo alcohols. Primary products are:

o Ethyl acetate, an acetate ester that is a solvent used in
coatings, inks and adhesives and in the manufacture of
photographic films and coated papers;

o Butyl acetate, an acetate ester that is a solvent used in inks,
pharmaceuticals and perfume;

o Propyl acetate, an acetate ester that is a solvent used in inks,
lacquers and plastics;

o Methyl ethyl ketone, a solvent used in the production of printing
inks and magnetic tapes;

o Butyric acid, an intermediate for the production of esters used
in artificial flavors;

o Propionic acid, an organic acid used to protect and preserve
grain; and

o Formic acid, an organic acid used in textile dyeing and leather
tanning.

Polyols and formaldehyde products are derivatives of methanol and are made
up of the following products:

o Formaldehyde, primarily used to produce adhesive resins for
plywood, particle board, polyacetal engineering resins and a
compound used in making polyurethane;

o Polyol products such as pentaerythritol, used in coatings and
synthetic lubricants; trimethylolpropane, used in synthetic
lubricants; neopentyl glycol, used in powder coatings; and 1,3
butylene glycol, used in flavorings and plasticizers.

Oxo alcohols and intermediates are produced from propylene and ethylene and
include:

o Butanol, used as a solvent for lacquers, dopes and thinners, and
as an intermediate in the manufacture of chemicals, such as butyl
acrylate;

o Propanol, used as an intermediate in the production of amines for
agricultural chemicals, and as a solvent for inks, resins,
insecticides and waxes;

o Synthesis gas, used as an intermediate in the production of oxo
alcohols and specialties.

Formaldehyde and oxo alcohols, which Celanese produced only in North
America, were transferred out of Celanese on October 5, 2004 as part of the
Recent Restructuring. In Europe, Celanese participates in European Oxo

GmbH, its non-consolidated European oxo chemicals joint venture with Degussa AG.
European Oxo GmbH began operations in October 2003.

Acetyl derivatives and polyols are commodity products characterized by
cyclicality in pricing. The principal raw materials used in the acetyl
derivatives business line are acetic acid, various alcohols, methanol,
acetaldehyde, propylene, ethylene and synthesis gas. Celanese manufactures many
of these raw materials for its own use as well as for sales to third parties,
including its competitors in the acetyl derivatives business. Celanese purchases
propylene and ethylene from a variety of sources. Celanese manufactures
acetaldehyde for its European production. Acetaldehyde is also available from
other sources.

Polyvinyl Alcohol. Polyvinyl alcohol is a performance chemical engineered
to satisfy particular customer requirements. It is used in adhesives, building
products, paper coatings, films and textiles. The primary raw material to
produce polyvinyl alcohol is vinyl acetate monomer, while acetic acid is
produced as a by-product. Prices vary depending on industry segment and end use
application. Products are sold on a global basis, and competition is from all
regions of the world. Therefore, regional economies and supply and demand
balances affect the level of competition in other regions. Although the
manufacturing operations for polyvinyl alcohol, which are in the United States,
were transferred out of Celanese as part of the Recent Restructuring, Celanese
purchases these products from its U.S. affiliates and resells them in Europe and
Asia. According to Stanford Research International's December 2003 report on
PVOH, Celanese Corporation is the largest North American producer of polyvinyl
alcohol and the third largest producer in the world.

Emulsions. Celanese purchased the emulsions business of Clariant AG on
December 31, 2002. The products in this business are sold under the Mowilith(R)
and Celvolit(R) brands and include conventional emulsions, high-pressure vinyl
acetate ethylene emulsions, and powders. Emulsions are made from vinyl acetate
monomer, acrylate esters and styrene. Emulsions are a key component of
water-based quality surface coatings, adhesives, non-woven textiles and other
applications. According to Kline & Co., a chemicals industry consultant, based
on sales the business held a number two position in emulsions (excluding SBRs)
in Europe and a number one position in European VAM-based emulsions in 2001.

Specialties. The specialties business line produces:

o Carboxylic acids such as pelargonic acid, used in detergents and
synthetic lubricants, and heptanoic acid, used in plasticizers
and synthetic lubricants;

o Amines such as methyl amines, used in agrochemicals,
monoisopropynol amines, used in herbicides, and butyl amines,
used in the treatment of rubber and in water treatment; and

o Oxo derivatives and special solvents, such as crotonaldehyde,
which is used by the Performance Products segment for the
production of sorbates, as well as raw materials for the
fragrance and food ingredients industry.

The prices for these products are relatively stable due to long-term
contracts with customers whose industries are not generally subject to the
cyclical trends of commodity chemicals.

The primary raw materials for these products are olefins and ammonia, which
are purchased from world market suppliers based on international prices.

In March 2002, Celanese formed Estech, a venture with Hatco Corporation, a
leading producer of synthetic lubricants, for the production and marketing of
neopolyol esters or NPEs. This venture, in which Celanese holds a 51 percent
interest, built and operates a 7,000 metric ton per year NPE plant at Celanese's
Oberhausen, Germany site. The plant came on stream in the fourth quarter of
2003. Neopolyol esters are used as base stocks for synthetic lubricants in
refrigeration, automotive, aviation and industrial applications, as well as in
hydraulic fluids. Celanese supplies Estech with carboxylic acids and polyols,
the main raw materials for producing NPEs.

Facilities

The Chemical Products segment has production sites in Singapore, Spain,
Sweden, Slovenia and Germany. The emulsions business line also has tolling
arrangements in the United Kingdom, France and Greece. Until the Recent

Restructuring, Celanese also had production sites in the United States, Canada
and Mexico and participated in a joint venture in Saudi Arabia that produces
methanol and MTBE. Over the last few years, Celanese has continued to shift its
production capacity to lower cost production facilities while expanding in
growth markets, such as China. As a result, Celanese shut down its formaldehyde
unit in Edmonton, Alberta, Canada in 2004. Celanese has commenced building a
600,000 metric ton acetic acid plant in Nanjing, China, which is expected to
come on stream in late 2006 or early 2007.

Capital Expenditures

The Chemical Products segment's capital expenditures were (euro) 43
million, (euro) 96 million and (euro) 106 million for the nine months ended
September 30, 2004 and the years ended December 31, 2003 and 2002, respectively.
The capital expenditures incurred during the last three years related primarily
to efficiency and safety improvement-related items associated with the normal
operations of the business, as well as spending for a new plant for synthesis
gas, an important raw material for the production of oxo alcohols and
specialties, at Celanese's Oberhausen site. The new plant, which supplies
European Oxo GmbH and Celanese, came on stream in the third quarter of 2003 and
has improved reliability and reduced production costs. Capital expenditures in
2003 also included the integration of a company-wide SAP system.

Markets

The following table illustrates net sales by destination of the Chemical
Products segment by geographic region for the nine months ending September 30,
2004 and the years ended December 31, 2003 and 2002.

NET SALES TO EXTERNAL CUSTOMERS BY DESTINATION - CHEMICAL PRODUCTS

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------
2004 2003 2002
----------------- ---------------- ----------------
% OF % OF % OF
(EURO) SEGMENT (EURO) SEGMENT (EURO) SEGMENT
------ ------- ------ ------- ------ -------
(IN MILLIONS, EXCEPT PERCENTAGES)
-------------------------------------------------------
North America.... 737 38% 1,046 39% 1,100 44%
Europe/Africa.... 770 40% 1,047 40% 865 35%
Asia/Australia... 366 19% 462 18% 442 18%
Rest of World.... 69 3% 73 3% 75 3%

The Chemical Products segment markets its products both directly to
customers and through distributors. It also utilizes a number of "e-channels",
including its website at www.chemvip.com, as well as system to system linking
through its industry portal, Elemica.

In the acetyls business line, the methanol market is global and highly
dependent on the demand for products made from methanol. Prior to the Recent
Restructuring, Celanese's production was used to satisfy its own demands for
methanol and was sold to a few regional customers who are manufacturers of
chemical intermediates and to a lesser extent, by manufacturers in the wood
products industry. Celanese typically entered into short-term contracts for the
sale of methanol. Acetic acid and vinyl acetate monomer are global businesses
which have several large customers. Generally, Celanese supplies these global
customers under multi-year contracts. The customers of acetic acid and vinyl
acetate monomer produce polymers used in water-based paints, adhesives, paper
coatings, film modifiers and textiles. Celanese has long-standing relationships
with most of these customers.

Polyvinyl alcohol is sold to a diverse group of regional and multinational
customers mainly under single year contracts. The customers of the polyvinyl
alcohol business line are primarily engaged in the production of adhesives,
paper, films, building products, and textiles.

Emulsions and emulsion powders are sold to a diverse group of regional and
multinational customers. Customers for emulsions are manufacturers of
water-based quality surface coatings, adhesives, and non-woven textiles.
Customers for emulsion powders are primarily manufacturers of building products.

Acetyl derivatives and polyols are sold to a diverse group of regional and
multinational customers both under multi-year contracts and on the basis of
long-standing relationships. The customers of acetyl derivatives are primarily
engaged in the production of paints, coatings and adhesives. Prior to the Recent
Restructuring, Celanese also provided acetyl derivatives to its Acetate Products
segment, as well as to other participants in the cellulose acetate industry.
Celanese manufactured formaldehyde for its own use as well as for sale to a few
regional customers that include manufacturers in the wood products and chemical
derivatives industries. The sale of formaldehyde was based on both long and
short term agreements. Polyols are sold globally to a wide variety of customers,
primarily in the coatings and resins and the specialty products industries. Oxo
products are sold to a wide variety of customers, primarily in the construction
and automotive industries. The oxo market is characterized by oversupply and
numerous competitors.

The specialties business line primarily serves global markets in the
synthetic lubricant, agrochemical, rubber processing and other specialty
chemical areas. Much of the specialties business line involves "one customer,
one product" relationships, where the business develops customized products with
the customer, but the specialties business line also sells several chemicals
which are priced more like commodity chemicals.

Competition

Principal competitors of Celanese in the Chemical Products segment include
Air Products and Chemicals, Inc., Atofina S.A., BASF, Borden Chemical, Inc., BP
p.l.c. ("BP"), Chang Chun Petrochemical Co., Ltd., Daicel, Dow, Eastman Chemical
Corporation ("Eastman"), E. I. Du Pont de Nemours and Company ("DuPont"),
Methanex Corporation ("Methanex"), Millennium Chemicals Inc. ("Millennium"),
Nippon Goshei, Perstorp Inc., Rohm & Haas Company, Showa Denko K.K., and Kuraray
Co. Ltd.

Technical Polymers Ticona

Ticona develops, produces and supplies a broad portfolio of high
performance technical polymers. The following table lists key Ticona products,
their trademarks, and their major markets.

--------------------------------------------------------------------------------
KEY TICONA PRODUCTS
--------------------------------------------------------------------------------
Hostaform(R) (Polyacetals)
--------------------------------------------------------------------------------
GUR(R)(Ultra High Molecular Weight Polyethylene or PE-UHMW)
--------------------------------------------------------------------------------
Celanex(R)/Vandar(R)/Riteflex(R)/Impet(R)(Polyester Engineering Resins)
--------------------------------------------------------------------------------
Vectra(R) (Liquid Crystal Polymers)
--------------------------------------------------------------------------------
Fortron(R)* (Polyphenylene Sulfide or PPS)
--------------------------------------------------------------------------------
Celstran(R), Compel(R)(long fiber reinforced thermoplastics)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
MAJOR MARKETS
--------------------------------------------------------------------------------
Automotive, Electronics, Consumer Products and Medical
--------------------------------------------------------------------------------
Profiles, Battery Separators, Industrial Specialties. Filtration, Coatings and
Medical
--------------------------------------------------------------------------------
Electrical, Electronics, Automotive, and Appliances
--------------------------------------------------------------------------------
Electronics, Telecommunications, Consumer and Medical
--------------------------------------------------------------------------------
Electronics, Automotive and Industrial
--------------------------------------------------------------------------------
Automotive and Industrial
--------------------------------------------------------------------------------

* Fortron is a registered trademark of Fortron Industries.

Ticona's technical polymers have chemical and physical properties enabling
them, among other things, to withstand high temperatures, resist chemical
reactions with solvents and resist fracturing or stretching. These

products are used in a wide range