HOECHST CELANESE CORP, 10-K, 1997-03-28

HOECHST CELANESE CORP
10-K, 1997-03-28
PLASTIC MATERIAL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS)

Previous: AMERICAN CONSOLIDATED GROWTH CORP, 8-K/A, 1997-03-28

Next: AIRCOA HOTEL PARTNERS L P, 10-K, 1997-03-28

<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the Fiscal Year ended December 31, 1996

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from __________ to __________

Commission File Number 33-13326

-------------------

HOECHST CELANESE CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 13-5568434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1041 ROUTE 202-206

BRIDGEWATER, NEW JERSEY 08807
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (908) 231-2000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. All voting stock is held by an affiliate of the registrant.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. As of March 1, 1997 there were
10,000 shares of Hoechst Celanese Corporation common stock outstanding. All of
such shares are owned by the registrant's parent, Hoechst Corporation.
<PAGE>

NOTE: Unless the context otherwise requires, when used in this 1996 Annual
Report on Form 10-K ("10-K") "Hoechst Celanese" and the "Company"
includes the consolidated corporation or any one or more of its
subsidiaries, divisions or joint ventures, as applicable.

TABLE OF CONTENTS

- --------------------------------------------------------------------------------
ITEM PAGE
- --------------------------------------------------------------------------------

PART 1

1. Business ................................................................1

2. Properties ..............................................................8

3. Legal Proceedings .......................................................10

4. Submission of Matters to a Vote of Security Holders .....................12

PART II

5. Market for Registrant's Common Equity and Related Stockholder Matters ...13

6. Selected Financial Data .................................................13

7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................13

8. Financial Statements ....................................................19

9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .............................................44

PART III

10. Directors and Executive Officers of the Registrant ......................44

11. Executive Compensation ..................................................46

12. Security Ownership of Certain Beneficial Owners and Management ..........49

13. Certain Relationships and Related Transactions ..........................49

PART IV

14. Exhibits and Reports on Form 8-K ..... ..................................50

(i)
<PAGE>

PART I
ITEM 1. BUSINESS

THE COMPANY

The Company was formed in 1918 and was renamed Hoechst Celanese Corporation in
February 1987. The Company manufactures and sells, principally to industrial
customers, a diversified line of products including textile and technical
fibers; acetate cigarette filter tow; specialty and bulk chemicals and bulk
pharmaceuticals; engineering plastics; pigments; and polyester film. The
Company's operations are segmented as follows: Chemicals; Fibers and Film;
Specialties and Technical Polymers (comprised of the Hoechst Technical Polymers
and Specialty Chemicals Group); and Corporate Research & Technology.

The Company is wholly owned by Hoechst Corporation, which in turn is wholly
owned by Hoechst Aktiengesellschaft ("Hoechst AG"), a large pharmaceutical and
chemical company headquartered in Frankfurt, Federal Republic of Germany.
Hoechst AG and its consolidated entities (the "Hoechst Group") consist of over
441 companies. The Hoechst Group operates in more than 100 countries. The
Hoechst Group's sales in 1996 were approximately $33.8 billion. See "Certain
Relationships and Related Transactions." The Hoechst Group is one of the largest
manufacturers of prescription drugs and one of the four largest producers and
marketers of chemicals and chemical-related products in the world.

As part of a worldwide strategy, Hoechst AG is moving towards a management
holding company concept. Thus, the Company is undergoing an internal review to
align its businesses under this new global approach. Under this approach, the
Cellulosics business has been transferred from the Fibers and Film segment to
the Chemicals segment.

In line with the worldwide strategy of Hoechst AG, the pharmaceutical
operations in North America were realigned. Accordingly, the Company completed
the transfer of its interest in the former Life Sciences segment to its Parent
or the subsidiaries of its Parent. The Company reflected the 1995 operating
results of these businesses as discontinued operations in the accompanying
consolidated financial statements.

The Company's principal executive offices are located at 1041 Route 202-206,
Bridgewater, New Jersey 08807; its mailing address is Route 202-206, Post Office
Box 2500, Somerville, New Jersey 08876-1258; and its telephone number is (908)
231-2000. During 1997, the Company will move its executive offices to 30
Independence Way, Post Office Box 4915, Warren, New Jersey 07060-4915.

DESCRIPTION OF BUSINESS SEGMENTS
CHEMICALS SEGMENT

This segment consists of Hoechst Celanese Chemical Group, Ltd. ("HCCGL"), the
chemical operations of Grupo Celanese, S.A., the chemical operations of Celanese
Canada Inc., and the cellulose acetate business. The Company entered the
petrochemical field in the United States in 1945, primarily to obtain supplies
of acetic acid and related chemical raw materials for its fibers operations. As
its internal chemical usage expanded and additional products were developed, the
segment began selling chemicals to others. This segment employs approximately
8,900 people and produces more than 60 different chemicals. Celanese(R) is an
internationally registered trademark of this segment.

The segment produces chemicals by upgrading hydrocarbons such as ethylene,
propylene, natural gas and butane. The hydrocarbon raw materials are purchased
on the open market, principally under long-term contracts.

1
<PAGE>

The major chemicals produced fall into two broad product groups: (1) methyl
chemicals, oxo-alcohols and solvents; and (2) acetyl chemicals and monomers.
Methyl chemicals are principally used in plastics, polyesters, adhesives,
solvents, synthetic lubricants, fuel additives and coatings. Oxo-alcohols and
solvents are principally used in surfactants, coatings, rocket propellants,
antifreeze, herbicides and polyesters. Monomers and acetyl chemicals are
primarily used in water-based paints, adhesives, textile finishes, paper
coatings, manufactured fibers, pharmaceuticals, herbicides and plastics.

The Company is one of the largest producers in the United States of cellulose
acetate. Cellulose acetate flake is produced for sale or converted to acetate
tow for use in cigarette filters and to filament used in apparel and industrial
applications. The major products in the cellulose acetate business include
acetate filament and tow. Acetate fibers are made principally from acetic
anhydride produced by the Company and from wood pulp purchased by the Company.

With respect to substantially all of its major products, this segment is
either the largest or second largest United States merchant market
supplier. Other major United States producers are: of methyl chemicals,
Borden, Inc., E.I. du Pont de Nemours & Co., Inc. ("duPont"),
Georgia-Pacific Corporation and Hercules Incorporated; of alcohols,
duPont, Eastman Chemical Products, Inc. ("Eastman"), Shell Oil Company
and Union Carbide Corporation; and of monomers and acetyl chemicals,
BASF, duPont, Eastman, Quantum Chemical Corporation, Rohm and Haas Co.
and Union Carbide Corporation.

Major acetate fibers competitors include: Eastman, Daicel Chemical
Industries, LTD. and Rhodia AG.

Grupo Celanese, S.A. is the sole or a major Mexican producer of a variety of
products including vinyl acetate, acetic acid, acetic anhydride, acrylates,
cellulose acetate filament yarn, cellulose acetate flake and cigarette filter
tow. A substantial portion of the chemical production of Grupo Celanese, S.A. is
sold in the export market, in competition with world producers.

Celanese Canada Inc. is the sole or a major Canadian producer of acetic
acid, acetic anhydride, formaldehyde, pentaerythritol, vinyl acetate
monomer, cellulose acetate filament yarn, cellulose acetate flake and
cigarette filter tow. A substantial portion of the chemical production
of Celanese Canada Inc. is sold in the export market, in competition
with world producers. Celanese Canada Inc. operates a world scale
methanol unit at its Edmonton plant site in Alberta. The methanol
operation is owned by Celanese Canada Inc. and the Company. Methanex
Corporation is the largest Canadian producer of methanol.

The Company participates in a 50/50 joint venture, Clear Lake Methanol Partners,
L.P., with Valero Javelina Company.

The Company owns a 75% interest, through a wholly owned subsidiary, in Hoechst
Acetyls Singapore Pte. Ltd., a joint venture with Hoechst AG, for the
manufacture of vinyl acetate monomer. A manufacturing site in Singapore is
currently under construction and production is expected to commence in 1997.

The Company has a 30% interest in each of three joint ventures in the People's
Republic of China for cellulose acetate flake and tow. The three joint venture
manufacturing sites are located at Nantong (flake and tow), Kunming (tow) and
Zhuhai (tow), People's Republic of China.

Utilizing both acquired and internally developed technology, the segment is
continually working to upgrade its chemical processes to improve energy, raw
material and capital utilization. By producing a number of its major
chemicals at different plant locations, the segment attempts to avoid or
minimize the effect of production disruptions at any one location.

2
<PAGE>

FIBERS AND FILM SEGMENT

This segment is comprised of the following business areas: Textile Fibers,
Technical Fibers and Polyester Resins and Films. The Fibers and Film segment
employs approximately 10,200 people and operates plants in the United States and
abroad. The major product lines include: polyester staple, filament, resins,
monofilament, spunbond and film; purified terephthalic acid ("PTA");
dimethylterephthalate ("DMT"); polybenzimidazole ("PBI") and ethylene
oxide/glycol. The Company is one of the largest producers of polyester fibers in
the United States. It is also one of the leading producers of polyester film and
bottle resins. The Company conducts research and development, manufactures,
markets and sells a combination of branded and unbranded resins, fibers and film
products for a wide variety of end uses. The Company sells most of its fibers
and yarns directly to textile mills, tire manufacturers, and other intermediate
processors. Among the internationally registered trademarks are: Trevira(R),
Hostaphan(R) and Trespaphan(R).

Polyester staple and filament, commonly recognized by their Trevira(R)
trademark, are principally used in wearing apparel, upholstery, floor coverings,
home furnishings, and woven and non-woven fabrics. Polyester staple and filament
are also used in tires, belts, hoses, thread and plastic reinforcements.

Polyester monofilament is used in zippers, conveyor belting and dryer and
forming screen applications in the paper industry. Roofing is the primary end
use for polyester spunbond. Polyester resins are primarily used in beverage,
pharmaceutical and other containers and for the manufacture of polyester fibers.

Hostaphan(R) polyester film, manufactured by the Company, is used in many
consumer products including audio, video and computer tape; food packaging;
solar window film; labels and decals; graphic arts film; photoresist; and other
electronics applications. Trespaphan(R) polypropylene film is imported for
resale from other companies in the Hoechst Group and is used in packaging,
capacitors, pressure sensitive tape and electric motor insulators.

The key raw materials used by the Fibers and Film segment in production are
either supplied internally or purchased on the open market, generally under
long-term contracts. Polyester fibers are produced from PTA or DMT and ethylene
glycol, which are either purchased from other suppliers or produced by the
Company. See "Raw Materials and Energy."

Major polyester fibers competitors include: Allied-Signal, Inc., duPont, ICI
Americas, Inc.("ICI"), Rhodia AG and Wellman, Inc.

Major United States and foreign polyester film producers include:
duPont, ICI, Toray Industries (America), Inc. and Teijin America, Inc.
Competing producers of PTA and DMT in the United States are Amoco
Chemicals Corporation and duPont, respectively.

Grupo Celanese, S.A. is the sole or a major Mexican producer of a variety of
products including polyester high denier industrial yarn, industrial staple,
textile filament, polyester staple, industrial nylon filament, yarn, polyester
bottle resin, laminated and printed film and bioriented polypropylene.

Celanese Canada Inc. is the sole or a major Canadian producer of a
variety of products including polyester textile staple, carpet staple
and bottle resins. A substantial portion of the fibers production of
both Grupo Celanese, S.A. and Celanese Canada Inc. is sold in export
markets in competition with world producers.

SPECIALTIES AND TECHNICAL POLYMERS SEGMENT

This segment consists of Hoechst Technical Polymers and the Specialty Chemicals
Group. This segment employs approximately 3,500 people and produces, imports and
sells a wide variety of specialty products.

Hoechst Technical Polymers. Hoechst Technical Polymers produces a variety of
high-performance engineering thermoplastics, including acetal copolymer sold
under the trademarks Celcon(R) and Hostaform(R), Celanese(R) nylon 6/6 resins,
thermoplastic polyester sold under the trademarks Celanex(R) and Impet(R),
liquid crystal polymers sold

3
<PAGE>

under the trademark Vectra(R), long fiber-reinforced thermoplastics sold under
the trademark Celstran(R) and thermoplastic alloys sold under the trademark
Vandar(R), as replacements for metals and other plastics in a wide variety of
end uses. The product lines of the business also include Hostalen(R) GUR, ultra
high molecular weight polyethylene. The Company produces the basic raw materials
for Celcon(R), Celanex(R), Impet(R) and Vandar(R) resins and purchases them for
Celanese(R) nylon 6/6 and Vectra(R) and Celstran(R) resins. Other major United
States producers of one or more similar engineering thermoplastics are duPont,
General Electric Company and BASF. The Company participates in Fortron
Industries, a joint venture (with a 50% interest; Kureha Chemical Industry Co.,
Ltd. ("Kureha") having a 50% interest). The joint venture operates a plant to
manufacture Fortron(R) polyphenylene sulfide. Since 1987, the Company has
marketed Fortron(R) which is manufactured by Kureha in Japan and by Fortron
Industries in the United States.

The Company participates in Polyplastics Co., Ltd. (with a 45% interest;
Daicel Chemical Industries, Ltd. having a 55% interest) which produces
and sells acetal copolymer, thermoplastic polyester resins and other
polymeric products.

Specialty Chemicals Group. This group's product lines include: organic pigments,
resins, sodium hydrosulfite, surfactants, and other specialty chemicals which
are mainly used in the textile, ink, pulp and paper, paint, coatings, plastics,
personal care, detergent and food processing industries; organic intermediates
used for synthesis of dyes, pigments, pharmaceuticals, cosmetics, agricultural
chemicals, photochemicals, plastics, adhesives, and other chemical products;
inorganic chemicals sold for broad industrial use, including pharmaceuticals,
electrical and battery equipment and oil drilling; superabsorbent polymers used
in personal care products; waxes and lubricants used for polish and plastics
processing applications and liquid photoresists and ancillaries used in the
manufacture of microchips for computers and other electronic devices. Among
internationally registered trademarks are: Genapol(R) and Hostapon(R)
surfactants; Sanwet(R) superabsorbent polymers (a registered trademark of Sanyo
Chemical Industries, Ltd. licensed to the Company); and AZ(R) liquid
photoresist.

Bulk Pharmaceuticals & Intermediates ("BPI") is a supplier of bulk analgesics,
pharmaceutical bulk actives and pharmaceutical intermediates. The Company
participates in BHC Company ("BHC") (with a 50% interest; BASF having a 50%
indirect interest) which manufactures and markets bulk ibuprofen. BHC's major
competitor is Ethyl Corporation. BPI also manufactures acetaminophen for which
its major competitors include Mallinckrodt Corporation and Rhone-Poulenc
Corporation.

Effective July 1, 1995, Hoechst AG and Bayer AG ("Bayer") formed a worldwide
joint venture to manufacture and sell textile dyestuffs. In August 1995, a joint
venture was formed in the United States, DyStar L.P., through Hoechst Celanese
Dyes Company, Inc., a wholly owned subsidiary of the Company, and Bayer
Corporation, a wholly owned subsidiary of Bayer, each contributing their former
textile dyestuffs businesses for equal ownership.

CORPORATE RESEARCH & TECHNOLOGY SEGMENT (CR&T)

This segment, formerly Advanced Technology Segment, consists of the North
American unit of the Hoechst Group corporate research and technology
organization. CR&T's mission is to identify, assess and work on new developments
and technologies that are of strategic importance to the Hoechst Group.
Additionally, CR&T supports the North American business units with technical
services. This segment employs approximately 600 people.

RESEARCH AND DEVELOPMENT

The Company conducts research and development both independently and jointly
with Hoechst AG and, additionally, has been a party to a broad research and
development cost-sharing agreement with Hoechst AG since January 1, 1988.

The Company continues to conduct its own research and development activities in
areas where specific developments for the United States market increase the
Company's competitiveness.

4
<PAGE>

Research and development costs are included in expenses as incurred. The
Company's research and development costs for 1996, 1995, and 1994 were $176
million, $179 million, and $182 million, respectively. Management intends to
maintain the Company's research and development expenditures in 1997 at
approximately the same level as 1996.

At December 31, 1996, approximately 1,500 employees, including approximately 800
professionals, were engaged in basic and applied research and development at
the Company. These individuals work in coordination with the Hoechst Group's
research and development personnel in the Federal Republic of Germany and other
parts of the world. The Hoechst Group in turn has access to a significant
portion of the Company's technology, know-how and patent rights. The Hoechst
Group is one of the leading research-oriented chemical and pharmaceutical
companies in the world, employing approximately 14,800 persons in its various
research and development laboratories. Research and development expenditures of
the Hoechst Group amounted to approximately $2.6 billion in 1996. Based on
individual license agreements and the cost-sharing agreement, the Company has
access to a significant portion of the Hoechst Group's technology, know-how and
patent rights for the United States and other markets, including licenses for
new developments.

The Company's United States research and development facilities are located in
Auburn Hills, Michigan (automotive plastic applications); Branchburg, New Jersey
(photoresists); Charlotte, North Carolina (textile and technical fibers,
specialty chemicals, separations products and polyester resins); Corpus Christi,
Texas (chemicals, pharmaceutical intermediates and bulk actives); Coventry,
Rhode Island (organic intermediates, pigments and specialty chemicals); Greer,
South Carolina (polyester film); Winona, Minnesota (technical polymers);
Florence, Kentucky (technical polymers); Portsmouth, Virginia (superabsorbent
polymers) and Summit, New Jersey (technical polymers).

MARKETING AND COMPETITION

The Company's products are generally sold in the United States directly or
through distributors or agents. Foreign subsidiaries and affiliates sell
principally through local sales personnel or agents. The principal customers
worldwide are other manufacturers which use the Company's products in a wide
variety of industrial and consumer products.

In general, the Company sells its products in highly competitive worldwide
markets. The number of competitors in a market or country and the Company's
competitive position vary widely with the products and countries involved. See
specific discussion of competitors in "Description of Business Segments." There
is growing competition from private and state-owned industries in certain
foreign countries in which there is an abundance of low-cost labor or raw
materials. This competition has a direct or indirect effect on many product
lines. For example, in the area of textile fibers, business is impacted by
fabric and apparel imports into the United States, Canada and Mexico,
particularly from the Far East. Depending upon the characteristics of the
particular market, the Company competes on the basis of price, product quality
and performance, technical support and customer service. Within the Chemicals
and Fibers and Film segments, the Company competes primarily on the basis of
price, product quality and performance. In general, Specialties and Technical
Polymers products are sold based on product performance, technical support and,
to a lesser extent, price. The Company's business is affected to some degree by
seasonality in the industries of its customers such as automotive, housing and
textiles.

The business is also sensitive to changes in the world economy, including
changes in currency exchange rates. Operations outside the United States are
subject to the economic and political risks inherent in the countries in which
they operate. Additionally, the export and domestic markets can be affected
significantly by import laws and regulations and energy cost differentials.
During 1996, the Company's export sales from the United States were 15.3% of
consolidated net sales.

Indirect marketing activities of the Company are extended through technical and
educational services, advertising and promotion. These activities reach each
level of the manufacturing and distribution system, as well as consumers of
apparel, home furnishings and industrial products. Product development and
technical service personnel supplement direct sales efforts by assisting
customers in using existing products and developing new ones.

5
<PAGE>

RAW MATERIALS AND ENERGY

Most of the Company's products are made by chemically processing and upgrading
several basic types of raw materials including petroleum hydrocarbons and
derivatives, natural gas and wood pulp. These derivatives include ethylene and
paraxylene, which are primarily supplied by major United States and Canadian oil
companies. Raw materials are purchased from affiliated and non-affiliated
suppliers throughout the world.

The Company's production facilities rely largely on coal, fuel oil, natural gas
and electricity for energy.

The Company currently has adequate supplies or access to sources of all
purchased raw materials and energy for the foreseeable future. The Company does
not consider itself dependent upon any one supplier for a material amount of its
raw material or fuel purchases. However, in the United States, wood pulp (a raw
material for cellulosics) is largely obtained from two suppliers, and Hoechst
Celanese Polyester Intermediates is the sole supplier of DMT and is one of two
suppliers of PTA used in the production of polyester. Grupo Celanese, S.A.
purchases the majority of its raw materials from Alfa, S.A. de C.V. and
Petroleos de Mexicanos.

In addition, some active ingredients and other raw materials used by the
Specialty Chemicals Group are supplied by other companies in the Hoechst Group.

GOVERNMENT REGULATIONS

The Company believes it is in substantial compliance with all environmental,
health and safety regulations and continues to devote attention to the health
and safety of its employees and the protection of the public health and the
environment in the regions where it operates. Such compliance has not had an
adverse effect on the Company's competitive position or business. The Company
cannot predict the effect of regulations which may be adopted in the future by
governmental bodies responsible for air, water and solid waste pollution
controls and employee and community health and safety.

PATENTS AND LICENSES

The Company owns, or is licensed under, more than 4,500 patents relating to its
products and manufacturing processes, some of which are important to specific
commercial operations. No single patent or group of patents is considered
material to the business as a whole. The Company's principal licenses are either
continuing licenses from third parties or relate to patents and know-how owned
by other companies in the Hoechst Group. Generally in the latter cases, the
licenses require no specific payment because, overall, the research and
development costs have been shared. In cases where license fees are involved
with the Hoechst Group, they are generally based on percentages of sales and do
not require minimum payments. Management believes that the terms of such license
agreements are similar to those competitively negotiated between unrelated
parties.

The Company has developed and acquired technical information and owns
patents in the chemicals, fibers, specialties and technical polymers
fields, some of which have been licensed to affiliates and others
worldwide.

EMPLOYEES

At December 31, 1996, worldwide employment for the Company was
approximately 24,100. The Company employed about 8,000 persons outside
the United States. In the United States, fewer than one-fourth of the
plants and employees are organized by labor unions. Most labor
agreements are for terms of three years. The Company offers
comprehensive benefit plans for employees and their families and
believes relations with employees are satisfactory.

6
<PAGE>

ENVIRONMENTAL

The Company's worldwide operations are subject to environmental laws and
regulations which impose limitations on the discharge of pollutants into the air
and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes. The Company believes that it is in substantial
compliance with all applicable environmental laws and regulations.

In 1996, combined worldwide expenditures, including third party and divested
sites, for compliance with environmental control regulations and internal
Company initiatives totaled $189 million, of which $66 million was for capital
projects. In both 1997 and 1998, total annual environmental expenditures are
expected to be approximately $180 million, of which $70 million is for capital
projects. It is anticipated that stringent environmental regulations will
continue to be imposed on the Company and the industry in general. Although the
Company cannot predict expenditures beyond 1998, management believes that the
current spending trends will continue.

The Company may be subject to claims brought by Federal or state regulatory
agencies or private individuals pursuant to statutory authority or common law.
In particular, the Company has a potential liability under the Federal
Comprehensive Environmental Response Compensation and Liability Act
("Superfund") and related state laws for investigation and cleanup costs at
approximately 100 sites. At most of these sites, numerous companies, including
either the Company or one of its predecessor companies, have been notified that
the United States Environmental Protection Agency ("EPA"), state governing body
or private individuals consider such companies to be potentially responsible
parties under Superfund or related laws. The proceedings relating to these sites
are in various stages. The cleanup process has not been completed at most sites
and the status of the insurance coverage for most of these proceedings is in
litigation. The Company has accrued its best estimate of its ultimate liability
for investigation or cleanup costs, but, due to the many variables involved in
such estimation, the ultimate liability may vary. Expenditures for
investigation, clean up and related activities have been $21 million for the
three years ended December 31, 1996 with expenditures in no year greater than $9
million.

SEGMENT AND GEOGRAPHICAL INFORMATION

See Note (14) of Notes to Consolidated Financial Statements for Segment
and Geographical Information.

7
<PAGE>

ITEM 2. PROPERTIES

The Company owns and operates various manufacturing facilities within the United
States and abroad. It also owns or leases facilities related to its operations
such as warehouses, pipelines, tolling operations, research and development and
sales offices.

The Company's principal manufacturing facilities, which are owned by the Company
(unless otherwise indicated), are summarized below:

CHEMICALS SEGMENT:
<TABLE>
<CAPTION>

U.S.

<S> <C>
Bay City, Texas ................. Vinyl acetate, butanol, propanol, synthetic
fatty acids, butyl acetate

Bishop, Texas ................. . Methanol, formaldehyde, pentaerythritol,
trimethylolpropane

Bucks, Alabama .................. Amines

Clear Lake, Texas ............... Acetic acid, ethoxylates, vinyl acetate,
acrylic acid and esters, methanol*

Narrows, Virginia ............... Acetate filament and flake, cigarette filter
tow

Pampa, Texas .................... Acetic acid, acetic anhydride, ethyl acetate,
methyl ethyl ketone, acrylic esters

Portsmouth, Virginia ............ Specialty amines

Rock Hill, South Carolina ....... Acetate filament and flake, formaldehyde

NON-U.S.

Celanese Canada Inc.:

Drummondville, Quebec ........... Acetate filament fibers

Edmonton, Alberta ............... Acetic acid, acetic anhydride, cellulose
acetate flake, cigarette filter tow,
formaldehyde, methanol**, pentaerythritol,
sodium formate, vinyl acetate

Grupo Celanese, S.A.:

Cangrejera, Veracruz ............ Acetic acid, vinyl acetate, dimethyl
formamide, methyl amines, acetic anhydride
and acrylic acid

Celaya, Guanajuato .............. Acetic acid esters, solvents, acetic
anhydride

Cosoleacaque, Veracruz .......... Acrylic acid esters

Ocotlan, Jalisco ................ Cellulose acetate flake, filament and
cigarette filter tow

Hoechst Celanese S.A.:

Lanaken, Belgium ................ Cigarette filter tow

</TABLE>

- ----------

* The methanol operation is owned by a joint venture. See Item 1 - "Business
-- Description of Business Segments."

** The methanol operation is owned by Celanaese Canada Inc. and Company.

8
<PAGE>

FIBERS AND FILM SEGMENT:
<TABLE>
<CAPTION>

U.S.

<S> <C>
Clear Lake, Texas ................. Ethylene oxide and glycol
Greer, South Carolina ............. Polyester film and resins
Rock Hill, South Carolina ......... PBI
Salisbury, North Carolina ......... Polyester staple and filament fibers
Shelby, North Carolina ............ Polyester filament fibers
Spartanburg, South Carolina ....... Polyester staple, polyester resins,
spunbond and monofilament
Wilmington, North Carolina ........ PTA, DMT and terate resins

NON-U.S.
Hoechst Celanese S.A.:
Lanaken, Belgium .................. Acetate and triacetate filament fibers
Celanese Canada Inc.:
Millhaven, Ontario ................ Polyester staple fibers and polyester
resins
Grupo Celanese, S.A.:
Ocotlan, Jalisco .................. Polyester filament
Queretaro, Queretaro .............. High denier nylon and polyester staple,
filament, and high denier filament
Toluca, Mexico .................... Polyester staple and high denier polyester
and nylon filaments
Zacapu, Michoacan ................. Bioriented polypropylene film, laminated
printed films and cellulosic casings

SPECIALTIES AND TECHNICAL POLYMERS SEGMENT:

Bayport, Texas* ................... Ultra high molecular weight polyethylene
Bishop, Texas ..................... Engineering plastics and acetaminophen
Branchburg, New Jersey ............ Liquid photoresist
Bucks, Alabama .................... Sodium hydrosulfite, sulfur dioxide, sodium
bisulfite solution
Charlotte, North Carolina* ........ Microporous membranes
Coventry, Rhode Island ............ Pigments and organic intermediates
Florence, Kentucky ................ Engineering plastics
Leeds, South Carolina ............. Sodium bisulfite solution, sodium
hydrosulfite, sodium hydrosulfite
solution, specialty blended products

Mount Holly, North Carolina ....... Resins, surfactants and other specialty
chemicals
Portsmouth, Virginia .............. Superabsorbent materials
Shelby, North Carolina ............ Engineering plastics
Wilmington, North Carolina ........ Polyphenylene sulfide
Winona, Minnesota ................. Engineering plastics

</TABLE>

Management believes that the Company's properties are suitable for its business
and have adequate productive capacities to meet current and future business
requirements.

- ----------

* This facility is leased.

9
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in a number of lawsuits, including environmental,
product liability and personal injury actions. Certain of these lawsuits are or
purport to be class actions. In some of these cases, claimed damages are
substantial. While it is impossible at this time to determine with certainty the
ultimate outcome of these lawsuits, management believes, based on the advice of
legal counsel, that adequate provisions have been made for probable losses with
respect thereto and that the ultimate outcome will not have a material adverse
effect on the financial position of the Company, but may have a material adverse
effect on the results of operations or cash flows in any given year.

In late February 1990, the U.S. EPA issued a Notice of Violation to the
Company's Celriver plant alleging that the plant is subject to the Benzene
NESHAP Fugitive Emissions Standard of the Clean Air Act. Although the Company
subsequently met the Fugitive Emissions Standard voluntarily at all plants that
used benzene (the Celriver, Celco and Bishop facilities), it believed that the
facilities properly determined in 1984 that they qualified for an exemption from
the standard and, therefore, enforcement and sanctions were not appropriate. The
Department of Justice (DOJ) and EPA filed complaints against Celriver in July
1992 in S.C.; Celco in November 1993 in VA; and Bishop in March 1995 in TX
seeking penalties of up to $25,000 per day of violation. In May 1996, the Court
in the Celriver case gave deference to the Government's interpretation but
dismissed its penalty claim because the Company had not been given notice of
that interpretation as required by the U.S. Constitution. The Government filed
an appeal. The Company filed a cross-appeal continuing its challenge to the
Government's new interpretation. Briefing in the Court of Appeals has been
completed, but oral argument has not been scheduled. The Celco and Bishop cases
have been stayed by agreement of the parties pending the outcome of the Celriver
appeal.

Prior to 1987, the Company made polyethylene water service pipe. In December
1995, the Company was brought into 15 related lawsuits in the Superior Court of
the State of California for the County of Orange by approximately 462 homeowners
who allege damage from a landslide in January 1993 in Anaheim Hills, California.
The claims against the Company are that polyethylene water service pipe (known
as "Yardley Water Service Line") sold by the Company leaked or broke in the
landslide area and either caused or contributed to the landslide. Other
defendants are the City of Anaheim, other governmental agencies and Flintkote
Corporation, another manufacturer of water service pipe. The case against the
governmental agencies was filed in 1993. Although the total damages claimed
aggregate approximately two billion dollars, management believes that the claims
against the Company are without merit and will defend itself vigorously.
Management believes this will not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.

In June 1991, the Company entered into an agreement with the EPA to participate
in a voluntary program known as the "Toxic Substances Control Act - Section 8
(e) CAP Program." Under this program, the EPA is allowing participating
companies to conduct voluntary, retrospective self-audits, to submit newly
discovered 8 (e) studies to the EPA and to pay a penalty of $6 thousand for each
unreported study. The Company's penalty, which was the program's $1 million
maximum amount, was paid in October 1996.

The Company is a named defendant in 36 putative class actions, three of which
have been certified as class actions, as well as a defendant in other non-class
actions filed in twelve states (the "Plumbing Actions"). In these Plumbing
Actions the plaintiffs typically seek recovery for alleged property damages,
and, in certain cases, additional damages under the Texas Deceptive Trade
Practices Act and analagous statutes in other jurisdictions. The other
defendants include United States Brass Corporation ("U.S. Brass"), Vanguard
Plastics, Inc. ("Vanguard"), Shell Oil Company ("Shell") and E.I. duPont
deNemours & Co., Inc. ("duPont"). Damage amounts are not specified. The plumbing
systems were designed and manufactured primarily by U.S. Brass and Vanguard. The
pipe was made from polybutylene resin supplied by Shell. The Company sold acetal
copolymer resin and duPont sold acetal homopolymer resin to other companies who
manufactured the fittings used in the plumbing systems. The class actions and
the purported class actions are in the Circuit Court, State of Alabama, County
of Mobile (one case), Circuit Court, State of Maryland, County of Montgomery
(one case), the 20th Judicial Circuit Court, State of Illinois, County of St.
Clair (two cases), the Circuit Court, State of Missouri, County of St. Louis
(one case), the Superior Court, State of Arizona, County of Maricopa (two
cases), the Municipal Court, State of California, County of San Diego (one
case), the Superior Court, State of California, Counties of San Diego (six
cases),

10
<PAGE>

and Monterey (one case), the District Court, State of Nevada, County of Clark
(one case), the 2nd Judicial District Court, State of Nevada, County of Washoe
(one case), the 164th Judicial District Court, State of Texas, County of Harris
(one case), the United States District Court for the Southern District of Texas,
Houston Division (one case), the District Court, State of Colorado, County of
Denver (one case), the Superior Court of California, Santa Cruz County (one
case), the Circuit Court of the Eleventh Judicial Circuit, Florida, Dade County
(one case) (which has been dismissed on appeal), the Superior Court of Georgia,
Fulton County (one case), the Superior Court of Indiana, Marion County (one
case), the District Court of Iowa, Polk County (one case), the 18th Judicial
District of Louisiana, Iberville Parish (one case), the Civil District Court of
Louisiana, Orleans Parish (one case), the Circuit Court of Michigan, Wayne
County (one case), the Court of Common Pleas of Ohio, Montgomery County (one
case), the Circuit Court of Oregon, Multnomah County (one case), the Court of
Common Pleas of Pennsylvania (1st Judicial District), Philadelphia County (one
case), the Court of Common Pleas of South Carolina, Beaufort County (one case),
the Circuit Court of Wisconsin, Milwaukee County (one case), the District Court,
State of Colorado, Denver District (one case), the 22nd Judicial Circuit Court,
State of Missouri, County of St. Louis (one case) and the Superior Court, State
of New Jersey, County of Burlington (one case).

The Company and Shell have resolved through settlement or obtained dismissals of
four certified state court class actions.

Based on, among other things, the findings of outside experts and the successful
use of the Company's acetal copolymer in similar applications, the Company does
not believe its acetal copolymer was defective or caused the plumbing systems to
fail. In many cases the Company's exposure may be limited by the fact that the
other defendants and other responsible parties may be found liable in whole or
substantial part or by invocation of the statute of limitations since the
Company ceased selling the resin for use in the plumbing systems in site built
homes during 1986 and in manufactured homes during 1989. The Company is
defending itself vigorously in these actions. The Company has commenced
litigation in the Superior Court - Law Division, State of New Jersey, County of
Somerset against U.S. Brass and its former and current parent, Household
International, Inc. ("Household"), and Eljer Industries, Inc. ("Eljer"),
respectively, to recover, among other things, the portion of the plumbing action
judgements, settlements and expenses that are attributable to U.S. Brass,
Household and Eljer. However, as a result of U.S. Brass filing for Chapter 11
protection in bankruptcy court in Sherman, Texas, all claims against U.S. Brass
have been stayed and this litigation was removed to the bankruptcy court. The
Company has made a motion in the bankruptcy court to remand the litigation to
state court so that its claims against Household and Eljer can be pursued. By
order dated October 21, 1996, the bankruptcy court granted the Company's motion
to remand the litigation to the Superior Court of New Jersey so that the Company
could pursue its claims against Household and Eljer. Household filed a motion to
reconsider the remand order and Eljer sought limited reconsideration of the
remand order. The bankruptcy court has not ruled on the motions to reconsider.

In November 1995, the Company, Shell and duPont entered into a national class
action settlement, which has been approved by the Courts, subject to appeals.
All such appeals have been dismissed.

The settlement calls for the replacement of plumbing systems of claimants who
have had qualifying leaks. Furthermore, the three companies have agreed to fund
such replacements up to $950 million. The allocation of the payments already
made and future payments between the affected companies has not been finally
determined and will be subject to allocation in binding arbitration. There are
additional pending lawsuits not covered by this settlement.

On or about December 20, 1995, the Company and Shell settled the claims of
certain individuals, owning 110,000 property units, who are represented by the
law firm of Fleming, Hovenkamp & Grayson, P.C. ("FHG") for an amount not to
exceed $170 million. FHG's clients will also be eligble for a replumb of their
homes in accordance with the terms of the national class action settlement. The
Company's and Shell's contributions under this settlement also will be subject
to allocation in binding arbitration.

11
<PAGE>

Management believes that the Plumbing Actions are either covered by insurance or
provided for in the financial statements. In September 1989, after being sued by
one of its insurers in New York, the Company filed suit in the Superior Court of
the State of Delaware in and for New Castle County against National Union Fire
Insurance Co. of Pittsburgh, Pennsylvania, the primary general liability
insurance carrier for the Company from April 1985 to May 1989 and 40
excess/umbrella carriers insuring the Company from 1978 to 1989, seeking a
declaration that insurance coverage exists for these product liability claims.
The insurers' New York action has been dismissed. Negotiations with most of the
carriers have resulted in settlement or agreements in principle to settle,
resulting in substantial continuing coverage of the Plumbing Actions or cash
payments for claims. There are ongoing discussions with several of the remaining
insurers. The Company's Delaware suit has been stayed pending the results of
interlocutory appeals to the Delaware Supreme Court on two issues. Outside
counsel believes that the Company has a substantial probability of prevailing in
its litigation against the carriers.

The Company is not liable for any alleged defects in such systems which were
designed, manufactured and marketed by other companies. Nonetheless, the Company
has agreed to participate in the proposed settlements described above to reduce
litigation expenses and to provide relief to qualifying homeowners with
polybutylene plumbing problems.

Management believes that the Plumbing Actions will not have a material adverse
effect on the financial position of the Company, but may have a material adverse
effect on the results of operations or cash flows in any given year. See Note
(15) of Notes to the Consolidated Financial Statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

12
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
------ ------ ------- ------ ------
(IN MILLIONS)

<S> <C> <C> <C> <C> <C>
Net sales ....................... $6,906 $7,395 $ 6,874 $6,171 $6,320
Operating income (loss) ......... 500 584 (39) 302 304
Earnings (loss) from continuing
operations before cumulative
effect of accounting change .. 199 310 (108) 129 84
Total assets .................... 8,286 8,317 7,775 7,611 6,888
Long-term debt .................. 1,026 962 1,082 871 823
Dividends declared .............. 90 130 60 70 85

</TABLE>

Note: This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Financial
Statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following sections should be read in conjunction with Note (14) of Notes to
Consolidated Financial Statements for Segment and Geographical Information.

Forward-looking statements made in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve risks and uncertainties.

RESULTS OF OPERATIONS

1996 COMPARED TO 1995

On July 18, 1995, Hoechst Corporation, the Company's parent, completed the
acquisition of Marion Merrell Dow Inc. In line with the worldwide strategy of
Hoechst AG, the pharmaceutical operations in North America were realigned.
Accordingly, the Company completed the transfer of its interest in the former
Life Sciences segment to its Parent or the subsidiaries of its Parent. The
Company reflected the 1995 operating results of these businesses as discontinued
operations in the accompanying consolidated financial statements.

13
<PAGE>

approach, the Cellulosics business has been transferred from the Fibers and Film
segment to the Chemicals segment. It is unknown at this time when other
realignments, if any, will be made and the effect they will have on the Company.

Hoechst AG, Frankfurt, Germany and Clariant AG, Muttenz, Switzerland intend to
combine their respective worldwide specialty chemicals businesses and have
signed a nonbinding general agreement. Consummation of the combination is
subject to a number of conditions including the negotiation of definitive
agreements, approval by the board members and shareholders of both companies and
approval by the antitrust authorities. Accordingly, the Company is unable to
predict whether or when a transaction with Clariant AG will be consummated.

Net sales of $6,906 million in 1996 decreased by 6.6% or $489 million from 1995
net sales of $7,395 million. Sales decreases were realized in most segments. The
Chemicals segment sales decreased $133 million over the prior year within most
product lines except for the continuing favorable performance of acrylates and
cigarette tow. Selling price impact was $80 million unfavorable due to declining
prices, particularly in methanol and acetic acid. Volumes also decreased for
most basic chemicals, however, increased worldwide demand for both acetate and
filter products resulted in higher volumes compared to 1995. The Fibers and Film
segment experienced sales declines of $210 million from the same period last
year. Competitive pricing pressures resulted in decreased selling prices of $188
million. In Textile Fibers, sales were lower due to market softness for
polyester staple compared to the prior year. For filament products, selling
prices were maintained, comparable to the prior year level. However, volumes for
filament products were stronger because of the increased demand for the product
in the fashion industry. Technical Fibers sales decreased due mainly to the sale
of the caprolactum business in fourth quarter 1995, which was partially offset
by the strong demand in the tire cord business as well as higher pricing in most
of the other Technical Fibers businesses. Polyester Resins and Films sales
decreased as prices and volumes were unfavorable for PET resins and
intermediates. This decline is mainly due to intense competition and market
saturation for resins. The Specialties and Technical Polymers segment sales
decreased $182 million over the comparable 1995 period. In Technical Polymers
(formerly Advanced Materials), overall sales volumes for the full year decreased
primarily due to the transfer of the fluoropolymers business to Dyneon, a
Hoechst-3M joint venture, effective August 1, 1996. Specialty Chemicals sales
decreased largely as the result of the sale of the printing plates business to
Bayer Corporation (AGFA Division) on January 2, 1996 and the transfer of the
dyes business to DyStar, a Hoechst-Bayer joint venture, in 1995. Excluding these
transactions, Specialty Chemicals experienced higher volumes in detergent raw
materials, separations products, and pigments. Selling prices were relatively
stable in most businesses, however, superabsorbents and bulk pharmaceuticals
experienced lower pricing versus the prior year.

Selling, general and administrative expenses ("SG&A") decreased $134 million
over 1995. The decrease is a result of the sale of the printing plates business
and the transfer of the fluoropolymers business to Dyneon in 1996, and lower
profit sharing compared to 1995.

Research and development expenses decreased by $3 million from the 1995 levels,
primarily due to reduced spending.

Operating income declined by $84 million from $584 million in 1995 to $500
million in 1996. The decline was driven by reduced profitability in the
Chemicals and Fibers and Film segments. In the Chemicals segment, lower
operating income was primarily the result of lower prices and volumes for most
basic chemical product lines while Cellulosics improved due to both favorable
price and volume changes. In the Fibers and Film segment, operating income
decreased over the prior year. In Textile Fibers, favorability in filament was
not enough to offset lower pricing and volumes in staple. Technical Fibers
operating income remained relatively flat versus the prior year. The operating
income for Polyester Resins and Films decreased compared to the prior year due
to industry oversupply and intense competition in the PET business. In the
Specialties and Technical Polymers segment, operating income increased. In
Technical Polymers, operating income increased slightly over the comparable
prior year, attributable primarily to increased demand in the polyester and
Celstran(R) businesses, which more than offset the decrease in operating income
resulting from the transfer of the fluoropolymer business to Dyneon. Specialty
Chemicals operating income increased compared to the prior year. Favorable
volumes in detergent raw materials, separations and pigment products resulted in
slightly improved operating income which offset the effect of the printing
plates and dyes transactions. In addition, 1996 included a charge relating to a
write-down of the remaining dye assets; whereas, 1995 included a charge relating
to a write-down of assets and additional environmental remediation exposure.

14
<PAGE>

Equity in net earnings of affiliates improved by $3 million over 1995 due to
improved earnings in Fortron Industries, a 50% joint venture, which sells
polyphenylane sulfide.

Interest and other income, net, decreased by $115 million compared to the prior
year. During 1995, a special dividend of $34 million was received from a foreign
investment, a gain of approximately $38 million was recorded associated with
transferring the Company's methanol production assets at the Clear Lake, TX
plant and forming a joint venture with Valero Javelina Company and a gain of $24
million was recorded on the sale of the textile nylon business operated by Grupo
Celanese, S.A. During 1996, a gain of $10 million was recognized on the sale of
the printing plates business.

The effective tax rate was 32% for 1996 compared to 26% for 1995. The increase
is mainly attributable to the decrease in non-US earnings taxed at lower rates.

1995 COMPARED TO 1994

On July 18, 1995, Hoechst Corporation, the Company's parent, completed the
acquisition of Marion Merrell Dow Inc. (which was renamed Hoechst Marion
Roussel, Inc. ["HMRI"]). In line with the worldwide strategy of Hoechst AG, the
pharmaceutical operations in North America were realigned. Accordingly, the
Company's management approved a formal plan to transfer its interest in Copley
Pharmaceutical, Inc. and Hoechst-Roussel Pharmaceuticals Inc. to its Parent or
the subsidiaries of its Parent. The transfer of the carrying value of the net
assets of these businesses was effective July 1, 1995. Accordingly, the Company
was reimbursed by Hoechst Corporation for any costs, including operating losses,
the Company incurred associated with the strategic realignment of the
pharmaceutical operations. Beginning with the second quarter of 1995, the
Company eliminated its Life Sciences segment. In addition, in the fourth quarter
1995, the Company transferred its interest in Agri-Vet Inc., which owns the
Company's interest in Hoechst-Roussel Agri-Vet Company and AgrEvo USA Company,
to its Parent. The Company has reflected the operating results of all of these
businesses as discontinued operations in the accompanying consolidated financial
statements.

Net sales of $7,395 million in 1995 increased by 7.6%, or $521 million, over net
sales of $6,874 million in 1994. The largest sales improvements were realized in
the Chemicals and Fibers and Film segments. The Chemicals segment sales improved
by $389 million, which was driven by $371 million of favorable pricing versus
the prior year, especially for methanol. Both vinyl acetate monomers and acetic
acid product lines continued to see strong demand and favorable pricing.
Although some softness in the market was noticed in the second half of 1995,
these products remained favorable over the prior year. Both volumes and prices
were favorable for filter products over the prior year. The Fibers and Film
segment experienced sales growth of $145 million over 1994. Strong pricing
impact of approximately $261 million, driven by PET resins, more than offset
declining volumes, mostly in staple. In Textile Fibers, pricing increases in the
domestic staple market were high enough to more than offset decreases in
domestic volumes for polyester staple and acetate. This decrease in volumes
versus prior year is due to market softness in the later part of 1995,
particularly the apparel market. The Technical Fibers Group experienced sales
growth for the year over 1994 due to improved Tire/MRG (mechanical rubber goods)
volumes in the domestic market. Polyester Resins and Films sales increased
significantly as a result of higher selling prices and volumes for PET resins
due to strong demand in the packaging materials and plastic containers markets.
In addition, continued favorable pricing and volumes were experienced in PET
film due to growing demand for both thin and thick film applications. The
Specialties and Technical Polymers segment sales were $36 million lower than
prior year, as sales increases in Technical Polymers were not enough to offset
decreases in the Specialty Chemicals Group. In Technical Polymers, overall sales
improvements compared to 1994 resulted from favorable sales volumes across most
product lines largely resulting from continued strong domestic and export
demand, further commercialization of products and the benefit of a strong
economy. Specialty Chemicals' 1995 sales experienced a downturn versus the prior
year primarily due to price declines in superabsorbents resulting from intense
competition and a reduction in volumes due to the contribution of the dyes
business to the DyStar joint venture, the U.S. part of a worldwide joint venture
with Hoechst AG and Bayer AG. These declines were too large to be countered by
the improved domestic volumes in surfactants, fine chemicals, AZ Photoresist and
bulk pharmaceuticals.

15
<PAGE>

Selling, general and administrative expenses increased $22 million over the
prior year mainly due to higher personnel related costs associated with higher
profit sharing and increased reengineering spending especially in the Fibers
area. Research and development expenses remained at the same levels versus the
prior year.

The 1995 operating income of $584 million was $623 million greater than 1994
which had an operating loss of $39 million. In the fourth quarter of 1995, the
Company recorded a special charge of $192 million ($125 million, net of tax) for
the expected costs and expenses relating to the write-down of assets and
additional environmental remediation exposure associated mostly with the
Specialties and Technical Polymers segment and for potential additional costs
pertaining to pending and future product liability claims, net of probable
insurance recoveries (See Note (16) of Notes to Consolidated Financial
Statements and Item 3. "Legal Proceedings"). In November 1995, the Company,
Shell and duPont entered into a national class action settlement, which has been
approved by the Courts, subject to appeals. Outside counsel believes that the
Company has a substantial probability of prevailing on any such appeals. The
settlement calls for the replacement of plumbing systems of claimants who have
had qualifying leaks. Furthermore, the three companies have agreed to fund such
replacements up to $950 million. The allocation of the payments already made and
future payments between the affected companies has not been finally determined.
There are additional pending lawsuits not covered by this settlement. In
December 1995, the Company and Shell reached agreement to settle 60,000 claims
which were not part of the national class action and which comprise
substantially all of the remaining active claims against the Company. This
settlement is on terms similar to the class action settlement.

Operating income in the Chemicals segment benefited from a significant increase
in sales for the full year resulting from increased volumes and pricing,
particularly in methanol and filter products, which more than offset the higher
raw material costs for ethylene and propylene. Improvements in the Fibers and
Film segment over the prior year were led by Technical Fibers and Polyester
Resins and Films. In Textile Fibers, operating income decreased as demand for
acetate filament declined. Although the cost of raw materials increased,
Tire/MRG sales volumes in Technical Fibers resulted in increased operating
income over the prior year. The operating income for Polyester Resins and Films
improved over the prior year due to very favorable pricing in the domestic
market for PET Film, Polyester Intermediates, and PET Resins. In the Specialties
and Technical Polymers segment, operating income remained flat compared to 1994.
Although Technical Polymers experienced increased sales in most product lines,
this was not enough to offset decreases in Specialty Chemicals. Specialty
Chemicals' operating income declined as the result of higher raw material costs
for most product lines, as well as price declines for superabsorbents.

Equity in net earnings of affiliates improved by $8 million over 1994 due to
increased earnings in a 45% owned affiliate, which sells copolymer and resins,
resulting from improved sales and the effect of the weakening of the U.S. dollar
against the Japanese yen.

Interest and other income reflects the following: a gain of approximately $38
million associated with transferring the Company's methanol production assets at
the Clear Lake, TX plant and forming a joint venture with Valero Javelina
Company which started up in the third quarter 1995; a gain of $24 million on the
sale of the textile nylon business operated by Grupo Celanese, S.A. and a
dividend of $34 million from an investment in National Methanol Company, which
operates in Saudi Arabia.

The effective tax rate was 26% in 1995 compared to a benefit of 105% in 1994
which arose as a result of a change in a prior year's accounting estimate in
1994 which resulted in a tax benefit of $63 million.

Due to the significant devaluation of the Mexican new peso in December 1994 and
its continued weakening against the U.S. dollar throughout 1995, the equity
section of the Company was negatively impacted in 1995 by approximately $70
million from the translation effect of the Company's 40% ownership of Grupo
Celanese, S.A. The Company is uncertain about the potential unfavorable impact
of future fluctuations of the Mexican new peso.

16
<PAGE>

The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("FAS 121"), which establishes standards for the recognition of
impairment of certain assets. Adoption of FAS 121 did not have a material impact
on the financial position or results of operations of the Company.

ENVIRONMENTAL

In 1996, combined worldwide expenditures, including third party and divested
sites, for compliance with environmental regulations and internal Company
initiatives totaled $189 million of which $66 million was for capital projects.
In both 1997 and 1998, total annual environmental expenditures are expected to
be approximately $180 million of which $70 million is for capital projects. It
is anticipated that stringent environmental regulations will continue to be
imposed on the Company and the industry in general. Although the Company cannot
predict expenditures beyond 1998, management believes that the current spending
trends will continue.

In 1996, 1995, and 1994 the total environmental costs charged to operations for
remediation efforts amounted to $24 million, $101 million and $105 million,
respectively. As of December 31, 1996 and 1995, the Company's total
environmental liability recognized in the financial statements is $248 million
and $272 million, respectively. The amounts are neither reduced for anticipated
insurance recovery nor discounted from the anticipated payment date.

In the opinion of management, environmental expenditures will not have a
material adverse effect on the financial position, results of operations, or
cash flows of the Company.

INFLATION

In recent years, inflation has not had a material impact on the Company's costs
due principally to price competition among suppliers of raw materials. However,
in certain segments of the Company's businesses, changes in the prices of raw
materials, particularly petroleum derivatives, could have a significant impact
on the Company's costs, which the Company may not be able to reflect fully in
its pricing structure.

Effective January 1, 1997, the Mexican economy has been deemed
hyperinflationary; thus, the Company will switch the functional currency for its
Mexican entities from the peso to the U.S. dollar. Although it is not practical
to quantify, we expect 1997 results for our Mexican operations to be lower than
what they would have been prior to this change.

RATIO OF EARNINGS FROM CONTINUING OPERATIONS TO FIXED CHARGES

The ratio of earnings to fixed charges for 1996 was 5.5 compared to 6.0 for
1995. The decrease was due to weaker earnings from continuing operations,
slightly offset by lower interest expense. For purposes of calculating the ratio
of earnings to fixed charges, earnings consist of earnings from operations
before fixed charges, minority interests and income taxes. Fixed charges consist
of interest and debt expense, capitalized interest and the estimated interest
portion of rents under operating leases.

LIQUIDITY AND CAPITAL RESOURCES

Beginning in 1996, the Company pools its cash with its Parent and the Company's
excess cash is loaned to its Parent under a revolving credit agreement.
Accordingly, the Company had no cash and cash equivalents at December 31, 1996.
Under this revolving credit agreement, the outstanding receivable balance from
Parent was $191 million as of December 31, 1996.

17
<PAGE>

Cash provided by operations for 1996 was $493 million compared to $748 million
in 1995. The decrease is primarily attributed to lower earnings in 1996,
decreased working capital in 1996 and the effect of discontinued operations in
1995. Cash provided by operations along with cash from the sale of businesses
and assets were more than sufficient to finance the Company's capital
expenditures.

During 1996, the Company borrowed $383 million and repaid $380 million under its
commercial paper program. There was $3 million commercial paper outstanding at
December 31, 1996. In 1996, the Company issued $35 million of tax-exempt bonds
to finance the construction of pollution control facilities in Texas and
Virginia.

The Company paid its Parent a $130 million dividend in 1996 and a $60 million
dividend in 1995. The Company intends to continue its practice of paying a
dividend to its Parent at the discretion of the Company's Board of Directors.

The Company had an aggregate of $175 million medium-term notes outstanding as of
December 31, 1996. The Company may sell from time to time up to an additional
$250 million of such notes. The proceeds from the sale of any medium-term notes
will be used for general corporate purposes.

The Company expects that its capital expenditures (which should approximate 1996
levels), investments and working capital requirements will continue to be met
primarily from cash generated from operations. However, the Company may, due to
the timing of funding requirements, supplement its liquidity from external or
affiliated sources. Such sources include the Company's medium-term note shelf
registration, commercial paper program and loans from its Parent or Hoechst AG
and affiliates.

18
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

PAGE
----

<S> <C>
Consolidated Balance Sheets as of December 31, 1996 and 1995 ............. 20

Consolidated Statements of Earnings for the three years ended
December 31, 1996 ........................................................ 21

Consolidated Statements of Stockholder's Equity for the three years
ended December 31, 1996 .................................................. 22

Consolidated Statements of Cash Flows for the three years ended
December 31, 1996 ........................................................ 23

Notes to Consolidated Financial Statements ............................... 24

Report of Independent Auditors ........................................... 43

</TABLE>

19
<PAGE>

HOECHST CELANESE CORPORATION

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

December 31,
-------------------
1996 1995
------- -------
(In millions)
ASSETS

<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ -- $ 81
Marketable securities ................................ 2 --
Net receivables ...................................... 2,154 1,919
Inventories .......................................... 782 854
Deferred income taxes ................................ 86 90
Prepaid expenses ..................................... 33 22
------- -------
Total current assets ............................... 3,057 2,966

Investments in affiliates .............................. 417 447
Property, plant and equipment, net ..................... 2,643 2,660
Deferred income taxes .................................. 29 65
Long-term receivable from parent ....................... 520 520
Other assets ........................................... 666 585
Excess of cost over fair value of net assets
of businesses acquired, net .......................... 954 987
Net assets held for distribution ....................... -- 87
------- -------

Total assets ....................................... $ 8,286 $ 8,317
======= =======

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:

Commercial paper, notes payable
and current installments of long-term debt ......... $ 9 $ 7
Accounts payable and accrued liabilities ............. 1,759 1,953
Dividend payable to parent ........................... 90 130
Income taxes payable ................................. 322 285
------- -------
Total current liabilities .......................... 2,180 2,375

Long-term debt ......................................... 1,026 962
Minority interests ..................................... 455 372
Other liabilities ...................................... 1,189 1,267

Stockholder's equity:

Common stock ......................................... -- --
Additional paid-in capital ........................... 2,976 2,929
Retained earnings .................................... 613 540
Cumulative translation and other adjustments ......... (153) (128)
------- -------
Total stockholder's equity ......................... 3,436 3,341
------- -------

Total liabilities and stockholder's equity ........... $ 8,286 $ 8,317
======= =======
</TABLE>

See accompanying notes to consolidated financial statements

20
<PAGE>

HOECHST CELANESE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------

(In millions)

<S> <C> <C> <C>
Net sales ........................................ $ 6,906 $ 7,395 $ 6,874

Cost of sales .................................... 5,626 5,702 5,483
Selling, general and administrative expenses ..... 604 738 716
Research and development expenses ................ 176 179 182
Special charges .................................. -- 192 532
------- -------- --------
Operating income (loss) ...................... 500 584 (39)

Equity in net earnings of affiliates ............. 11 8 --
Interest expense ................................. (86) (107) (109)
Interest and other income, net ................... 98 213 47
------- -------- --------
Earnings (loss) before income taxes and
minority interests ......................... 523 698 (101)

Income tax expense (benefit) ..................... 168 181 (106)
------- -------- --------
Earnings before minority interests ........... 355 517 5

Minority interests ............................... 156 207 113
------- -------- --------
Earnings (loss) from continuing operations ... 199 310 (108)

Loss from discontinued operations, net of tax .... -- (49) (78)
------- -------- --------
Net earnings (loss) .......................... $ 199 $ 261 $ (186)
======= ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

21
<PAGE>

HOECHST CELANESE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>

Years ended December 31,
-----------------------------
1996 1995 1994
------- ------- -------
(In millions)
- ------------------------------------------------------------------------------------------------------------------------------------

Common stock

<S> <C> <C> <C> <C>
Par value $.10 per share (authorized Balance at beginning and end of year ....... $ -- $ -- $ --
======= ======= =======
and issued 10,000 shares)
- ------------------------------------------------------------------------------------------------------------------------------------

Additional paid-in capital Balance at beginning of year ............... $ 2,929 $ 2,804 $ 2,769

Transfers to/from parent, net .............. 47 125 35
------- ------- -------
Balance at end of year ..................... $ 2,976 $ 2,929 $ 2,804
======= ======= =======

- ------------------------------------------------------------------------------------------------------------------------------------

Retained earnings Balance at beginning of year ............... $ 540 $ 409 $ 655

Net earnings (loss) ........................ 199 261 (186)

Dividends - cash ........................... (90) (130) (60)

Dividends- net assets of subsidiaries ...... (36) -- --
------- ------- -------
Balance at end of year ..................... $ 613 $ 540 $ 409
======= ======= =======

- ------------------------------------------------------------------------------------------------------------------------------------

Cumulative translation and other adjustments Balance at beginning of year. ............. $ (128) $ (49) $ 58

Current year adjustments ................... (25) (79) (107)
------- ------- -------
Balance at end of year ..................... $ (153) $ (128) $ (49)
======= ======= =======

- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.

22
<PAGE>

HOECHST CELANESE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Years ended December 31,
---------------------------
1996 1995 1994
------- ----- -------

(In millions)

<S> <C> <C> <C>
Operating activities:
Earnings (loss) from continuing operations ....... $ 199 $ 310 $ (108)
Adjustments to reconcile net
earnings (loss) to net cash provided by
operating activities:
Special charges, net of amounts used ........... (194) 49 400
Change in equity of affiliates ................. (7) (5) 8
Depreciation and amortization .................. 464 466 459
Deferred income taxes .......................... 40 (23) (223)
(Gain) loss on sale of businesses
and assets, net ............................. (4) (39) 9
Issuances of note receivable from Parent ....... (1,597) (349) --
Collections of note receivable from Parent ..... 1,681 74 --
Changes in operating assets and liabilities,
net of effect of businesses
acquired and sold:
Net receivables .............................. (146) (280) (210)
Inventories .................................. 15 (163) 190
Accounts payable and accrued liabilities ..... (30) 458 84
Income taxes payable ......................... 37 33 (65)
Other, net ................................... 35 37 86
Net cash provided by (used in) operating
activities of discontinued
operations ................................ -- 180 (54)
------- ----- -------
Net cash provided by operating activities .. 493 748 576
------- ----- -------
Investing activities:
Capital expenditures ............................. (575) (486) (468)
Proceeds from sale of businesses and assets ...... 100 71 4
Proceeds from sale of marketable securities ...... 98 33 70
Purchases of marketable securities ............... (135) (51) (64)
Purchases of and investments in businesses
and assets, net ............................. -- -- (13)
Net cash used in investing activities
of discontinued operations .................... -- (23) (22)
------- ----- -------
Net cash used in investing activities ...... (512) (456) (493)
------- ----- -------
Financing activities:
Proceeds from long-term debt ..................... 93 10 477
Proceeds from short-term borrowings .............. 636 691 2,986
Payments on long-term debt ....................... (29) (125) (270)
Payments on short-term borrowings ................ (634) (860) (3,175)
Dividends paid ................................... (130) (60) (70)
Net cash (used in) provided by financing
activities of discontinued
operations ................................... -- (6) 10
------- ----- -------
Net cash used in financing activities ...... (64) (350) (42)
------- ----- -------
Exchange rate changes on cash ...................... 2 (47) (22)
------- ----- -------
Net (decrease) increase in cash
and cash equivalents ..................... (81) (105) 19
Cash and cash equivalents at beginning of year ..... 81 186 167
------- ----- -------
Cash and cash equivalents at end of year ........... $ -- $ 81 186
======= ===== =======
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest, net
of amounts capitalized ......................... $ 99 $ 131 $ 128
Income taxes .................................... 102 150 168

</TABLE>

23
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

(a) Principles of consolidation

Hoechst Celanese Corporation (the "Company") is wholly owned by
Hoechst Corporation ("Parent"), a holding company, itself a wholly owned
subsidiary of Hoechst Aktiengesellschaft ("Hoechst AG"). The Company
manufactures and sells, principally to industrial customers, a diversified
line of products including textile and technical fibers; acetate cigarette
filter tow; specialty and bulk chemicals and bulk pharmaceuticals;
engineering plastics; pigments; and polyester film. The consolidated
financial statements include the accounts of the Company and its majority
owned or controlled subsidiaries, including two wholly owned captive
insurance companies, joint ventures and partnerships. All significant
intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made in the 1995 and
1994 consolidated financial statements to conform to the classifications
used in 1996.

Substantially all of the Company's minority interests are comprised of
Grupo Celanese, S.A. and Celanese Canada Inc. The Company, in conjunction
with an investment by its Parent, owns 51% of the outstanding voting shares
of Grupo Celanese, S.A. and exercises management control. The Company owns
approximately 56% of Celanese Canada Inc.

As part of a worldwide strategy, Hoechst AG is moving towards a
management holding company concept. Thus, the Company is undergoing an
internal review to align its businesses under this new global approach.
Under this approach, the Cellulosics business has been transferred from the
Fibers and Film segment to the Chemicals segment.

In line with the worldwide strategy of Hoechst AG, the pharmaceutical
operations in North America were realigned. Accordingly, the Company, in
two separate transactions, completed the transfer of its interest in the
former Life Sciences segment to its Parent or the subsidiaries of its
Parent which resulted in a net increase to stockholder's equity of $11
million in 1996 and $125 million in 1995. The Company reflected the 1995
operating results of these businesses as discontinued operations in the
accompanying consolidated financial statements.

The combined net sales of the discontinued operations for the years
ended December 31, 1995 and 1994 were $885 million and $921 million,
respectively. The net assets held for distribution as of December 31, 1995
consist primarily of accounts receivable, inventory, property, plant and
equipment, other noncurrent assets, accounts payable and accrued
liabilities.

Effective January 1, 1994, Hoechst Corporation contributed its shares
of Hoechst Canada Inc. ("HCI") to the Company. HCI is involved in
industrial chemicals. During 1994, the Company also transferred its 41%
investment in Ticona Polywerke GmbH to Hoechst AG. These transactions
resulted in a $35 million net increase to paid-in capital. The effect on
the Company's consolidated financial statements was not material.

(b) Cash and cash equivalents

Beginning in 1996, the Company pools its cash with its Parent and the
Company's excess cash is loaned to its Parent under a revolving credit
agreement. See Note (2).

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

24
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(1) Summary of Significant Accounting Policies (continued)

The Company has classified its investments in debt and equity
securities as "available-for-sale" and has reported those investments at
their fair or market value in the Consolidated Balance Sheets as marketable
securities or other assets.

(d) Inventories

Inventories are stated at the lower of cost (first-in, first-out
["FIFO"] or last-in, first-out ["LIFO"]) or market.

(e) Investments and equity in net earnings of affiliates

In general, the Company's share of net earnings or losses of companies
in which it owns at least 20% and less than a majority, and does not
exercise management control, is included in the Consolidated Statements of
Earnings as "Equity in net earnings of affiliates".

(f) Property, plant and equipment, net

Property, plant and equipment is stated at cost. Depreciation and
amortization are computed on a straight-line basis over the following
estimated useful lives:

Land improvements 20 years
Buildings 30 years
Building improvements 10 years
Machinery and equipment 10 years

Amortization of leasehold improvements is provided on a straight-line
basis over the estimated useful lives of the related assets or lease terms,
whichever is shorter.

Expenditures for maintenance and repairs are charged against
operations; major replacements, renewals and significant improvements are
capitalized.

(g) Intangibles

Excess of cost over fair value of net assets of businesses acquired
("Goodwill") is being amortized using the straight-line method principally
over a period of forty years. The Company reviews that the forecasted
cumulative undiscounted cash flow of those acquired businesses is greater
than the carrying value of the Goodwill. Amortization expense charged to
operations amounted to $33 million in 1996 and 1995 and $37 million in
1994. Accumulated amortization at December 31, 1996 and 1995 was $321
million and $288 million, respectively.

Patents and trademarks are being amortized on a straight-line basis
over their estimated useful or legal lives, ranging from 5 to 17 years.
Amortization expense charged to operations amounted to less than $1 million
in 1996, $5 million in 1995 and $13 million in 1994. Accumulated
amortization at December 31, 1996 and 1995 was $16 million.

25
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(1) Summary of Significant Accounting Policies (continued)

(h) Income taxes

The Company's consolidated results of operations are included in the
consolidated Federal income tax return of its Parent. The Company's Parent
allocates a provision for Federal income taxes equivalent to the tax effect
on the operations of the Company as if a separate return were filed.

Deferred income taxes have been provided to recognize the effect of
temporary differences between financial statement and income tax
accounting.

(i) Research and development

Research and development costs are included in expenses as incurred.

(j) Functional currencies

In general, local currencies have been designated as the functional
currencies for the Company's foreign operations. Assets and liabilities are
translated to United States dollars at the exchange rate in effect at the
balance sheet date. Revenues and expenses are translated at weighted
average exchange rates prevailing during the year. Translation adjustments
are recorded as a separate component of stockholder's equity.

(k) Estimates and assumptions

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

(2) Related Party Transactions

Purchases from Hoechst AG and its affiliates aggregated $386 million in
1996, $447 million in 1995 and $526 million in 1994. Net sales to Hoechst AG
and its affiliates aggregated $286 million in 1996, $312 million in 1995 and
$233 million in 1994.

The Company's principal licenses are under patents owned by Hoechst AG
and its affiliates. License fees, relating to license agreements between the
Company and Hoechst AG and its affiliates, charged to operations aggregated
less than $1 million in 1996, 1995, and 1994.

26
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(2) Related Party Transactions (continued)

The Parent has a revolving credit agreement with the Company under
which it may borrow up to $400 million. The Parent agreed to pay interest
at 30 day LIBOR plus .0625 of 1%. As of December 31, 1996 and 1995, the
outstanding receivable balance was $191 million and $275 million,
respectively. During 1996 and 1995, the Parent borrowed $1,597 million and
$349 million, respectively, under this agreement. Repayments on the
revolving credit agreement for 1996 and 1995 were $1,681 million and $74
million, respectively. Interest related to such borrowings aggregated $6
million in 1996 and $4 million in 1995. No such loan existed at December
31, 1994. The Company pools its cash with its Parent and loans its excess
cash to its Parent under this revolving credit agreement.

The Company has a revolving credit agreement with its Parent under
which it may borrow up to $750 million. The Company has agreed to pay
interest at 30 day LIBOR plus .0625 of 1%. There was no balance under this
agreement as of December 31, 1996, 1995 and 1994. Repayments on the
revolving credit agreements for 1994 were $679 million. Interest charges
related to such borrowings aggregated $4 million in 1994.

The Company has an outstanding note receivable from its Parent as of
December 31, 1996 and 1995. The Parent has agreed to pay interest at
3-month LIBOR plus .0625 of 1%. The note is payable in June 2000. Interest
income related to the note was $29 million in 1996 and $20 million in 1995.

Short-term note receivables from Hoechst AG and its affiliated
companies aggregated $454 million at December 31, 1996. Interest income
related to the notes was $18 million in 1996. No such note receivables
existed at December 31, 1995.

The Company transferred its interest in Agri-Vet, Inc. to its Parent
during the fourth quarter of 1995 in exchange for a short-term note. This
note was repaid in the first quarter of 1996.

Term obligations payable to its Parent aggregated $50 million at
December 31, 1996, $63 million at December 31, 1995 and $186 million at
December 31, 1994. Interest expense on these obligations aggregated $4
million in 1996, $13 million in 1995 and $13 million in 1994.

Short-term note obligations payable to Hoechst AG and its affiliated
companies aggregated $360 million at December 31, 1996 and 1995, and $510
million at December 31, 1994. Interest expense on such obligations
aggregated $20 million in 1996, $31 million in 1995 and $12 million in
1994.

(3) Net Receivables

1996 1995
------- -------

(In millions)

<S> <C> <C>
Trade .............................. $ 906 $ 945
Parent and affiliates .............. 834 599
Reinsurance receivables ............ 277 209
Other .............................. 171 201
------- -------
Subtotal .......................... 2,188 1,954
Allowance for doubtful accounts .... (34) (35)
------- -------
Net receivables ................... $ 2,154 $ 1,919
======= =======

</TABLE>

27
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(3) Net Receivables (continued)

As of December 31, 1996 and 1995, the Company had no significant
concentrations of credit risk. Concentrations of credit risk with respect
to trade receivables are limited since the Company's customer base is
dispersed across many different industries and geographies.

(4) Inventories
<TABLE>
<CAPTION>

1996 1995
----- -----
(In millions)

<S> <C> <C>
Finished goods ............................. $ 590 $ 676
Work-in-process ............................ 90 92
Raw materials and supplies ............... 161 174
----- -----
Subtotal .................................. 841 942
Excess of current costs over stated values . (59) (88)
----- -----
Total inventories ......................... $ 782 $ 854
===== =====
</TABLE>

At December 31, 1996, $412 million ($503 million at December 31, 1995)
of total inventories were valued by the LIFO method.

(5) Investments and Equity in Net Earnings of Affiliates
(In millions, except number of affiliates)
<TABLE>
<CAPTION>

1996 1995 1994
------- ------- -----
<S> <C> <C> <C>

Total:
Net sales ............................. $ 860 $ 748 $ 598
======= ======= =====
Net earnings .......................... $ 33 $ 24 $ 13
======= ======= =====
The Company's share:
Net earnings .......................... $ 11 $ 8 $ --
======= ======= =====
Dividends ............................. $ 4 $ 4 $ 8
======= ======= =====
Total assets ............................. $ 1,031 $ 1,048 $ 853
Total liabilities ........................ (236) (253) (219)
Interests of others ...................... (440) (414) (344)
------- ------- -----
The Company's equity .................. 355 381 290
Excess of cost over underlying equity
in net assets acquired .................. 62 66 68
------- ------- -----
The Company's investment .............. $ 417 $ 447 $ 358
======= ======= =====
Number of affiliates ..................... 8 9 7
======= ======= =====
</TABLE>

Effective January 1, 1995, the Company and Valero Javelina Company
("Valero") formed a joint venture, Clear Lake Methanol Partners L.P., to
produce methanol. The Company contributed its methanol production assets at
the Clear Lake, Texas plant and Valero contributed cash.

28
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(5) Investments and Equity in Net Earnings of Affiliates (continued)

Effective July 1, 1995, Hoechst AG and Bayer AG ("Bayer") formed a
worldwide joint venture to manufacture and sell textile dyestuffs. In
August 1995, a joint venture was formed in the United States, Dystar L.P.,
through Hoechst Celanese Dyes Company, Inc., a wholly owned subsidiary of
the Company, and Bayer Corporation, a wholly owned subsidiary of Bayer,
each contributing their former textile dyestuffs business for equal
ownership.

(6) Property, Plant and Equipment, Net

1996 1995
------- -------
(In millions)

<S> <C> <C>
Land and improvements ...................... $ 238 $ 246
Buildings, improvements and
leasehold improvements ................... 494 593
Machinery and equipment .................... 3,026 2,911
Construction in progress ................... 465 454
Capitalized interest ....................... 173 158
------- -------
Subtotal .................................. 4,396 4,362
Accumulated depreciation
and amortization ....................... (1,753) (1,702)
------- -------
Property, plant and equipment, net ........ $ 2,643 $ 2,660
======= =======

</TABLE>

Interest costs capitalized in 1996, 1995 and 1994 were $15 million, $17 million
and $15 million, respectively.

29
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(7) Income Taxes

1996 1995 1994
----- ----- -----
(In millions)

<S> <C> <C> <C>
Earnings (loss) before income taxes and minority interests consist
of the following:
United States ............................................... $ 179 $ 268 $(373)
Non-U.S ..................................................... 344 430 272
----- ----- -----
$ 523 $ 698 $(101)
===== ===== =====
The provision (benefit) for income taxes consists of the following:
Current: United States (Federal and state) .................... $ 54 $ 93 $ 30
Non-U.S .............................................. 74 94 94
----- ----- -----
Total current ............................................... 128 187 124
----- ----- -----

Deferred: United States (Federal and state) .................... 41 1 (205)
Non-U.S .............................................. (1) (7) (25)
----- ----- -----
Total deferred .............................................. 40 (6) (230)
----- ----- -----

Income tax provision (benefit) ................................. $ 168 $ 181 $(106)
===== ===== =====

United States income taxes at Federal statutory tax rate ......... $ 183 $ 245 $ (35)
Increase (decrease) in taxes resulting from:
Non-deductible depreciation and amortization ................. 8 10 12
State income taxes, net of Federal income tax benefit ........ 3 17 (21)
Non-U.S. earnings taxed at different rates ................... (33) (61) (20)
Settlement of open tax years.................................. -- (20) (63)
Other ........................................................ 7 (10) 21
----- ----- -----

Income tax provision (benefit) ................................. $ 168 $ 181 $(106)
===== ===== =====

</TABLE>

30
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(7) Income Taxes (continued)

The tax effects of the temporary differences which give rise to a
significant portion of deferred tax assets and liabilities as of December
31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)

<S> <C> <C>
Postretirement obligations................................. $223 $232
Accrued expenses........................................... 194 264
State income taxes and net loss carryforwards.............. 66 58
Alternative minimum tax carryforward....................... -- 14
Other...................................................... 16 40
---- ----
Gross deferred tax assets................................ 499 608
Valuation allowance...................................... (32) (24)
---- ----
Net deferred tax asset................................... 467 584

Depreciation............................................... 283 330
Interest................................................... 5 5
Inventory.................................................. 64 64
Non-U.S. investments....................................... -- 18
Other...................................................... -- 12
---- ----
Gross deferred tax liabilities........................... 352 429
---- ----

Net deferred tax asset .................................. $115 $155
==== ====

</TABLE>

A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Accordingly, the Company has established a valuation allowance for state
net operating loss carryforwards which may not be realizable. Based on the
Company's historical and current pretax earnings, management believes it is
more likely than not that the Company will realize the benefit of the
remaining deferred tax assets existing at December 31, 1996 and 1995.
Further, management believes the existing deductible temporary differences
will reverse during periods in which the Company generates net taxable
income.

The financial reporting basis of investments in certain non-U.S.
subsidiaries differs from their tax basis. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", a
deferred tax liability is not recorded on this temporary difference because
the investments are essentially permanent in duration. A reversal of the
Company's plans to permanently reinvest in these operations would cause
such temporary differences to become taxable. At December 31, 1996 and 1995
these temporary differences were approximately $834 and $516 million,
respectively. A determination of the amount of unrecognized deferred tax
liability related to these investments is not practicable.

31
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(8) Accounts Payable and Accrued Liabilities

1996 1995
------ ------
(In millions)

<S> <C> <C>
Accounts payable, trade...................................... $ 395 $ 476
Accounts payable, parent and affiliate....................... 395 349
Accrued salaries and benefits................................ 128 197
Accrued environmental costs.................................. 78 97
Outstanding insurance loss reserves.......................... 473 356
Other........................................................ 290 478
------ ------
Total accounts payable and accrued liabilities.............. $1,759 $1,953
====== ======
</TABLE>

(9) Long-term Debt

1996 1995
------ ------
(In millions)

<S> <C> <C>
Term notes:
9.625% notes, due 1999..................................... $ 250 $250
6.125% notes, due 2004..................................... 249 250
7.125% medium-term notes, due 2009......................... 100 100
7.39% bank loan, due 2004.................................. 50 --
6.89% term note payable to Parent, due 1998................ 50 60
7.5% medium-term notes, due 2004........................... 30 30
8.48% senior promissory notes, due 1996-2002............... 25 30
9.8% medium-term notes, due 2013 and 2018.................. 25 25
Pollution control and industrial revenue bonds,
interest rates ranging from 5.2% to 9.0%
(as adjusted annually), due at various dates
through 2026.................................................. 219 194
Other.......................................................... 28 23
------ ------
Total long-term debt....................................... $1,026 $962
====== ====

</TABLE>

The Company has a commercial paper program aggregating $600 million.
Included in "Commercial paper, notes payable and current installments of
long-term debt" in the Consolidated Balance Sheets at December 31, 1996 is
$3 million due to holders of commercial paper. There was no balance due at
December 31, 1995.

The Company has revolving credit agreements with several banks that
provide for loans up to $600 million for a renewable term of 364 days. The
Company pays a commitment fee of 1/16 of 1% per annum based on unused
amounts. The above described credit lines provide the credit backup for the
Company's commercial paper program. The credit lines were unused at
December 31, 1996 and 1995. The Company had letters of credit outstanding
amounting to $240 million at December 31, 1996 and $242 million at December
31, 1995.

The Company has limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company's
derivative policy provides the ability to lock in optimal rates for
future/existing borrowings and promotes the achievement of a desired level
of fixed/floating rate mix. The Company enters into interest rate swap and
cap agreements to reduce the exposure of interest rate risk inherent in the
Company's debt portfolio. The Company had open interest rate swaps and cap
positions with a notional amount of $400 million at December 31, 1996 and
$412 million at December 31, 1995. The Company's exposure to counterparty
financial instruments is not material.

32
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(9) Long-term Debt (continued)

The Company's debt instruments include covenants, as defined in the
loan agreements, that require maintenance of consolidated net worth of not
less than $2.3 billion, and the limitation of dividends and other
restricted payments. The Company is in compliance with all debt convenants.
At December 31, 1996, $645 million was available for dividends or other
restricted payments under existing loan agreements. The Company intends to
continue its current policy to pay dividends to its Parent at the
discretion of the Company's Board of Directors.

Annual maturities of long-term debt, including current installments,
each year for the next five years are: $5 million in 1997; $55 million in
1998; $255 million in 1999; $5 million in 2000; and $25 million in 2001.

(10) Other Liabilities
<TABLE>
<CAPTION>

1996 1995
------ ------
(In millions)
<S> <C> <C>

Pension and postretirement medical
and life obligations ......................... $ 641 $ 728
Other .............................................. 548 539
------ ------
Total other liabilities ........................ $1,189 $1,267
====== ======
</TABLE>

(11) Benefit Plans

The Company has several defined benefit pension plans covering
substantially all employees. Benefit formulas are based on years of
service and compensation levels or years of service and negotiated
benefits. The pension plans in the United States are being funded in
accordance with the requirements of the Employee Retirement Income
Security Act of 1974.

Net periodic pension cost for defined benefit pension plans consists
of the following:
<TABLE>
<CAPTION>

1996 1995 1994
----- ----- -----
(In millions)

<S> <C> <C> <C>
Service cost benefits earned during the period ...... $ 63 $ 63 $ 57
Interest cost on projected benefit obligation ....... 143 128 115
Actual return on plan assets ........................ (149) (217) (52)
Net amortization and deferral ....................... 70 126 (37)
----- ----- -----
Net periodic pension cost ......................... $ 127 $ 100 $ 83
===== ===== =====
</TABLE>

33
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(11) Benefit Plans (continued)

In 1996, the Company elected to change the measurement date for all
pension assets and liabilities from December 31 to September 30. The effect
of this change was not material. The following table reconciles the funded
status of the Company's qualified plans as of September 30, 1996 and
December 31, 1995 to the amounts recognized in the Company's Consolidated
Balance Sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

1996 1995
------- -------

(In millions)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation ......................... $ 1,518 $ 1,419
======= =======
Accumulated benefit obligation .................... $ 1,552 $ 1,469
======= =======
Projected benefit obligation ........................ $ 1,766 $ 1,733
Plan assets at fair value ........................... 1,484 1,282
------- -------
Projected benefit obligation in excess of plan assets 282 451
Unrecognized prior service cost ..................... (72) (84)
Unrecognized net loss from past experience
different from that assumed ........................ (113) (251)
Unrecognized net asset being recognized over
7 to 18 years ..................................... 26 33
Fourth quarter contributions ........................ (7) --
Additional minimum liability ........................ -- 80
------- -------
Accrued pension obligation ........................ $ 116 $ 229
======= =======
</TABLE>

The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.50% and 4.25% in 1996 (7.25% and 4.25% in 1995 and 8.25%
and 5.0% in 1994). The expected long-term rate of return on plan assets
used in determining net periodic pension cost was 9.0% in 1996, 1995, and
1994.

Assets of the Company's pension plans consist of equity and fixed
income securities, real estate and deposit administration contracts
maintained in master trust funds, which are managed by various investment
managers appointed by the Company.

The Company has various investment savings plans for certain
employees, some of which qualify under Section 401(k) of the Internal
Revenue Code. The Company's contributions to the plans are based on
specified percentages of employee contributions and aggregated $31 million
in 1996, $35 million in 1995 and $36 million in 1994.

The Company provides certain of its employees with non-qualified
supplemental retirement benefits. The accumulated benefit obligation of
these benefits totalled $135 million in 1996 and $121 million in 1995.

(12) Other Postretirement Benefits

Under various employer sponsored plans, the Company provides certain
health care and life insurance benefits for retired employees and their
dependents. Substantially all of the Company's employees are eligible for
health care benefits after reaching normal retirement age with 10 years of
service. Benefits, eligibility and

34
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(12) Other Postretirement Benefits (continued)

cost sharing provisions for union employees vary by location. Generally,
the medical plans pay a stated percentage, based upon years of service, of
most medical expenses reduced for any deductible and payments made by
government programs and other group coverage. The Company is generally
self-insured for these costs and has no plan assets. The plans' provisions
include a cap which limits future Company contributions for medical
coverage under these plans.

Net Periodic Postretirement Benefit Cost included the following
components:

1996 1995
---- ----
(In millions)

<S> <C> <C>
Service cost on benefits earned ...................... $ 8 $ 8
Interest cost on accumulated postretirement
benefit obligation ................................. 29 29
--- ---
Net periodic postretirement benefit cost ............. $37 $37
=== ===
</TABLE>

In 1996, the Company elected to change the measurement date for all
postretirement healthcare and life insurance liabilities from December 31
to September 30. The effect of this change was not material. The following
table reconciles the unfunded status of the Company's plans as of September
30, 1996 and December 31, 1995 to the amounts recognized in the Company's
Consolidated Balance Sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>

1996 1995
---- ----
(In millions)
<S> <C> <C>

Accumulated postretirement benefit obligation:
Retirees.............................................. $242 $259
Active plan participants.............................. 162 153
---- ----
Accumulated postretirement benefit obligation......... 404 412

Unrecognized net loss................................. (8) (34)
Fourth quarter benefit payments....................... (6) -
---- ----
Accrued postretirement benefit obligation............ $390 $378
==== ====
</TABLE>

For measuring the expected postretirement benefit obligation, the
Company assumed a 8.79% rate of increase in the per capita claims cost in
1996 and assumed that the rate would decrease gradually over a five year
period to 5.5% and remain at that level thereafter. The discount rate used
in determining the accumulated postretirement benefit obligation was 7.50%
at September 30, 1996 and 7.25% and 8.25% at December 31, 1995 and 1994,
respectively.

If the health care cost trend were increased 1%, the accumulated
postretirement benefit obligation as of September 30, 1996 would have
increased by approximately $20 million, or 5%. The effect of the change on
the aggregate of service and interest cost for 1996 would be an increase of
approximately $2 million, or 5%.

35
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(13) Leased Assets and Lease Commitments

At December 31, 1996, minimum lease commitments under long-term
operating leases are as follows:
<TABLE>
<CAPTION>

(In millions)

<S> <C>
1997.......................................................... $61
1998.......................................................... 48
1999.......................................................... 42
2000.......................................................... 37
2001.......................................................... 32
Later years................................................... 80
Sublease income............................................... (2)
----
Minimum lease commitments................................... $298
====
</TABLE>

Total minimum rent charged to operations under all operating leases
was $65 million in 1996, $57 million in 1995 and $60 million in 1994.

Management expects that, in the normal course of business, leases that
expire will be renewed or replaced by other leases.

36
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(14) Segment and Geographical Information

Totals as
Specialties shown in
and Corporate Corporate/ consolidated
Fibers Technical Research & Eliminations financial
Chemicals and Film Polymers Technology & Other statements
--------- -------- -------- ---------- ------- ----------

(In millions)
<S> <C> <C> <C> <C> <C> <C>

1996:
Net sales ............................ $3,108 $2,460 $ 1,415 $ 4 $ (81) $ 6,906
Operating income ..................... 471 110 64 (95) (50) 500
Depreciation/amortization ............ 187 148 104 18 7 464
Capital expenditures ................. 253 250 47 11 14 575
Total assets ......................... 2,433 1,813 1,862 141 2,037 8,286

1995:
Net sales ............................ $3,241 $2,670 $ 1,597 $ 1 $ (114) $ 7,395
Operating income ..................... 727 228 (30) (100) (241)(a) 584
Depreciation/amortization(b) ......... 188 133 113 17 21 472
Capital expenditures ................. 168 234 67 11 6 486
Total assets ......................... 2,312 1,723 1,960 148 2,174 8,317

1994:
Net sales ............................ $2,852 $2,525 $ 1,633 $ 2 $ (138) $ 6,874
Operating loss ....................... 492 154 27 (87) (625)(a) (39)
Depreciation/amortization(c).......... 192 157 113 18 (3) 477
Capital expenditures ................. 152 201 94 14 7 468
Total assets ......................... 2,444 1,840 2,036 175 1,280 7,775

</TABLE>

- ----------

(a) Includes special charges. See Note (16).

(b) Includes $6 million of depreciation reserves for asset write-downs related
to the 1995 special charges.

37
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(14) Segment and Geographical Information (continued)

The following table presents financial information based on the
geographic location of the manufacturing facilities of the Company:

United Other Regions/
States Mexico Canada Europe Eliminations Total
------ ------ ------ ------ ------------ -----

(In millions)
<S> <C> <C> <C> <C> <C> <C>

1996:
Net sales (a) ...................... $ 5,131 $ 909 $397 $433 $ 36 $ 6,906
Transfers between
geographic areas(b) ............. 321 205 152 2 (680) --
------- ------ ---- ---- ------- -------
Total ............................ $ 5,452 $1,114 $549 $435 $ (644) $ 6,906
======= ====== ==== ==== ======= =======
Operating income ................... $ 164 $ 217 $ 92 $ 18 $ 9 $ 500
Total assets ....................... $ 6,820 $ 718 $463 $126 $ 159 $ 8,286

1995:
Net sales(a) ....................... $ 5,602 $ 912 $406 $457 $ 18 $ 7,395
Transfers between
geographic areas(b) .............. 335 232 211 4 (782) --
------- ------ ---- ---- ------- -------
Total ............................ $ 5,937 $1,144 $617 $461 $ (764) $ 7,395
======= ====== ==== ==== ======= =======
Operating income ................... $ 210 $ 235 $160 $ 8 $ (29) $ 584
Total assets ....................... $ 6,957 $ 663 $465 $134 $ 98 $ 8,317

1994:
Net sales(a) ....................... $ 5,251 $ 820 $424 $357 $ 22 $ 6,874
Transfers between
geographic areas(b) .............. 266 171 192 -- (629) --
------- ------ ---- ---- ------- -------
Total ............................ $ 5,517 $ 991 $616 $357 $ (607) $ 6,874
======= ====== ==== ==== ======= =======
Operating loss ..................... $ (339) $ 102 $179 $ 14 $ 5 $ (39)
Total assets ....................... $ 7,887 $ 684 $469 $158 $(1,423) $ 7,775

</TABLE>

- ----------

(a) Included in United States net sales are export sales of $1,056 million in
1996, $1,163 million in 1995 and $930 million in 1994, principally to Asia.

(b) Product transfers between geographic areas are priced on a basis intended
to reflect, as nearly as practicable, the prevailing market value of the
products transferred.

38
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIA STATEMENTS (continued)

(15) Commitments and Contingencies

The Company is a defendant in a number of lawsuits, including
environmental, product liability and personal injury actions (see Note (18)
for discussion of environmental). Certain of these lawsuits are or purport
to be or have been preliminarily certified as class actions. In some of
these cases, claimed damages are substantial. While it is impossible at
this time to determine with certainty the ultimate outcome of these
lawsuits, management believes, based on the advice of legal counsel, that
adequate provisions have been made and that the ultimate outcome will not
have a material adverse effect on the financial position of the Company,
but may have a material adverse effect on the results of operations or cash
flows in any given year.

The Company is named as a defendant in thirty-six putative class
actions, three of which have been certified as class actions as well as a
defendant in other non-class actions filed in twelve states ("the Plumbing
Actions"). In these lawsuits the plaintiffs typically seek recovery for
alleged property damage to housing units, mental anguish from the alleged
failure of polybutylene plumbing systems, and punitive damages and, in
certain cases, additional damages under the Texas Deceptive Trade Practices
Act. The other defendants include United States Brass Corporation ("U. S.
Brass") (formerly a wholly owned subsidiary of Household International,
Inc.), Vanguard Plastics, Inc. ("Vanguard"), Shell Oil Company ("Shell")
and E. I. duPont de Nemours & Co., Inc. ("duPont").

Damage amounts are not specified. The plumbing systems were designed
and manufactured primarily by U. S. Brass and Vanguard. The pipe was made
from polybutylene resin supplied by Shell. The Company sold acetal
copolymer resin and duPont sold acetal homopolymer resin to other companies
who manufactured certain of the fittings used in the plumbing systems.
Based on, among other things, the finding of outside experts and the
successful use of the Company's acetal copolymer in similar applications,
the Company does not believe that its acetal copolymer was defective or
caused the plumbing systems to fail. In many cases, the Company's exposure
may be limited by the fact that the other defendants and other responsible
parties may be found liable in whole or substantial part or by invocation
of the statute of limitations since the Company ceased selling the resin
for use in the plumbing systems in site built homes during 1986 and in
manufactured homes during 1989.

In November 1995, the Company, Shell and duPont entered into a
national class action settlement, which has been approved by the Courts,
subject to appeals. All such appeals have been dismissed. The settlement
calls for the replacement of plumbing systems of claimants who have had
qualifying leaks. Furthermore, the three companies have agreed to fund such
replacements up to $950 million. The allocation of the payments already
made and future payments between the affected companies will be determined
in binding arbitration. There are additional pending lawsuits not covered
by this settlement.

On or about December 20, 1995, the Company and Shell settled the
claims of certain individuals, owning 110,000 property units, who are
represented by the law firm of Fleming, Hovenkamp & Grayson, P.C. ("FHG")
for an amount not to exceed $170 million. FHG's clients will also be
eligible for a replumb of their homes in accordance with the terms of the
national class action settlement. The Company's and Shell's contributions
under this settlement will also be subject to allocation in binding
arbitration.

39
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(15) Commitments and Contingencies (continued)

The Company is not liable for any alleged defects in such systems,
which were designed, manufactured and marketed by other companies.
Nonetheless, the Company has agreed to participate in the settlement to
reduce litigation expenses and to provide relief to qualifying homeowners
with polybutylene plumbing problems.

The Company has accrued its best estimate of its share of the Plumbing
Actions. Due to the many variables involved in the estimation process, as
facts and circumstances change, the estimate will be adjusted. Since the
Company was only one of the suppliers of a resin used in part of the
plumbing systems and not a manufacturer or marketer of these systems, the
Company does not know the number of units that contain the plumbing
systems, the number of systems that will fail, if any, or the extent of any
failures. Based on settlement agreements signed with several insurers and
the opinion of counsel as to the outcome of current litigation with the
remaining insurers, management believes that the expenses related to the
Plumbing Actions are substantially covered by insurance.

In order to mitigate the potential exposure to and cost of litigation,
the Company, together with Shell and duPont, has agreed to continue funding
the Plumbing Claims Group ("PCG"), which assesses individual repair
requests and pays for certain repairs of qualifying homeowners with leaking
polybutylene plumbing systems. The allocation of the cost of operating PCG
between the Company and Shell will be determined in binding arbitration.

Management believes that the Plumbing Actions will not have a material
adverse effect on the financial position of the Company, but may have a
material adverse effect on the results of operations or cash flows in any
given year.

At December 31, 1996, there were outstanding commitments relating to
capital projects of approximately $219 million.

(16) Special Charges

In 1995, the Company recorded a special charge of $192 million ($125
million net of tax), for potential additional costs pertaining to pending
and future product liability claims, net of probable insurance recoveries,
relating to certain plumbing systems using fittings manufactured by other
companies from acetal copolymer resin sold by the Company and the expected
cost and expenses relating to the write-down of assets and additional
environmental remediation exposure associated mostly with the Specialities
and Technical Polymers segment. (See Notes (15) and (18) for additional
information relating to the class action and environmental, respectively).

During 1994, the Company recorded a special charge of $532 million ($319
million net of tax). This charge included the expected costs pertaining to
pending and future product liability claims, net of probable insurance
recoveries, relating to certain plumbing systems using fittings manufactured
by other companies from acetal copolymer resin and additional environmental
remediation exposures. In addition, this special charge includes the
expected costs and expenses relating to the reduction in the workforce and
the write-down of assets associated mostly with the Specialties and
Technical Polymers segment.

40
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(17) Fair Value of Financial Instruments

Summarized below are the carrying values and estimated fair values of
the Company's financial instruments as of December 31, 1996 and 1995. For
purposes of the following disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties.

1996 1995
-------------- --------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in millions)

<S> <C> <C> <C> <C>
Other assets - investments ......... $ 221 $ 221 $113 $ 113
Long-term debt ..................... 1,026 1,053 962 1,037
Debt related derivative instruments -- (7) -- (5)

</TABLE>

Included in other assets are certain investments accounted for under
the cost method and long-term marketable securities classified as
available-for-sale. In general, the cost investments are not publicly
traded; however, the Company believes that the carrying value approximates
the fair value.

The fair value of the Company's long-term debt and derivative
financial instruments is estimated based on quotations from investment
bankers and on current rates of debt for similar types of issues. The fair
value of derivative financial instruments related to debt is equal to the
unrealized gain (loss).

The carrying amounts reported in the Consolidated Balance Sheets for
cash and cash equivalents, net receivables, commercial paper, notes
payable, trade payables and the current installments of long-term debt
approximate fair value, due to the short-term nature of these instruments.
Accordingly, these items have been excluded from the table.

(18) Environmental

The Company's worldwide operations are subject to environmental laws
and regulations which impose limitations on the discharge of pollutants
into the air and water and establish standards for the treatment, storage
and disposal of solid and hazardous wastes. The Company believes that it is
in substantial compliance with all applicable environmental laws and
regulations.

The Company reviews the effects of any new laws and regulations on
each of its locations; determines whether a liability exists based on that
review; and records a liability, as appropriate. The Company expenses all
expenditures mandated by law or Company policy to ameliorate existing
conditions. Liabilities that are established represent the Company's best
estimate based on all the available facts and are adjusted as facts and
circumstances change.

The Company may be subject to substantial claims brought by Federal or
state regulatory agencies or private individuals pursuant to statutory
authority or common law. In particular, the Company has a potential
liability

41
<PAGE>

HOECHST CELANESE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(18) Environmental (continued)

under the Federal Comprehensive Environmental Response Compensation and
Liability Act ("Superfund") and related state laws for investigation and
cleanup costs at approximately 100 sites. At most of these sites, numerous
companies, including either the Company or one of its predecessor
companies, have been notified that the United States Environmental
Protection Agency ("EPA"), state governing body or private individuals
consider such companies to be potentially responsible parties ("PRPs")
under Superfund or related laws. The proceedings relating to these sites
are in various stages. The cleanup process has not been completed at most
sites and the status of the insurance coverage for most of these
proceedings is uncertain. Consequently, the Company cannot determine
accurately its ultimate liability for investigation or cleanup costs at
these sites. Expenditures (including third party and divested sites) for
investigation, cleanup and related activities have been $21 million for the
three years ended December 31, 1996 with expenditures in no year greater
than $9 million.

As events progress at each site for which it has been named a PRP, the
Company accrues, as appropriate, a liability for site cleanup. Such
liabilities include all costs that are probable and can be reasonably
estimated. In establishing these liabilities, the Company considers: its
shipments of waste to a site; its percentage of total waste shipped to the
site; the types of wastes involved; the conclusions of any studies; the
magnitude of any remedial actions that may be necessary; and the number and
viability of other PRPs. Often the Company will join with other PRPs to
sign joint defense agreements that will settle, among the PRPs, each
party's percent allocation of costs at the site. Although the ultimate
liability may differ from the estimate, the Company routinely reviews the
liabilities and revises the estimate, as appropriate, based on the most
current information available.

In 1996, 1995 and 1994 the total environmental costs charged to
operations for remediation efforts amounted to $24 million, $101 million
and $105 million, respectively. As of December 31, 1996 and 1995, the
Company's total environmental liability recognized in the financial
statements is $248 million and $272 million, respectively. The amounts are
neither reduced for anticipated insurance recovery nor discounted from the
anticipated payment date. Moreover, environmental liabilities are paid over
an extended period and the timing of such payments cannot be predicted with
certainty.

Management believes that environmental costs will not have a material
adverse effect on the financial position, results of operations or cash
flows of the Company.

(19) Other Matters

Hoechst AG, Frankfurt, Germany and Clariant AG, Muttenz, Switzerland
intend to combine their respective worldwide specialty chemicals businesses
and have signed a nonbinding general agreement. Consummation of the
combination is subject to a number of conditions including the negotiation
of definitive agreements, approval by the board members and shareholders of
both companies and approval by the antitrust authorities. Accordingly, the
Company is unable to predict whether or when a transaction with Clariant AG
will be consummated.

During 1996, the Company recognized a gain of $10 million on the sale
of the printing plates business.

During 1995, the Company recorded a gain of approximately $38 million
associated with transferring the Company's methanol production assets at
the Clear Lake, TX plant and forming a joint venture with Valero Javelina
Company which started up in the third quarter. A gain of $24 million was
also recorded on the sale of the textile nylon business operated by Grupo
Celanese, S.A. during the fourth quarter. A special dividend of $34 million
from an investment in National Methanol Company, which operates in Saudi
Arabia, was recorded. These amounts were included in Interest and other
income, net in the Consolidated Statements of Earnings.

42
<PAGE>

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

The Board of Directors
Hoechst Celanese Corporation:

We have audited the accompanying consolidated balance sheets of Hoechst
Celanese Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hoechst
Celanese Corporation as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Short Hills, New Jersey
January 30, 1997

43
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no change of accountants or reported disagreement on any
matter of accounting principles or procedures or financial statement disclosure
in 1996.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of Hoechst Celanese are as follows:

Name Age Position(s) with the Company
---- --- ----------------------------

<S> <C> <C>
Thomas F. Kennedy(1)....54 Chairman of the Board of Directors,
President, Chief Executive Officer

Harry R. Benz(1) .......59 Senior Vice President--Finance, Chief Financial
Officer and Director

William B. Harris(1) ...50 Senior Vice President and Director

Klaus Warning (1).......47 Senior Vice President and Director

Richard Bailey(1).......51 Senior Vice President--Strategic Resources
Management and Director

David A. Jenkins .......55 Vice President--General Counsel and Director

Michael E. Grom.........46 Vice President and Treasurer

Raymond W. Smedley .....56 Vice President and Controller

</TABLE>

- ----------

(1) Member of Executive Committee, a committee of the Board of Directors.

All directors of the Company have been appointed for a term commencing
October 4, 1996. All terms of directors will end on the date of the next annual
stockholder meeting.

All executive officers were appointed for a term commencing October 15,
1996, except for Mr. Grom who became Vice President and Treasurer on March 17,
1997. All terms of executive officers will end at the first meeting of the Board
following the next annual stockholder meeting.

Mr. Kennedy has been Chairman of the Board of the Company since May 29,
1996, President and Chief Executive Officer since January 1, 1996, Executive
Vice President of the Company from April 1992 until December 31, 1995, and
Director of the Company since March 1989. On January 1, 1995, he was appointed
President of Hoechst Global Basic Chemicals. He was Group President of the
Chemical Group from July 1989 to March 1992. From March 1989 to March 1992 he
was Vice President of the Company. Prior to that, he was President of the
Chemical Group from March 1989 to June 1989, Executive Vice President of the
Chemical Group from January 1988 to February 1989 and Executive Vice President
of Celanese Chemical Company, Inc. from September 1986 until December 1987. He
previously served as Vice President and General Manager of Filter Products from
October 1984 to September 1986. Prior to that, he was Business Director of
Celanese Chemical Company, Inc.

44
<PAGE>

Mr. Benz has been Senior Vice President--Finance and Chief Financial
Officer of the Company since April 1992 and Director of the Company since
February 1987. From February 1987 to March 1992 he was Vice President--Finance
and Chief Financial Officer of the Company. He was a Director and Chief
Financial Officer with American Hoechst Corporation ("AHC") from October 1980 to
February 1987. Prior to 1980 he served as AHC's Treasurer for nine years. He
also had responsibility for AHC's Petrochemicals and Plastics Group. Prior to
joining AHC, he was employed by KPMG Peat Marwick LLP for 10 years.

Mr. Harris has been Senior Vice President of the Company and President of
Trevira, the worldwide fibers business of Hoechst AG, since May 1, 1994. He was
President of Textile Fibers Group from January 1990. From January 1988 to May
1994 he was Vice President of the Company. He served as Treasurer of the Company
from January 1988 until March 1989 and Executive Vice President, Textile Fibers
Group from April 1989 until December 1989. He was formerly President of Celanese
Fibers Operations, Ltd. from September 1986 until January 1988 and Vice
President and General Manager of Polymer and Filter Products from September 1986
until December 1987. He served as Vice President, Administration of Celanese
Fibers from November 1984 until August 1986. From May 1984 he was Executive Vice
President of Celanese Canada Inc. and from November 1982 until April 1984 he was
Vice President, Finance of Celanese Canada Inc.

Dr. Warning has been Senior Vice President of the Company since January 1,
1996, Vice President of the Company from May 1995 until December 1995 and a
Director of the Company since May 1995. He has been Deputy Head of Global
Specialty Chemicals Division since January 1, 1995. From July 1994 to December
1994, he served as head of the Surfactants and Auxiliaries Division of Hoechst
AG.

Dr. Bailey has been Senior Vice President of Strategic Resources Management
of the Company since January 1, 1996 and Director of the Company since February
1996. He was Corporate Vice President, Human Resources and Corporate Relations
of Hoechst Marion Roussel, Inc. ("HMRI") from January 1992 to December 1995.
From December 1990 to December 1991, he was Managing Director (Vice President)
Global Research and Development of HMRI.

Mr. Jenkins has been Vice President--General Counsel of the Company since
January 1989 and a Director since April 1989. He served as Deputy General
Counsel of the Company from June 1987 to December 1987 and as Vice President and
General Counsel of the Hoechst Celanese Advanced Technology Company from August
1986 to June 1987. He was Secretary of Celanese from June 1984 to August 1986
and General Attorney of Celanese from September 1976 to August 1986.

Mr. Grom was elected Vice President and Treasurer on March 17, 1997. From
February 1994 to March 1997 he served as Assistant Treasurer of the Company. He
was Vice President, Finance and Information Systems for the Company's former
Life Sciences Group from September 1990 to February 1994. Mr. Grom is a
Certified Public Accountant.

Mr. Smedley has been Vice President and Controller of the Company since
February 1987. Prior to that, he served as Controller of AHC from 1975 and Vice
President and Controller from 1980. Prior to joining AHC in 1972, he was with
Price Waterhouse LLP for 10 years. He is a Certified Public Accountant.

45
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following tables set forth the compensation paid during the past three
years and, in the case of pensions, payable in the future to the Chief Executive
Officer and the four next most highly compensated executive officers of the
Company.

Compensation Table

The following table sets forth the total amount of cash compensation paid to
the named executives in 1996, 1995 and 1994.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
Name and ------------------- ----------- All Other
Principal Position Year Salary Bonus(1) LTIP Payouts Compensation(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas F. Kennedy 1996 $474,616 (3) $350,000 $23,731
President, Chief 1995 385,962 $625,000 215,250 19,298
Executive Officer 1994 371,231 350,000 59,800 18,561

William B. Harris 1996 390,577 (3) 140,000 19,529
Senior Vice President 1995 360,962 475,000 86,100 18,048
1994 260,942 350,000 27,600 13,609

Harry R. Benz 1996 354,616 250,000 250,000 17,731
Senior Vice President 1995 335,962 450,000 153,750 16,798
1994 321,635 270,000 55,200 16,082

David A. Jenkins 1996 264,039 60,000 160,000 13,202
Vice President - 1995 253,308 225,000 98,400 12,665
General Counsel 1994 243,308 130,000 36,800 12,166

Klaus Warning (4) 1996 258,769 175,000 -- 12,938
Senior Vice President 1995 153,846 250,000 -- 7,692
- -----------------------------------------------------------------------------------
</TABLE>

- ----------

(1) Bonus paid early in the following year for services rendered in each of the
listed years.

(2) Company contribution to Savings Plan.

(3) Amount not calculable as of filing date.

(4) Hired by the Company effective May 1, 1995.

46
<PAGE>

1996 Long-Term Incentive Awards Table

The following table sets forth the awards made under the Company's
Long-Term Incentive Award Plan to the named executives in 1996.

Long-Term Incentive Plans - Awards in Last Fiscal Year
- -----------------------------------------------------------------------------------
Estimated Future Payouts
-----------------------------
Number of Period Until Threshold Target Maximum
Name Units Payout
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas F. Kennedy 3,500 3 Years $87,500 $350,000 $525,000

William B. Harris 3,000 3 Years 75,000 300,000 450,000

Harry R. Benz 2,500 3 Years 62,500 250,000 375,000

David A. Jenkins 1,600 3 Years 40,000 160,000 240,000

Klaus Warning 2,000 3 Years 50,000 200,000 300,000
- -----------------------------------------------------------------------------------
</TABLE>

Payments and awards are tied to achieving specified levels of Return on
Capital Employed ("ROCE"), both absolute and relative to a competitive group of
other companies. The target amount will be earned if 100% of the targeted ROCE
is achieved. If threshold levels are not achieved, no payments will be made from
the Plan. If threshold levels are achieved but target levels are not achieved,
payments as low as 25% of the target amounts will be made. If certain stretch
goals beyond target levels are achieved, payments as high as 150% of the target
amounts will be made.

47
<PAGE>

Pension Table

The following table sets forth estimated annual retirement benefits for the
named executives under the Hoechst Celanese Retirement Plan and the Hoechst
Celanese Executive Pension Plan.
<TABLE>
<CAPTION>

Pension Plan Table (1)

Benefits for Representative Years of Credited Service (2)
---------------------------------------------------------

Final Average Earnings(3) 15 20 25 30 35
---------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000............. $ 55,050 $ 60,000 $ 60,000 $ 60,000 $ 60,000
200,000............... 110,000 120,000 120,000 120,000 120,000
300,000............... 165,000 180,000 180,000 180,000 180,000
400,000.............. 220,000 240,000 240,000 240,000 240,000
500,000............... 275,000 300,000 300,000 300,000 300,000
600,000............... 330,000 360,000 360,000 360,000 360,000
700,000............... 385,000 420,000 420,000 420,000 420,000
800,000............... 440,000 480,000 480,000 480,000 480,000
900,000............... 495,000 540,000 540,000 540,000 540,000
1,000,000............. 550,000 600,000 600,000 600,000 600,000
1,100,000.............. 605,000 660,000 660,000 660,000 660,000
1,200,000.............. 660,000 720,000 720,000 720,000 720,000

</TABLE>

- ----------

(1) This table represents total benefits payable from both the Hoechst Celanese
Retirement Plan and the Hoechst Celanese Executive Pension Plan. Messrs.
Kennedy, Harris, Benz and Jenkins are participants in both of these plans.
Dr. Warning is covered by the Hoechst AG Pension Plan. Benefits from the
Executive Pension Plan are only payable in the event the executive retires
directly from employment with the Company.

(2) Amounts shown assume the executive retires at age 65 (or earlier if certain
years of service requirements with the Company are met) and are paid
annually for the remainder of the executive's life regardless of marital
status. Benefits listed in the table are not subject to any deduction for
Social Security.

(3) Final Average Earnings are defined in the plans as the average of the three
highest years' earnings (base salary plus bonus) out of the last 10 years
before retirement. The Final Average Earnings for Messrs. Kennedy, Harris,
Benz and Jenkins are approximately $832,861, $653,903; $652,708; and
$412,083, respectively. The approximate years of Credited Service of the
executives covered by the plans are: Mr. Kennedy, 30 years; Mr. Harris, 22
years; Mr. Benz, 25 years; and Mr. Jenkins, 22 years.

48
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Collectively, the directors and executive officers of the Company
beneficially own less than 1% of the outstanding capital stock of Hoechst AG.
Each of Messrs. Benz and Kennedy serves on the Board of Directors of Celanese
Canada Inc. Each of Messrs. Benz and Kennedy own 300 shares of its common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationship with Hoechst AG

The Company is wholly owned by Hoechst Corporation, which in turn is wholly
owned by Hoechst AG, a large pharmaceutical and chemical company headquartered
in Frankfurt, Federal Republic of Germany. Hoechst AG is a publicly held company
whose shares are listed and traded on a number of major stock exchanges in
Europe including the Frankfurt, Federal Republic of Germany; London, United
Kingdom; and Geneva, Switzerland stock exchanges and on the Tokyo stock exchange
in Japan.

Because the Company and other members of the Hoechst Group are engaged in
similar industries, there may arise conflicts of interest between the Company
and other members of the Hoechst Group. The Hoechst Group is undergoing a
worldwide reorganization pursuant to which, among other things, certain officers
of the Company are responsible for the basic chemicals and fibers businesses
globally. Strategies are being developed and coordinated on a
divisional-worldwide basis. Affiliated subsidiaries, including the Company, are
responsible for implementing such strategies and providing the necessary
operational infrastructure in running the various businesses within such
subsidiaries. As a result, situations have arisen and could in the future arise
where resources and business are shifted among profit centers, including the
Company, depending on the overall needs of the worldwide business divisions.

The Company and Hoechst AG are parties to a broad research and development
cost-sharing agreement. In most cases, licenses between the Company and Hoechst
AG under patents owned by Hoechst AG require no specific payment because overall
research and development costs have been shared. However, when license
agreements are negotiated and utilized between the Company and Hoechst AG, they
are on terms that are as favorable to the Company as could be obtained by third
parties from Hoechst AG.

The Company, from time to time, has entered into various financing
agreements with its parent, Hoechst Corporation, and affiliates of Hoechst AG at
competitive rates. See Note (2) of Notes to Consolidated Financial Statements.

The Company has, from time to time, contracted for various plant and
equipment design and consulting services from companies in the Hoechst Group on
terms at least as favorable as could be obtained from third parties.

The Company purchases from companies in the Hoechst Group many chemical raw
materials at competitive prices for use in manufacturing chemically-related
products. Several finished chemicals, which are resold in the United States, are
also purchased from companies in the Hoechst Group. See Note (2) of Notes to
Consolidated Financial Statements.

The Company intends to continue its current policy of paying dividends to
Hoechst Corporation at the discretion of the Company's Board of Directors.
Payment of dividends by the Company is restricted by its public debt
instruments, when there is, or a payment would result in, a default under these
instruments or if the payments (when aggregated with other "Restricted Payments"
as defined therein) would exceed a formula amount based on the total of $250
million plus Consolidated Net Income (as defined therein) plus certain Net Cash
Proceeds from the sale, conversion or exchange of stock (as specified therein).

49
<PAGE>

PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

The Consolidated Financial Statements of the Company and the Report of
Independent Auditors of KPMG Peat Marwick LLP are set forth in the
Financial Statements (Item 8) and are filed as part of this report.

(a)(2) Exhibits

The following Exhibits are filed as part of this report:

Exhibit
Number Description
------ -----------

3.1 Restated Certificate of Incorporation of the Company (filed as a
part of Exhibit 3 to the Company's Form S-1 Registration Statement
No. 33-13326 filed April 10, 1987, and incorporated herein by
reference).

3.2 Bylaws of the Company as amended December 15, 1989 (filed as an
Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference).

4.1 Form of Indenture between the Company and The Bank of New York
relating to the 9.45% Notes due 1997, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q
for the interim period ended June 30, 1987, and incorporated herein
by reference).

4.2 Form of Indenture between the Company and The Bank of New York
relating to the 9 5/8% Notes due 1999, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q
for the interim period ended September 30, 1987, and incorporated
herein by reference).

4.3 Form of Indenture between the Company and Chemical Bank relating to
medium-term notes and the form of such notes (filed as Exhibits to
the Company's Quarterly Report on Form 10-Q for the interim period
ended September 30, 1988, and incorporated herein by reference).

4.4 Form of First Supplemental Indenture between the Company and
Chemical Bank relating to medium-term notes and the form of such
notes (filed as Exhibits to the Company's Form S-3 Registration
Statement No. 33-23628 filed April 24, 1991, and incorporated
herein by reference).

4.5 Form of Indenture between the Company and Chemical Bank relating to
debt securities and medium-term notes and the form of such
securities and notes (filed as Exhibits to the Company's Form S-3
Registration Statement Nos. 33-23628 and 33-51675 filed December
22, 1993 and incorporated herein by reference).

4.6 The Company agrees to furnish the Commission upon request a copy of
any other instrument with respect to long-term debt of the Company
and any subsidiary for which consolidated or unconsolidated
financial statements are required to be filed and as to which the
amount of securities authorized thereunder does not exceed 10% of
the total assets of the Company and its subsidiaries on a
consolidated basis.

50
<PAGE>

Exhibit
Number Description
------- -----------

10.1 Agreement containing Consent Order and Agreement to Hold Separate,
dated February 19, 1987, among Hoechst AG, AHC, Celanese and the
United States Federal Trade Commission (filed as an Exhibit to the
Company's Form S-1 Registration Statement No. 33-13326 filed April
10, 1987, and incorporated herein by reference).

10.2 Technology Cooperation and License Agreement between Hoechst AG and
the Company as of January 1, 1988 (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987, and incorporated herein by reference).

10.3 Summary of AHC Medical Program Policy provisions applicable to
former members of the AHC Executive Committee (filed as an Exhibit
to the Company's Form S-1 Registration Statement No. 33-13326 filed
April 10, 1987, and incorporated herein by reference).

10.4 Summary of AHC Executive Retiree Life Insurance Program (filed
as an Exhibit to the Company's Form S-1 Registration Statement
No. 33-13326 filed April 10, 1987, and incorporated herein by
reference).

10.5 The Hoechst Celanese Executive Pension Plan, as amended, as of
November 1, 1991 (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference).

10.6 Supplemental Pension Plan to Retirement Plan (formerly the Celanese
Supplemental Pension Plan to the Celanese Retirement Income Plan)
(filed as an Exhibit to the Celanese Annual Report on Form 10-K
(File No. 1-1308) for the fiscal year ended December 31, 1977, and
incorporated herein by reference).

10.7 Grantor Trust Agreement, between Celanese and Bankers Trust Company
dated December 27, 1985, for payment of benefits under the
Executive Pension Plan (filed as an Exhibit to the Celanese Annual
Report on Form 10-K (File No. 1-1308) for the fiscal year ended
December 31, 1985, and incorporated herein by reference).

10.8 The Hoechst Celanese Executive Medical and Dental Plan, effective
January 1, 1989 (filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988, and incorporated
herein by reference).

10.9 Employment Agreement, dated January 21, 1987, between Celanese and
Joseph H. Patterson (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference).

10.10 Summary of Management Incentive Plan (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987, and incorporated herein by reference).

10.11 Hoechst Celanese Long-Term Incentive Plan, effective January 1,
1989 (filed as an Exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1988, and incorporated herein
by reference).

10.12 A description of the Hoechst Celanese Executive Benefits
Reimbursement Program (filed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988, and
incorporated herein by reference).

51
<PAGE>

Exhibit
Number Description
------ -----------

10.13 Agreement, dated December 7, 1994, between the Company and Joseph
H. Patterson, (filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference).

12 Computation of Ratio of Earnings to Fixed Charges.

21 Subsidiaries.

Where
Name Incorporated

Celanese Canada Inc. Canada
Celanese Engineering Resins, Inc. Delaware
Grupo Celanese, S.A. Mexico
Hoechst Celanese Chemical Group Ltd Delaware

23 Consent of Independent Accountants.

24.1 Powers of attorney, dated February and March 1997 for directors and
officers of the Company authorizing Thomas F. Kennedy and/or David
A. Jenkins to sign this 10-K on their behalf.

24.2 Certified copy of resolution adopted by the Board of Directors of
the Company on March 3, 1997 authorizing officers to sign this 10-K
on behalf of the Company pursuant to powers of attorney.

27 Financial Data Schedule (included in electronic filing only)

(b) Reports on Form 8-K

During the quarter ended December 31, 1996, no reports on Form 8-K were
filed.

52
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, Hoechst Celanese has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Hoechst Celanese Corporation

By: /s/ Thomas F. Kennedy
------------------------------
Thomas F. Kennedy
President, Chief Executive
Officer and Director

March 28, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 28, 1997, by the following persons on behalf of
the registrant and in the capacities indicated.

- --------------------------------------------------------------------------------
Signature Title
- --------------------------------------------------------------------------------
Principal Executive Officer:

/s/ Thomas F. Kennedy Director, President and Chief Executive
- ----------------------------- Officer
Thomas F. Kennedy

Principal Financial Officer:

/s/ Harry R. Benz Director, Senior Vice President--Finance
- ---------------------------- and Chief Financial Officer
Harry R. Benz

Principal Accounting Officer:

/s/ Raymond W. Smedley Vice President and Controller
- ----------------------------
Raymond W. Smedley

Directors:

William B. Harris* Director
David A. Jenkins* Director
Klaus Warning* Director
Richard Bailey* Director

- ----------

* Thomas F. Kennedy, by signing his name hereto, does sign this document on
behalf of each of the persons indicated above pursuant to powers of
attorney duly executed by such persons, filed with the Securities and
Exchange Commission.

By: /s/ Thomas F. Kennedy
-----------------------------
Thomas F. Kennedy
Attorney-in-Fact

53
<PAGE>

Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Securities Exchange Act of 1934 (the "Act") by registrants
which have not registered securities pursuant to Section 12 of the Act:

Hoechst Celanese Corporation is a wholly owned subsidiary of Hoechst
Corporation. Accordingly, no annual report or proxy material has been sent to
security holders.

54
<PAGE>

EXHIBITS TO 1996 ANNUAL REPORT ON FORM 10-K
-------------------------------------------

3.1 Restated Certificate of Incorporation of the Company (filed as a part
of Exhibit 3 to the Company's Form S-1 Registration Statement No.
33-13326 filed April 10, 1987, and incorporated herein by reference).

3.2 Bylaws of the Company as amended December 15, 1989 (filed as an
Exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference).

4.1 Form of Indenture between the Company and The Bank of New York
relating to the 9.45% Notes due 1997, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended June 30, 1987, and incorporated herein by
reference).

4.2 Form of Indenture between the Company and The Bank of New York
relating to the 9 5/8% Notes due 1999, and the form of such notes
(filed as Exhibits to the Company's Quarterly Report on Form 10-Q for
the interim period ended September 30, 1987, and incorporated herein
by reference).

4.4 Form of First Supplemental Indenture between the Company and Chemical
Bank relating to medium-term notes and the form of such notes (filed
as Exhibits to the Company's Form S-3 Registration Statement No.
33-23628 filed April 24, 1991, and incorporated herein by reference).

4.5 Form of Indenture between the Company and Chemical Bank relating to
debt securities and medium-term notes and the form of such securities
and notes (filed as Exhibits to the Company's Form S-3 Registration
Statement Nos. 33-23628 and 33-51675 filed December 22, 1993 and
incorporated herein by reference).

4.6 The Company agrees to furnish the Commission upon request a copy of
any other instrument with respect to long-term debt of the Company
and any subsidiary for which consolidated or unconsolidated financial
statements are required to be filed and as to which the amount of
securities authorized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a
<PAGE>

consolidated basis.

10.3 Summary of AHC Medical Program Policy provisions applicable to former
members of the AHC Executive Committee (filed as an Exhibit to the
Company's Form S-1 Registration Statement No. 33-13326 filed April
10, 1987, and incorporated herein by reference).

10.4 Summary of AHC Executive Retiree Life Insurance Program (filed as
an Exhibit to the Company's Form S-1 Registration Statement No.
33-13326 filed April 10, 1987, and incorporated herein by
reference).

10.5 The Hoechst Celanese Executive Pension Plan, as amended, as of
November 1, 1991 (filed as an Exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991, and incorporated
herein by reference).

10.6 Supplemental Pension Plan to Retirement Plan (formerly the Celanese
Supplemental Pension Plan to the Celanese Retirement Income Plan)
(filed as an Exhibit to the Celanese Annual Report on Form 10-K (File
No. 1-1308) for the fiscal year ended December 31, 1977, and
incorporated herein by reference).

10.7 Grantor Trust Agreement, between Celanese and Bankers Trust Company
dated December 27, 1985, for payment of benefits under the Executive
Pension Plan (filed as an Exhibit to the Celanese Annual Report on
Form 10-K (File No. 1-1308) for the fiscal year ended December 31,
1985, and incorporated herein by reference).

reference).

10.10 Summary of Management Incentive Plan (filed as an Exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, and incorporated herein by reference).

10.11 Hoechst Celanese Long-Term Incentive Plan, effective January 1, 1989
(filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1988, and incorporated herein by
reference).

10.13 Agreement, dated December 7, 1994, between the Company and Joseph H.
Patterson, (filed as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference).

12 Computation of Ratio of Earnings to Fixed Charges.

21 Subsidiaries.

NAME WHERE INCORPORATED

Celanese Canada Inc. Canada
Celanese Engineering Resins, Inc. Delaware
Grupo Celanese, S.A. Mexico
Hoechst Celanese Chemical Group Ltd. Delaware

23 Consent of Independent Accountants.

24.1 Powers of attorney, dated February and March 1997 for directors and
officers of the Company authorizing Thomas F. Kennedy and/or David A.
Jenkins to sign this 10-K on their behalf.

24.2 Certified copy of resolution adopted by the Board of Directors of the
Company on March 3, 1997, authorizing officers to sign this 10-K on
behalf of the Company pursuant to powers of attorney.

27 Financial Data Schedule (included in electronic filing only).

<PAGE>

EXHIBIT 12

HOECHST CELANESE CORPORATION

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Earnings as defined in the Rules and
Definitions specified in Regulation S-K,
Section 229.503:
Earnings (loss) from operations
before income taxes (a) .......... $ 523 $ 698 $(101) $ 292 $ 310

Add--
Fixed charges as computed on
bottom half of table ............ 112 136 139 119 124
Amortization of capitalized interest 13 13 11 14 13
Affiliate dividends ................ 4 4 8 2 9

Deduct--
Affiliate income ................... (15) (15) (9) (9) (17)
Majority-owned preferred stock
dividend requirement ............. -- -- -- -- (1)
Capitalized interest ............... (16) (17) (15) (20) (13)
----- ----- ----- ----- -----

Earnings as defined ................ $ 621 $ 819 $ 33 $ 398 $ 425
===== ===== ===== ===== =====

Fixed charges as defined in the
Rules and Definitions
specified in Regulation
S-K, Section 229.503:
Interest and debt expense ........... $ 86 $ 107 $ 109 $ 75 $ 80
Capitalized interest ................ 16 17 15 20 13
Interest factor of rentals (b) ...... 10 10 13 24 22
Interest on obligations under
capital leases .................... -- -- -- -- 8
Majority-owned preferred stock
dividend requirement ........ -- -- -- -- 1
Discount or premium of indebtness
(expensed or capitalized) .......... -- 2 2 -- --
----- ----- ----- ----- -----

Fixed charges as defined ............ $ 112 $ 136 $ 139 $ 119 $ 124
===== ===== ===== ===== =====

Ratio of earnings to fixed charges .... 5.5 6.0 * 3.3 3.4
===== ===== ===== ===== =====
</TABLE>

- ----------

* Calculation of the ratio results in an amount that is less than one. The
amount of the earnings deficiency for the year ended December 31, 1994 was
$186 which includes a special charge of $532 associated primarily with
product liability reserves, restructuring costs, asset write-downs and
compliance with environmental regulations. Excluding these charges, the
Ratio of Earnings to Fixed Charges would have been 4.1.

(a) Excludes reduction for minority interests and cumulative effect of
accounting change.

(b) Represents one-third of rent expense, which is deemed to be representative
of the interest factor of operating leases.

<PAGE>

EXHIBIT 23

- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

The Board of Directors
Hoechst Celanese Corporation:

We consent to the incorporation by reference in Registration Statement (No.
33-51675) on Form S-3 which also constitutes Post Effective Amendment No. 4 on
Form S-3 to Registration Statement (No. 33-23628) on Form S-1 of Hoechst
Celanese Corporation of our report dated January 30, 1997, relating to the
consolidated balance sheets of Hoechst Celanese Corporation as of December 31,
1996 and 1995, and the related consolidated statements of earnings,
stockholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of Hoechst Celanese Corporation.

KPMG PEAT MARWICK LLP

Short Hills, New Jersey
March 28, 1997

<PAGE>

EXIBIT 24.1

POWER OF ATTORNEY

As a Director and/or Officer of Hoechst Celanese Corporation, which will
file with the Securities and Exchange Commission, Washington, D.C., its Annual
Report on Form 10-K for the year of 1996 pursuant to the provisions of the
Securities Exchange Act of 1934, I do hereby constitute and appoint Perry W.
Premdas, Thomas F. Kennedy and David A. Jenkins, and each of them (with full
power to each of them to act alone) my true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for me and in my name,
place, and stead, in my offices and capacities as aforesaid and on behalf of the
Corporation, to execute and file the said Annual Report on Form 10-K, any
amendment thereto and any and all other documents to be signed and filed with
the Securities and Exchange Commission in connection therewith; granting unto
said attorneys-in-fact and agents and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises as fully to all intents and purposes as I might or
could do in person hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their substitutes may lawfully do
or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have executed this instrument on February 22, 1997.

By: /s/ Thomas F. Kennedy
---------------------
Thomas F. Kennedy
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument on March 18, 1997.

By: /s/ Harry R. Benz
---------------------
Harry R. Benz
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument on February 21, 1997.

By: /s/ William B. Harris
---------------------
William B. Harris
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument on February 23, 1997.

By: /s/ Klaus Warning
---------------------
Klaus Warning
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument on February 20, 1997.

By: /s/ Richard J. Bailey
---------------------
Richard J. Bailey
<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this instrument on February 20, 1997.

By: /s/ David A. Jenkins
---------------------
David A. Jenkins

<PAGE>

EXHIBIT 24.2

CERTIFICATE

HOECHST CELANESE CORPORATION

TO WHOM IT MAY CONCERN:

I, Edmond A. Collins, certify that I am the duly certified and qualified
Corporate Secretary of Hoechst Celanese Corporation (the "Corporation"), a
Delaware corporation, and that the following is a true, correct and complete
copy of a resolution passed by the Board of Directors of the Corporation by
Unanimous Consent Resolution on March 3, 1997, and said resolution has not been
amended or rescinded and is in full force and effect:

RESOLVED, that each officer and director who is authorized under law
to sign (on behalf of the Corporation or as an officer or director thereof)
the corporation's documents that are filed with the Securities and Exchange
Commission during 1997 is hereby authorized to execute a power of attorney
appointing Perry W. Premdas, Thomas F. Kennedy, or David A. Jenkins as his
true and lawful attorney to execute in his name, place and stead in any
such capacity and on behalf of the Corporation such documents and all
amendments and other papers in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys to have
full power to act without the others, and to do and perform, in the name
and on behalf of the officers and directors who shall have executed such
power-of-attorney, every act necessary to be done as such officer or
director could do in person; such documents shall include but not be
limited to the Annual Report on Form 10-K for fiscal year 1996 that is
filed pursuant to the Securities Exchange Act of 1934.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of this
Corporation this 6th day of March, 1997.

By: /s/ E. A. Collins
-----------------------
E. A. Collins
Secretary

[SEAL]
<PAGE>

HOECHST CELANESE CORPORATION
UNANIMOUS CONSENT RESOLUTION
OF THE BOARD OF DIRECTORS

In lieu of a Special Meeting of the Board of Directors of Hoechst Celanese
Corporation, the undersigned, being all the members of the Board of Directors of
the Corporation, do hereby unanimously consent to the following resolutions:

AUTHORIZE POWERS-OF-ATTORNEY TO SIGN DOCUMENTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION

WHEREAS, the Corporation files documents with the Securities and Exchange
Commission that are required to be signed by certain officers and
directors, and such documents receive an adequate review before filing;

NOW THEREFORE, the Board of Directors adopts the following resolution
which authorizes the signing of such documents by powers-of-attorney:

RESOLVED, that each officer and director who is authorized under law to
sign (on behalf of the Corporation or as an officer or director thereof)
the Corporation's documents that are filed with the Securities and
Exchange Commission during 1997 is hereby authorized to execute a power of
attorney appointing Perry W. Premdas, Thomas F. Kennedy, or David A.
Jenkins as his true and lawful attorney to execute in his name, place and
stead in any such capacity and on behalf of the Corporation such documents
and all amendments and other papers in connection therewith, and to file
the same with the Securities and Exchange Commission, each of said
attorneys to have full power to act without the others, and to do and
perform, in the name and on behalf of the officers and directors who shall
have executed such power-of-attorney, every act necessary to be done as
such officer or director could do in person; such documents shall include
but not be limited to the Annual Report on Form 10-K for fiscal year 1996
that is filed pursuant to the Securities Exchange Act of 1934.

The foregoing actions are taken pursuant to the Delaware General Corporation
Law, Section 141(f), and shall be of the same force and effect as if taken at a
meeting of the Board of Directors called and held for the purpose of taking the
actions set forth above.
<PAGE>

IN WITNESS WHEREOF, all of the directors of Hoechst Celanese Corporation have
affixed their signature hereto as of the date below written.

/s/ H. R. Benz /s/ R. J. Bailey
- ----------------------- -----------------------
H. R. Benz R. J. Bailey

/s/ W. B. Harris /s/ D. A. Jenkins
- ----------------------- -----------------------
W. B. Harris D. A. Jenkins

/s/ T. F. Kennedy /s/ K. Warning
- ----------------------- -----------------------
T. F. Kennedy K. Warning

DATED: March 3, 1997

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 2
<RECEIVABLES> 2,188
<ALLOWANCES> 34
<INVENTORY> 782
<CURRENT-ASSETS> 3,057
<PP&E> 4,484
<DEPRECIATION> 1,841
<TOTAL-ASSETS> 8,286
<CURRENT-LIABILITIES> 2,180
<BONDS> 1,026
0
0
<COMMON> 0
<OTHER-SE> 3,436
<TOTAL-LIABILITY-AND-EQUITY> 8,286
<SALES> 6,906
<TOTAL-REVENUES> 6,906
<CGS> 5,626
<TOTAL-COSTS> 780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 523
<INCOME-TAX> 168
<INCOME-CONTINUING> 199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 199
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>