Statement of Prof. Felcht

on the Occasion of the Inauguration of Degussa R&D Center Shanghai on April 23, 2004, in Shanghai

Ladies and Gentlemen:

Today we are here to celebrate the inauguration of our Research and Development Center in Shanghai. As you all know, Degussa is perfectly serious about incorporating China into the company’s global R&D network – and today provides one more proof of this.

The Center, which involves an investment volume of some €10 million, means that Degussa can now pursue even more specific product developments and introduce them to potential customers, thus taking the special requirements of the Chinese market into much better account.

Not only is this new center a milestone for Degussa China, it is also a milestone for the global Degussa family. The Center accommodates our business units with state-of-the-art laboratories, marketing facilities, rooms for application engineering seminars and technical after-sales services. We are very proud of the fact that what you see here today is the most diversified R&D laboratory under the global Degussa umbrella. It will help us consolidate and extend our leading market position, and is additionally one more step towards strengthening our competitiveness in the knowledge-based value chain.

We offer our customers tailor-made technical solutions, so called “solutions to customers”. This means we are crucially responsible for the value creation achieved by our business partners, which delivers the decisive competitive advantage that our systems are difficult to substitute and cannot thus be easily replaced by competitors' products. It also shows us that applications-engineering expertise and innovational prow-ess are indispensable factors for our success.

That is why despite the tough overall economic climate we left our ex-penditure on R&D untouched during the past fiscal year, and did not cut it back. We spent €347 million on R&D in our core operations, which amounts to an R&D-to-sales ratio of 3.2 percent. We are aiming for a ratio in the region of 4 percent for the future, but this presumes a marked improvement in the cyclical climate and thus in our earnings situation.

Degussa has around 3,100 employees working in R&D at over 50 research locations worldwide. To date we can proudly proclaim 55,000 patents worldwide. I am sure that with the commitment of our people here in China and with the opening of this new world class re-search and development center, that number is going to soar in the future.

Ladies and Gentlemen:

This new R&D center will not only form the basis for innovative Degussa “solutions to customers” in China, but solutions for the entire world – and it all begins right here and now, in Shanghai!